This action, pursuant to 5 U.S.C. 553, implements an amendment to regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This rule is issued under Marketing Order No. 984, as amended (7 CFR part 984), regulating the handling of walnuts grown in California. Part 984, (referred to as “the Order”) is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The Board locally administers the Order and is comprised of growers and handlers operating within the area of production, and a public member.

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Orders 13563 and 13175. In accordance with Executive Order 13175, AMS has not identified any tribal implications as a result of this rule. This rule falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the Order now in effect, California walnut handlers are subject to assessments. Funds to administer the Order are derived from such assessments. It is intended that the assessment rate be applicable to all assessable walnuts for the 2020-21 marketing year, and continue until amended, suspended, or terminated.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This rule decreases the assessment rate from $0.0400 per kernelweight pound assessable walnuts, the rate that was established for the 2017-18 and subsequent marketing years, to $0.0250 per kernelweight pound of assessable walnuts handled for the 2020-21 and subsequent marketing years.

The Order provides authority for the Board, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program. The members are familiar with the Board's needs and with the costs of goods and services in their local area and are thus able to formulate an appropriate budget and assessment rate. The assessment rate is formulated and discussed in a public meeting and all directly affected persons have an opportunity to participate and provide input.

For the 2017-18 and subsequent marketing periods, the Board recommended, and USDA approved, an assessment rate of $0.0400 per kernelweight pound of assessable walnuts handled. That assessment rate continued until modified, suspended, or terminated by USDA upon recommendation and information submitted by the Board or other information available to USDA.

On September 11, 2020, the Board unanimously recommended 2020-21 expenditures of $17,990,000 and an assessment rate of $0.0250 per kernelweight pound of assessable walnuts. In comparison, last year's budgeted expenditures were $25,760,000. The assessment rate of $0.0250 is $0.0150 lower than the rate currently in effect. The Board recommended decreasing the assessment rate to reduce the assessment burden on handlers. Funds from assessments and from the Board's reserve will be sufficient to cover proposed expenses, while maintaining the Board's reserve within the requirements of the Order at no more than two years' budgeted expenses.

The major expenditures recommended by the Board for the 2020-21 marketing year include $1,930,000 for employee expenses, $283,000 for office expenses, $1,600,000 for production research, $825,000 for grades and standards activities, and $13,112,000 for domestic market development. Budgeted expenses for these items in 2019-20 were $1,896,000, $293,000, $2,000,000, $825,000, and $20,700,000, respectively.

The Board derived the recommended assessment rate by considering anticipated expenses; estimated certification (“certification” means having the walnuts inspected) of 650,000 tons (inshell), based on a three-year average; and the amount of funds available in the authorized reserve.

Pursuant to § 984.51(b) of the Order, the estimated production is converted to a merchantable kernelweight basis using a factor of 0.45 (650,000 tons × 2,000 pounds per ton × 0.45), which yields 585,000,000 kernelweight pounds. At $0.0250 per pound, the assessment rate will generate $14,625,000 in assessment income and, along with funds from the reserve, will meet estimated expenses of $17,990,000.

Funds in the reserve (currently $20,133,075) will be kept within the maximum permitted in § 984.69 of the Order of approximately two marketing years' budgeted expenses. The reserve at the end of the 2020-21 marketing year is anticipated to be $13,258,075.

The assessment rate established in this rule will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Board or other available information.

Although the assessment rate will be effective for an indefinite period, the Board will continue to meet prior to or during each marketing year to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of Board meetings are available from the Board or USDA. Board meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate Board recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking would be undertaken as necessary. The Board's 2020-21 budget and those for subsequent marketing years will be reviewed and, as appropriate, approved by USDA.

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

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

There are approximately 90 handlers subject to regulation under the Order and approximately 4,400 walnut growers in the production area. The Small Business Administration (SBA) defines small agricultural service firms as those having annual receipts of less than $30,000,000, and small agricultural producers as those having annual receipts of less than $1,000,000 (13 CFR 121.201).

The Board reported that approximately 82 percent of California's walnut handlers shipped merchantable walnuts valued under $30 million during the 2018-2019 marketing year and would, therefore, be considered small handlers according to the SBA definition.

Data from the 2017 Agricultural Census, published by USDA's National Agricultural Statistics Service (NASS), show that 86 percent of California farms growing walnuts had walnut sales of less than $1 million.

An alternative computation includes more recent NASS data, starting with a three-year average value of utilized production of $1.263 billion for the most recent seasons for which data is available (2017/18 through 2019/20). Dividing that figure by the number of walnut growers (4,400) yields an average annual crop value per grower of approximately $287,045. This figure is well below the SBA small agricultural producer threshold of $1,000,000 in annual sales. Assuming a normal distribution, this provides evidence that a large majority of walnut growers can be considered small agricultural producers according to the SBA definition.

This rule decreases the assessment rate collected from handlers for the 2020-21 and subsequent marketing years from $0.0400 to $0.0250 per kernelweight pound of assessable walnuts. The Board unanimously recommended 2020-21 expenditures of $17,990,000 and an assessment rate of $0.0250 per kernelweight pound of assessable walnuts. The assessment rate of $0.0250 is $0.0150 lower than the rate currently in effect. The quantity of assessable walnuts for the 2020-21 marketing year is estimated at 650,000 tons (inshell), which is equivalent to 585,000,000 kernelweight pounds. Thus, the $0.0250 rate should provide $14,625,000 in assessment income. The Board anticipates that the income derived from handler assessments, along with funds from the Board's authorized reserve, will be adequate to cover budgeted expenses for the 2020-2021 marketing year.

The major expenditures recommended by the Board for the 2020-21 marketing year include $1,930,000 for employee expenses, $283,000 for office expenses, $1,600,000 for production research, $825,000 for grades and standards activities, and $13,112,000 for domestic market development. Budgeted expenses for these items in 2019-20 were $1,896,000, $293,000, $2,000,000, $825,000, and $20,700,000, respectively.

The Board unanimously recommended decreasing the assessment rate to reduce the assessment burden on handlers, and recommended utilizing funds from the authorized reserve to help cover the portion of the Board expenses.

Prior to arriving at this budget and assessment rate, the Board considered information from various sources, such as the Board's Executive Committee. The Board discussed alternative expenditure levels, based upon the relative value of various activities to the California walnut industry. The Board recommended the assessment rate of $0.0250 to provide $14,625,000 in assessment income based on the estimation. The Board determined that assessment revenue, along with funds from the authorized reserve will be adequate to cover budgeted expenses for the 2020-21 marketing year.

Based upon information from the National Agricultural Statistics Service (NASS), the grower price reported for walnuts in 2019 was $1,970 per ton ($0.99 per pound) of walnuts. In order to determine the estimated assessment revenue as a percentage of the total grower revenue, we calculate the assessment rate ($0.0250 per kernelweight pound) times the estimated production (585,000,000 kernelweight pounds), which equals the assessment revenue of $14,625,000. The grower revenue is calculated by multiplying the grower price of $1,970 per ton ($0.99 per kernelweight pound) times the estimated production (585,000,000 kernelweight pounds), which equals the grower revenue of $579,150,000. The final step, dividing the assessment revenue by the grower revenue, indicates that, for the 2020-21 marketing year, the estimated assessment revenue as a percentage of total grower revenue would be about 2.5 percent.

This rule decreases the assessment obligation imposed on handlers. Assessments are applied uniformly on all handlers, and some of the costs may be passed on to growers. However, decreasing the assessment rate reduces the burden on handlers and may also reduce the burden on growers.

The Board's meeting was widely publicized throughout the California walnut industry. All interested persons were invited to attend the meeting and participate in Board deliberations on all issues. Like all Board meetings, the September 11, 2020, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. Finally, interested persons were invited to submit comments on this rule, including the regulatory and information collection impacts of this action on small businesses.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the Order's information collection requirements have been previously approved by the OMB and assigned OMB No. 0581-0178 Vegetable and Specialty Crops. No changes in those requirements will be necessary as a result of this rule. Should any changes become necessary, they would be submitted to OMB for approval.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large California walnut handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

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

USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this final rule.

A proposed rule concerning this action was published in the Federal Register on March 5, 2021 (86 FR 12837). The Board notified all California walnut handlers of the proposed assessment rate decrease. The proposed rule was made available through the internet by USDA and the Office of the Federal Register. A 30-day comment period ending April 5, 2021, was provided for interested persons to respond to the proposal. No comments were received. Accordingly, no changes will be made to the proposed rule.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions about the compliance guide should be sent to Richard Lower at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant material presented, including the information and recommendation submitted by the Board and other information available, it is hereby found that this rule will tend to effectuate the declared policy of the Act.

For the reasons set forth in the preamble, 7 CFR part 984 is amended as follows:

The Consumer Financial Protection Act of 2010 (CFPA) authorizes the Bureau to conduct examinations of supervised nonbanks for the purposes of assessing and detecting “risks to consumers.” As explained below, the risks to active-duty servicemembers and their dependents from conduct that violates the Military Lending Act (MLA) fall squarely within that category. The CFPA also authorizes the Bureau to conduct examinations of very large banks and credit unions for purposes of detecting and assessing those “risks to consumers” that are “associated” with “activities subject to” Federal consumer financial laws, such as the Truth in Lending Act (TILA) or the CFPA. 1 Because conduct that violates the MLA is associated with activities that are subject to TILA and the CFPA, that standard is also satisfied here. The Bureau's interpretation is also entirely consistent with the enforcement scheme of the MLA, which by incorporating TILA's enforcement scheme authorizes the Bureau to use formal administrative adjudications, civil enforcement actions, and other authorities to enforce the MLA. That enforcement scheme is complemented by the Bureau's use of the examination process to detect and assess risks to consumers arising from violations of the MLA. This reading also avoids an unworkable gap in Bureau examinations that can otherwise only be potentially filled by the formal enforcement process; based on the Bureau's experience, that gap leads to wasteful inefficiencies for both the Bureau and supervised institutions. Additionally, the Bureau is no longer persuaded by counterarguments that it does not have the relevant authority, for reasons that will also be discussed below.

This part I is followed by part II, which provides some general background about the CFPA, the MLA, TILA, and the history of Bureau examinations regarding the MLA. Part III sets out the Bureau's analysis of its authority with respect to supervised nonbanks, including the statutory text; the statutory scheme; and counterarguments that the Bureau no longer finds persuasive. Part IV addresses the parallel issue in the context of very large banks and credit unions. Part V concludes with some regulatory matters.

The CFPA establishes the Bureau as an independent bureau in the Federal Reserve System and assigns the Bureau a range of rulemaking, enforcement, supervision, and other authorities. 2 Many of these authorities relate to the body of “Federal consumer financial law,” which the CFPA defines to include the CFPA itself, TILA, and a number of other statutes, rules, and orders, but it does not include the MLA. 3 For example, one of the Bureau's authorities is to “prescribe rules . . . as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof.”  4 A notable substantive provision of the CFPA is its prohibition on unfair, deceptive, or abusive acts or practices. 5 The CFPA also requires the Director of the Bureau to establish several offices, including an Office of Service Member Affairs. 6

The key CFPA provisions that are relevant to this interpretive rule are sections 1024 and 1025. Section 1024 addresses Bureau supervision of specified categories of nonbanks—for example, any covered person who “offers or provides to a consumer a payday loan”—while section 1025 addresses Bureau supervision of “very large” depository institutions and credit unions, which are generally those with more than $10 billion in total assets and their affiliates. 7

Section 1024(b)(1) provides that the Bureau “shall require reports and conduct examinations on a periodic basis of” a supervised nonbank for purposes of: “(A) assessing compliance with the requirements of Federal consumer financial law; (B) obtaining information about the activities and compliance systems or procedures of such person; and (C) detecting and assessing risks to consumers and to markets for consumer financial products and services.”  8

Section 1025(b)(1) contains parallel but slightly different language. It provides that the Bureau “shall have exclusive authority to require reports and conduct examinations on a periodic basis of” very large banks and credit unions for purposes of: “(A) assessing compliance with the requirements of Federal consumer financial laws; (B) obtaining information about the activities subject to such laws and the associated compliance systems or procedures of such persons; and (C) detecting and assessing associated risks to consumers and to markets for consumer financial products and services.”  9

These differences in wording between section 1024(b)(1) and section 1025(b)(1) are explained by the structure of the statute. Very large banks and credit unions have long been subject to supervisory examinations by the prudential regulators, who continue to examine these institutions for a broad range of purposes. 10 By contrast, the supervised nonbanks that are covered by section 1024(b)(1) were generally not subject to examination by the Federal government before the creation of the Bureau. 11 The purposes of Bureau examinations under sections 1024(b)(1) and 1025(b)(1) are both broad. But it was natural, to ensure thorough Federal examination of supervised nonbanks, for Bureau examinations of those nonbanks to cover an even broader range of subject matters than the Bureau's examinations of very large banks and credit unions. (For example, the Bureau can obtain information about all of a supervised nonbank's compliance systems or procedures, not only those that are “associated” with activities subject to Federal consumer financial laws.)

Accordingly, with respect to supervised nonbanks that are covered by section 1024(b)(1), the relevant question here is whether there are “risks to consumers” arising from conduct that violates the MLA that the Bureau may detect and assess. In the case of very large banks and credit unions that are covered by section 1025(b)(1), there is the additional question of whether such “risks to consumers” are “associated” with “activities subject to” Federal consumer financial laws, such as TILA or the CFPA. 12

The MLA, also known as the Talent Amendment, was bipartisan legislation first enacted in 2006. 13 As Senator Talent explained during the passage of the MLA: “The fact is, predatory payday lenders are targeting American troops and are trying to make a buck off of their service to our country. . . . This is a national problem. Predatory payday lenders set up shop near our military bases throughout the country and prey on our servicemembers. . . . Our troops deserve uniform, national protection against abusive financial practices that target them.”  14

The MLA establishes safeguards when creditors extend consumer credit to certain active-duty members of the armed forces or their covered dependents. The statute is implemented through regulations issued by the Department of Defense, in consultation with other specified agencies including the Bureau. 15 The Department of Defense has explained that under its implementing regulations, as revised in 2015, consumer credit for purposes of the MLA is, in general, “defined consistently with credit that for decades has been subject to the disclosure requirements of the Truth in Lending Act (TILA), codified in [the Bureau's] Regulation Z.”  16 However, there are some instances where the definition of consumer credit under the MLA and its implementing regulations is narrower than under TILA. 17

One of the MLA's safeguards is a prohibition on imposing interest at a military annual percentage rate (MAPR) of greater than 36 percent, where MAPR is calculated by reference to TILA's annual percentage rate (APR), with some specified differences. 18 The MLA also establishes a number of other limitations on the terms of credit transactions, such as a prohibition on rolling over credit under certain circumstances; a prohibition on requiring, as a condition for the extension of credit that, the borrower establish an allotment to repay an obligation; and a prohibition on prepayment penalties or fees. 19 The MLA requires disclosures that are based on TILA disclosures with additional supplementary information, such as a statement regarding the MAPR in addition to the disclosure of the TILA APR. 20

Conduct that violates the MLA may also violate TILA's disclosure requirements, or occur concurrently with violations of TILA's disclosure requirements, since the MLA's disclosure requirements incorporate and supplement TILA's. Conduct that violates the MLA may also overlap with violations of the CFPA's prohibition on deceptive acts or practices or other violations of Federal consumer financial law.

Congress provided that any contract prohibited by the MLA “is void from the inception of such contract.”  21 As the MLA's implementing regulations further explain, any contract with a covered borrower that fails to comply with the MLA or which contains one or more provisions prohibited under the MLA is void from the inception of the contract. 22 The MLA also provides criminal penalties for creditors that knowingly violate the statute. 23 However, as originally enacted in 2006, the MLA did not address administrative enforcement.

In 2013, Congress amended the MLA to provide that it “shall be enforced by the agencies specified” in section 108 of TILA, “in the manner set forth in that section or under any other applicable authorities available to such agencies by law.”  24 As the conference report explained, “for the purposes of the enforcement authority under this section, a violation of the Military Lending Act would be treated as though it were a violation of the Truth in Lending Act.”  25 Thus, the authorities in section 108 of TILA, which are discussed below, are applicable to the MLA.

Section 108 addresses administrative enforcement of TILA. It provides that TILA “shall be enforced” by a list of enforcing agencies, including the applicable prudential regulators and, since 2010, the Bureau. 26 In the case of the prudential regulators, section 108 specifies that they shall enforce TILA under statutory provisions that authorize, among other things, administrative adjudications for cease-and-desist orders and civil money penalties. 27 In the case of the Bureau, section 108 provides that TILA shall be enforced under subtitle E of the CFPA. Subtitle E authorizes the Bureau to, among other things, conduct administrative adjudications, initiate civil enforcement actions, and send civil investigative demands. 28 Section 108 further provides that each of the enforcing agencies “may exercise, for the purpose of enforcing compliance” with TILA, “any other authority conferred on it by law.”  29

As general background, since TILA's enactment in 1968, the prudential regulators have relied heavily on bank examinations in order to implement TILA. As noted above, each of the prudential regulators has longstanding statutory authority to “examine” or conduct “examinations” of banks or credit unions. 30 As the Federal Reserve reported to Congress in 1972, in its capacity as the agency that wrote regulations to implement TILA: “For the most part, compliance [with TILA] is determined by [the prudential regulators] during the regular periodic examinations of the creditors under their jurisdiction.”  31 The Federal Reserve similarly reported to Congress in 1983 that the five prudential regulators “enforce compliance with [TILA and three other consumer finance statutes] mainly through periodic examinations.”  32 Along the same lines, the Comptroller of the Currency testified to Congress in 2007 that the “primary method that federal banking agencies use to implement consumer protection standards is direct supervision—not formal enforcement actions—of the banks we supervise.”  33

In September 2013, the Bureau amended its short-term, small-dollar lending examination procedures to advise examiners that they “should review for MLA violations, which evidence risks to consumers and may require supervisory or enforcement action.”  34 This was about two years into the history of the Bureau's examination program and about nine months after the MLA was amended to provide the Bureau with authority to enforce the MLA in the same manner as it is authorized to enforce TILA. As far as the Bureau is aware, no supervised entity ever disputed the propriety of this aspect of the Bureau's examinations by appealing a supervisory determination regarding the MLA.

In 2018, the Bureau discontinued examination activity regarding the MLA. This was because the Bureau changed its position, taking the view that it lacked the authority to engage in MLA-related examination activity, for reasons that will be discussed below. 35 In 2019, the Bureau wrote to Congress to suggest legislation to “clarify the [Bureau's] authority to supervise for compliance with the [MLA].”  36

The Bureau is now returning to the original position that it took from 2013 until 2018. The Bureau believes that it does have the requisite authority, and that the view that it originally took in 2013 was the correct one, for the reasons discussed below.

Section 1024(b)(1)(C) of the CFPA, in relevant part, straightforwardly authorizes the Bureau to conduct examinations of supervised nonbanks for purposes of detecting and assessing “risks to consumers.”  37 As the Supreme Court has explained in another context: “Congress knows to speak in plain terms when it wishes to circumscribe, and in capacious terms when it wishes to enlarge, agency discretion.”  38

“Risks to consumers” that arise from conduct that violates the MLA fall well within that capacious phrase. Such conduct risks having adverse financial consequences for active-duty service members and their covered dependents. One reason why these consequences can be particularly significant for military families is that financial status can affect servicemembers' ability to maintain their security clearances and therefore maintain their military careers. Congress considered the risk of harm from contracts made in violation of the MLA so severe that it made such contracts entirely void.

A statute should be interpreted “as a symmetrical and coherent regulatory scheme.”  39 Here, the statutory scheme provides additional confirmation that “risks to consumers” include conduct that violates the MLA, for three main reasons.

First, the Bureau believes that risks of harm to consumers that the Bureau can address through its enforcement authority, when that proves necessary, are logically within the core of “risks to consumers” that the Bureau can detect and assess. There can be many types of risks to consumers, and the Bureau's ability to use its range of authorities to remedy those risks can vary in effectiveness. But if “risks to consumers” did not include, at the very least, those risks that are so severe and so central to the Bureau's consumer-protection mission that they can lead to a Bureau enforcement action for civil money penalties, restitution, disgorgement, and other relief, 40 it is unclear what remaining meaning the category would have. It would be anomalous to read out of the category of “risks to consumers” a type of risk that the Bureau can—out of all the potential risks to consumers—forcefully remedy through enforcement action if that becomes necessary. Thus, not only does conduct that violates the MLA fall within the plain language of “risks to consumers,” in the Bureau's view it is not a borderline case, but sits within the core of the provision.

Second, the Bureau's textual interpretation is the most effective way of carrying out the statutory scheme of the CFPA and MLA. When the Bureau is already examining a supervised nonbank or very large bank or credit union for potential violations of TILA that are intertwined with potential violations of the MLA, it is especially inefficient for both the Bureau and the supervised institution if the Bureau relies exclusively on enforcement tools under Subtitle E of the CFPA to identify and address MLA violations, closing off any use of the Bureau's supervisory process to detect and assess these risks to consumers. As one example, under the contrary interpretation, verifying TILA disclosures may be the work of a Bureau examiner, but scrutinizing the related MLA disclosures in the very same document would be reserved to a Bureau enforcement attorney, who would normally obtain copies of those disclosures by sending a civil investigative demand. The Bureau believes that the capacious reference to “risks to consumers” in section 1024(b)(1)(C)—when read according to its plain terms—avoids this incongruous result by allowing examiners to consider the potentially overlapping MLA and TILA issues together in one review.

A third reason why examinations regarding the MLA complement the Bureau's enforcement authority under Subtitle E is that such examinations can play a role in preventing violations of the MLA before they occur. In a Bureau examination to detect and assess the risk that consumers will be harmed by violations of the MLA, the Bureau is able to detect and assess not only fully completed violations of the MLA, but also practices by the supervised institution that present a danger of violations of the MLA and therefore risk harm to consumers. For example, one important practical step that creditors generally need to take, in order to avoid violations of the MLA, is to correctly identify which of their borrowers are active-duty servicemembers or covered dependents and therefore protected by the MLA. 41 If examiners observe an error or deficiency in the processes that a supervised institution uses to identify borrowers that are covered by the MLA, they can alert the institution of their assessment in their examination report or supervisory letter, and this may occur before the danger manifests in an actual violation of the MLA that in turn harms consumers. When Bureau examiners work cooperatively with supervised institutions to identify and address risks to consumers before they harm consumers, both the Bureau and supervised institutions can often avoid an after-the-fact enforcement action under Subtitle E of the CFPA. The Bureau believes that this is a prime example of a proper exercise of its authority under section 1024(b)(1)(C) to conduct examinations for the purpose of detecting and assessing risks to consumers.

During the period when it ceased MLA-related examination activity, the Bureau was persuaded by arguments that it lacked this authority. But for the following reasons, the Bureau no longer finds these arguments persuasive.

First, the Bureau's interpretation during this period was informed by the fact that the MLA is not a Federal consumer financial law, which is the focus of the examination authority in the separate section 1024(b)(1)(A) of the CFPA. The Bureau asserted that Congress confined the Bureau's authority to assess compliance to Federal consumer financial law and not compliance with other laws; that Congress intended not to confer examination authority with respect to the MLA, since it did not add the MLA to the definition of Federal consumer financial law; and that the Bureau would be circumventing Congress's intentions by conducting examinations related to the MLA.

The Bureau no longer accepts this argument, because the argument relies on assumptions about Congress's intentions that are not expressed anywhere in the statutory text or any legislative history. There is nothing in the statute to suggest that “risks to consumers” can never include violations of law. (Indeed, in the case of the MLA, Congress enacted it precisely because there were risks to active-duty servicemembers and their families.) Moreover, to the extent it is appropriate to speculate about Congress' choice to not amend the definition of Federal consumer financial law, it is understandable why Congress would not have added the MLA to that definition. As noted above, the Bureau has general rulemaking authority with respect to Federal consumer financial law, but Congress gave the Department of Defense, not the Bureau, general rulemaking authority for the MLA. Adding the MLA to the definition of Federal consumer financial law would have led to potential confusion about which agency, or both, has this significant rulemaking authority. Lastly, to assert that the Bureau is circumventing Congress's intentions is conclusory. Again, had Congress wished to more closely “circumscribe . . . agency discretion,” it would not have used the “capacious terms” that it did. 42

Second, the Bureau's prior interpretation was informed by the fact that Congress conferred authority on the Bureau to enforce the MLA through subtitle E of the CFPA, by incorporating TILA's enforcement scheme, without specifically addressing the Bureau's supervisory authority under section 1024. According to this line of argument, this specific conferral of certain enforcement authorities implies an unstated exclusion of supervisory authority. But the Supreme Court has rejected just such an argument. The Court has recognized that where financial regulators have formal enforcement powers regarding a specific subject but also “broad statutory authority to supervise financial institutions,” there is nothing that prevents “the regulators from invoking less formal means of supervision of financial institutions,” given that there is “no prohibition against the use of supervisory mechanisms not specifically set forth in statute or regulation.”  43 This is particularly true here, where Congress has expressly authorized the Bureau to rely upon “any other applicable authorities available to” the Bureau to enforce the MLA, and where TILA's enforcement regime likewise authorizes the Bureau to exercise “any other authority conferred on it by law” to aid in its enforcement of that statute. 44 Thus, there is no reason to infer that Congress's conferral of certain specific enforcement authorities foreclosed the use of other authorities to ensure conformity with the MLA and securing its protections for servicemembers and their families. Moreover, when Congress incorporated TILA's enforcement scheme into the MLA in 2013, there had been forty years of consistent history of regulators taking this kind of approach in the TILA context—using their generally-framed authorities to examine supervised institutions in order to supplement the formal enforcement measures that section 108 of TILA specifically references.

Third, the Bureau's prior interpretation was influenced by a concern that reading the phrase “risks to consumers” in sections 1024(b)(1)(C) to include those risks to consumers that arise from conduct that violates the MLA might lead to a similar reading with respect to other statutes that, like the MLA, are not covered by sections 1024(b)(1)(A). But, as already explained, there is nothing in the statutory text to suggest that “risks to consumers” are somehow limited to conduct that is lawful and that “risks to consumers” can never include conduct that violates the law. It is also appropriate to step back and recognize that this is a “slippery slope” argument. “Like all slippery-slope arguments, the . . . point can be inverted with equal logical force.”  45 Not exercising the Bureau's authority to identify these important risks to active-duty servicemembers and their families would be a slippery slope towards making the authority that Congress expressly conferred on the Bureau, to seek out “risks to consumers,” a dead letter. As discussed above, the Bureau believes that the very harmful conduct that Congress sought to prevent in the MLA, which the Bureau has the authority to remedy through its other authorities (specifically enforcement action), sits within the core of this authority. There could doubtless be debate about the outer limits of the authority, but that is simply because Congress chose to frame it in such flexible terms, and that is not a reason for the Bureau to boycott this core application of the authority.

The Bureau would note, in conclusion, that a common feature of the above arguments against the Bureau's authority is that they do not dispute the plain fact that conduct that violates the MLA presents risks to consumers. Instead, the arguments all implicitly rely on variations of a mistaken premise: that Congress could not have meant what it said when it used the words “risks to consumers” to confer examination authority on a consumer protection agency in the aftermath of a financial crisis. But it is “a fundamental principle of statutory interpretation that absent provisions cannot be supplied by the courts. This principle applies not only to adding terms not found in the statute, but also to imposing limits on an agency's discretion that are not supported by the text.”  46

Section 1025(b)(1)(C) of the CFPA authorizes the Bureau, in relevant part, to conduct examinations of very large banks and credit unions for purposes of detecting and assessing “risks to consumers” that are “associated” with “activities subject to” Federal consumer financial laws. This requirement that there be an association with activities subject to Federal consumer financial laws is present in section 1025(b)(1)(C) but not section 1024(b)(1)(C), which narrows section 1025(b)(1)(C) in comparison to section 1024(b)(1)(C). The Bureau previously assumed that MLA-related issues could not be “associated” risks to consumers under section 1025(b)(1)(C). But as explained above, the activity of extending “consumer credit” under the MLA is a subset of the activity of extending “consumer credit” under TILA. Indeed, violations of the MLA can overlap with violations of TILA's disclosure requirements, as well as the CFPA's prohibition on deceptive acts or practices or other violations of Federal consumer financial law. The analysis under section 1025(b)(1)(C) of the CFPA is otherwise similar to that under section 1024(b)(1)(C) of the CFPA, and so there is no need to repeat it here. 47

The Bureau recognizes the role of the prudential regulators in conducting MLA supervision, including examinations, at very large banks and credit unions. Applicable statutes grant the prudential regulators broad supervisory and examination powers, which they use for various purposes, including assuring the safety and soundness of supervised institutions, assuring compliance with laws and regulations at those institutions, and other purposes. By contrast, the Bureau's authority under section 1025(b)(1)(C) concerns a targeted purpose: Detecting and assessing those “risks to consumers” that are “associated” with “activities subject to” Federal consumer financial laws, such as TILA. Conducting examinations for that particular purpose is distinct from the prudential regulators' authority to conduct examinations for the purpose of assessing compliance with the MLA (or for safety and soundness or other purposes) —including the fact that the prudential regulators' purposes are not based on the association with Federal consumer financial law discussed above. Even though some of the activities in Bureau examinations may be similar to activities in prudential regulators' examinations, they are for a different purpose. Nothing in the CFPA or in this interpretive rule limits in any way, or should be deemed to limit in any way, the prudential regulators' consumer compliance examinations of very large banks or credit unions, or their subsidiaries, for the purpose of assessing compliance with the MLA.

Section 1025 has a number of provisions that promote coordination and efficiency among the Bureau and the prudential regulators. The agencies work with each other to minimize regulatory burden that may result from their complementary authorities, while ensuring the efficient and effective protection of covered borrowers.

This is an interpretive rule issued under the Bureau's authority to interpret the CFPA, including under section 1022(b)(1) of CFPA, which authorizes guidance as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of Federal consumer financial laws, such as the CFPA. 48

As an interpretive rule, this rule is exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act. 49 Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 50 The Bureau has also determined that this interpretive rule does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring approval by the Office of Management and Budget under the Paperwork Reduction Act. 51

Pursuant to the Congressional Review Act, 52 the Bureau will submit a report containing this interpretive rule and other required information to the United States Senate, the United States House of Representatives, and the Comptroller General of the United States prior to the rule's published effective date. The Office of Information and Regulatory Affairs has designated this interpretive rule as not a “major rule” as defined by 5 U.S.C. 804(2).

Section 308 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)  1 established several goals related to minority depository institutions (MDIs): (1) Preserving the number of MDIs; (2) preserving the minority character in cases of merger or acquisition; (3) providing technical assistance to prevent insolvency of institutions not now insolvent; (4) promoting and encouraging creation of new MDIs; and (5) providing for training, technical assistance, and education programs.

On April 3, 1990, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC Board and FDIC, respectively) adopted the Policy Statement on Encouragement and Preservation of Minority Ownership of Financial Institutions (1990 Policy Statement). The framework for the 1990 Policy Statement resulted from key provisions contained in Section 308 of FIRREA. The 1990 Policy Statement provided information to the public and minority banking industry regarding the agency's efforts in achieving the goals of Section 308.

During the 1990s, many MDIs continued to underperform industry averages for profitability and experience failure rates that were significantly higher than those of the industry overall. In order to discuss the challenges that MDIs faced, and identify best practices and possible ways the regulatory agencies could promote and preserve MDIs, the FDIC and other banking regulatory agencies—with assistance from several minority bank trade associations—invited officers from 156 MDIs to participate in a “Bankers and Supervisors Regulatory Forum” held in March of 2001. Approximately 70 bankers attended.

The FDIC also formed an Interdivisional Working Group to consider measures to modernize the policies and procedures related to MDIs. The working group incorporated many suggestions from the March 2001 forum into a revised Policy Statement Regarding Minority Depository Institutions, issued by the FDIC, after notice and comment, in April of 2002 (2002 Policy Statement). 2 The FDIC issued the 2002 Policy Statement to provide additional information regarding the FDIC's initiatives related to Section 308. The 2002 Policy Statement provided a more structured framework that set forth initiatives of the FDIC to promote the preservation of, as well as to provide technical assistance, training, and educational programs for, MDIs by working with those institutions, their trade associations, and the other federal financial regulatory agencies.

Over the years, the FDIC has continued to modify and enhance its MDI program to better carry out the FDIC's efforts to meet the goals in Section 308 of FIRREA. The revisions in the proposed Statement of Policy are intended, in part, to strengthen and improve the various aspects of the MDI program and how each component of the MDI program is carried out by various responsible entities that are part of the MDI program. The proposed revisions to the 2002 Policy Statement reflected in the proposed Statement of Policy describe the FDIC's enduring and strengthened commitment to, and engagement with, MDIs in furtherance of its goal of preserving and promoting MDIs.

In 2019, the FDIC established a new MDI Subcommittee of the Advisory Committee on Community Banking (CBAC). The MDI Subcommittee held its inaugural meeting in December 2019. There are nine executives serving as members of the MDI Subcommittee, representing African American, Native American, Hispanic American, and Asian American MDIs across the country. The MDI Subcommittee provides recommendations regarding the FDIC's MDI program to the CBAC for consideration. The MDI Subcommittee serves as a source of feedback with regard to the FDIC's efforts to fulfill its statutory goals to preserve and promote MDIs; provides a platform for MDIs to promote collaboration, partnerships, and best practices; and identifies ways to highlight the work of MDIs in their communities.

The FDIC published, also in 2019, an MDI research study, which explores changes in MDIs, their role in the financial services industry, and their impact on the communities they serve. 3 The study period covered 2001 to 2018 and looked at the demographics, structural change, geography, financial performance, and social impact of MDIs.

Additionally, to discuss the challenges that MDIs face, provide information on best practices, and collaborate on possible ways the regulatory agencies can promote and preserve MDIs, in June of 2019, the FDIC hosted the Interagency MDI and Community Development Financial Institution (CDFI) Bank Conference, Focus on the Future: Prospering in a Changing Industry, in collaboration with the Office of the Comptroller of Currency and the Board of Governors of the Federal Reserve System. More than 80 MDI and CDFI bankers, representing 61 banks, attended the two-day conference. 4

All of these various efforts by the FDIC to enhance its MDI program have informed the proposed revisions to the Statement of Policy. The FDIC has received suggestions from bankers at outreach and trade association meetings as well as feedback from the June 2019 conference. The MDI Subcommittee has also provided feedback to the CBAC for consideration and recommendation to the FDIC. Many of these suggestions and feedback have been incorporated into the revised Statement of Policy. The following section summarizes the significant changes from the 2002 Policy Statement.

On September 25, 2020, the FDIC published in the Federal Register proposed revisions to its MDI Policy Statement. 5 The FDIC proposed changes in the following seven areas:

Technical assistance and other engagement. The proposed Statement of Policy clarified that technical assistance is not a supervisory activity and is not intended to present additional regulatory burden. Further, the proposed Statement of Policy stated that examination teams will not view requests for, or acceptance of, technical assistance negatively when evaluating institution performance or assigning ratings.

FDIC outreach. The proposed Statement of Policy was updated to provide additional outreach opportunities, including with the Chairman's office and the National Director for Minority and Community Development Banking.

MDI Subcommittee. The proposed Statement of Policy described the newly established FDIC MDI Subcommittee of the CBAC, which serves as source of feedback on FDIC strategies to fulfill statutory goals to preserve and promote MDIs. The MDI Subcommittee may also make recommendations or offer ideas to the CBAC for consideration and presentation to the FDIC. The MDI Subcommittee provides a platform for MDIs to promote collaboration, partnerships, and best practices. The MDI Subcommittee also identifies ways to highlight the work of MDIs in their communities.

Definitions. The proposed Statement of Policy added definitions for terms used in the MDI program: Technical assistance; training and education; and outreach. Technical assistance is defined as individual assistance that a regulator will provide to a MDI in response to an institution's request for assistance in addressing specific areas of concern. The proposed Statement of Policy also noted that technical assistance is a tool to provide on-going support to institutions in an effort to facilitate timely implementation of recommendations, full understanding of regulatory requirements, and in some instances, the viability of the institution. Training and education programs consist of instruction designed to impart proficiency or skills related to a particular job, process, or regulatory policy. This training and education can be provided in person, through webinars or conference calls, or in a conference setting. Outreach consists of FDIC representatives meeting with financial institutions with a primary focus of building relationships and open communication and providing information and resources. Outreach is generally offered by the FDIC and can include meetings between financial institution management and senior FDIC management.

Reporting. The proposed Statement of Policy reflects updated reporting requirements applicable to the FDIC, including the Annual Report to Congress on the Preservation and Promotion of Minority Depository Institutions pursuant to Section 367 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Section 308 of FIRREA. The Section 367 requirements were enacted since the Statement of Policy was last updated in 2002.

Measurement of effectiveness. The proposed Statement of Policy also established new requirements to measure the effectiveness of the MDI program. The National Director and the regional office staff will routinely solicit feedback from MDIs to assess the effectiveness of the FDIC's technical assistance, training and education, and outreach efforts and the MDI program in general. The FDIC will track instances of technical assistance, training and education, and outreach and solicit feedback on the effectiveness of these activities by administering periodic surveys and holding discussions with bank management.

Examinations. The proposed Statement of Policy added a description of how the FDIC applies rating systems to examinations of MDIs. Specifically, the proposed Statement of Policy described how the Uniform Financial Rating System (UFIRS) and the Uniform Interagency Consumer Compliance Rating System (UICCR) are designed to reflect an assessment of the individual institution, including its size and sophistication, the nature and complexity of its business activities, and its risk profile rather than a comparison to peer institutions

The FDIC sought comment generally on the proposed revisions to the Statement of Policy and asked six specific questions regarding aspects of the proposal. Seven comment letters were received. 6 The comments came from an insured financial institution, a financial institution trade organization, a non-profit organization, a service provider that serves minority depository institutions, and individuals. Commenters generally supported the proposed revisions to the Statement of Policy, however, some commenters also made specific recommendations to the Statement of Policy. These comments are discussed in more detail below. The FDIC is making one change to the Statement of Policy in response to comments received.

The FDIC received several comments on the methods described in the Statement of Policy that would be used to identify and provide useful engagement opportunities. One commenter suggested that additional technical assistance could be provided to MDIs in danger of failing. After consideration of this comment, the FDIC has decided not to make any related changes to the Statement of Policy. The FDIC already seeks to preserve the minority character of failing institutions before and during the resolution process, as required by Section 308 of FIRREA. Further, the FDIC provides ongoing supervisory oversight of institutions prior to failure through regular on-site examinations, visitations, off-site monitoring, and various offers to provide technical assistance.

One commenter requested that the Statement of Policy more explicitly state that outreach will include national and state banking industry trade associations. Another commenter suggested that collaboration with state banking agencies might enhance program content, delivery, and reach. Such collaboration already is contemplated by the Statement of Policy, so no changes are necessary. However, the FDIC agrees that it would be useful to explicitly include national and state bankers associations among the various external organizations with whom the FDIC will discuss opportunities to collaborate, the challenges faced by MDIs, and other topics, and has made a change to the Statement of Policy to reflect such outreach.

One group of academics suggested that MDI resources be centralized in a single location. This commenter further recommended that the burden of requesting services should be transferred from the MDIs to FDIC staff in Regional and Field offices. The FDIC suggests that the current structure of the MDI program, with a National Director and staff in the FDIC's Washington Office, Regional Coordinators in each of the FDIC's six Regional Offices, and additional staff in 82 Field Offices spread across the country, all available to respond to questions and to provide technical assistance, works well to provide resources to MDIs. The FDIC also assigns to every FDIC-supervised institution, of any size or ownership form, a case manager and a review examiner who are available for all supervisory activities or inquiries. The FDIC believes it is better to meet the needs of MDIs where they are, rather than in a central location, and has not made a change in response to these comments.

The same commenter suggested more could be done to reach out to MDIs and those in the process of organizing de novo MDIs, specifically recommending an annual informational conference for entrepreneurs seeking to enter the industry. The FDIC has in place a number of initiatives to assist existing and potential future MDIs. Regional Directors and their staff work with MDI organizers to help them understand application requirements and processes, and provide technical assistance throughout the process. This work includes the National Director's office and senior Regional management in the MDI organizer's respective region, hosting conference calls with the organizer addressing questions regarding MDI designation and other topics. The FDIC currently is developing videos targeted at entrepreneurs and others seeking to establish an MDI. The Statement of Policy is intended to provide general principles and commitments from the FDIC regarding the MDI program. In order for the Statement of Policy to be a living document that allows the FDIC to prioritize different initiatives and to move away from unsuccessful efforts, the Statement of Policy does not include many details about specific initiatives. The FDIC takes notice of the commenter's suggestion, but has not revised the Statement of Policy.

The FDIC received several comments on the definitions included within the Statement of Policy. Two commenters suggested that the FDIC should broaden MDI eligibility in the Statement of Policy to include women-led institutions. One of these commenters specifically recommended that the FDIC should consider implementing a requirement that in order for an institution to obtain MDI status, they must have at least a minimum of two women on their executive leadership boards. The FDIC, in response, notes that the Statement of Policy closely follows the statutory definitions of “minority depository institution” and “minority” set forth in Section 308 of FIRREA, which does not include women-owned or women-led institutions. Minority depository institutions have very unique challenges and serve distinct communities. The primary purpose of the FDIC's MDI program is to promote and preserve these institutions and develop resources specific to the needs of these institutions.

Another commenter recommended that the FDIC define the term “predominantly minority” in the context of a community the institution serves. The FDIC has established MDI Designation Assessment Procedures, which will be published and included in the publicly available Application Procedures Manual. These procedures provide the criteria that must be met by institutions seeking the MDI designation. The procedures also describe the FDIC's process for assessing an institution's eligibility for the designation. These procedures include steps for performing an assessment of the community served by the institution, consisting partly of a review of the minority population in the institution's target area.

The FDIC also received comments specifically relating to the definitions assigned to technical assistance, education, and outreach. One commenter recommended that the FDIC interpret as broadly as possible the specific instances within each category (technical assistance, training and education, outreach) which will likely benefit MDIs. In measuring the effectiveness of the MDI program, the FDIC regularly solicits comments from MDIs regarding the usefulness and quality of technical assistance, outreach, and education and training efforts of the FDIC. The FDIC thus has developed an understanding of, and will continue to assess, the most beneficial resources made available to institutions. The definitions in the Statement of Policy provide the FDIC with the flexibility to meet the evolving needs of the MDI program and will not be changed.

Regarding the term “technical assistance,” the FDIC received a comment suggesting that the FDIC use the term “professional consultation” in place of “technical assistance” to encourage working relationships with MDI executives. The FDIC responds that the term “technical assistance” is widely used throughout the banking industry and specifically set forth in Section 308 of FIRREA. The FDIC has not received any comments from institutions indicating they have any concerns with the term itself. Many institutions use the technical assistance and other resources, such as outreach, made available by the FDIC and have found the resources beneficial as they address challenges or require clarification on supervisory recommendations and processes as well as laws and regulations.

The same commenter noted that the proposed Statement of Policy provides a statement regarding the supervisory impact of requests for, or acceptance of, technical assistance. The commenter noted that, while its member institutions did not perceive a negative impact that served as a barrier to seeking technical assistance, the proposed clarification is laudable.

One commenter recommended that the FDIC consider whether MDIs might benefit from a clearly stated supervisory impact from participating in outreach activities similar to the statement included in the technical assistance definition, noting that technical assistance is not a supervisory activity. The FDIC has not received any feedback from MDI management indicating any perceived reluctance to communicate freely during outreach activities. Further, the FDIC understands the importance of developing strong working relationships with institution management, the development of which requires open communication. The FDIC encourages participants of all outreach activities to communicate any recommendations, questions, or concerns without worry of repercussion.

The FDIC received several comments on the types of information regarding the MDI program that would be useful to include in annual reports or the MDI program website. One commenter suggested, to encourage MDIs to use resources offered by the FDIC more fully, that the FDIC's annual report should highlight the FDIC's efforts in establishing new MDIs, success stories with growing MDIs, how the FDIC has assisted struggling MDIs, and, in the event of a failure, how the minority focus of the failed MDI has been retained by the acquiring institution. The FDIC does, and will continue to, highlight achievements made by MDIs within the Annual Report to Congress and other publications featuring the activities of MDIs. These publications will also capture supervisory activities promoting the creation of new MDIs, including the support provided during the de novo application process.

One commenter suggested the FDIC research the potential impact of MDIs on rural areas and how to successfully scale MDIs in rural areas. While not described in the proposed Statement of Policy, the FDIC considers the most pertinent studies for MDIs and the banking industry as a whole, as well as the timing of such research. The commenter also suggested the FDIC's website organization should be designed for users such as entrepreneurs, new managers of MDIs, growing MDIs, and faltering MDIs. The FDIC is updating the MDI program website to expand the scope of information contained therein. The FDIC will develop informational videos promoting the creation of MDIs and providing education on applying for deposit insurance and obtaining the MDI designation. As noted above, the FDIC is developing videos specifically for entrepreneurs and other parties interested in establishing a de novo MDI.

One commenter recommended the FDIC clarify whether the intended use of the results from periodic surveys and discussions with bank management will be shared with the MDI Subcommittee, the FDIC's Board, and the general public. The FDIC notes that the results of the effectiveness survey and comments provided by institution management informs the MDI program on key areas where the MDI program has been successful and areas where the FDIC can improve program delivery. These findings and discussions strengthen the MDI program by identifying key resources that have been or could be beneficial to institutions. The findings of the survey are shared with the MDI Subcommittee, CBAC, and the FDIC Board. The FDIC may consider including summary survey information in the Annual Report to Congress.

The FDIC received comments on methods to identify and provide technical assistance, outreach, and training education and resources that would be beneficial to minority depository institutions. One commenter suggested expanding the training and educational programs portion of the Engagement with MDIs section of the Statement of Policy to specifically include virtual environments and the services of private organizations in order to ensure that MDIs have a wide variety of solutions to meet their needs. The FDIC develops training material on laws, regulations, and guidance pertinent to the financial institutions it supervises. Any private companies interested in providing training to MDIs can contact trade associations or institutions directly.

Modern transport category airplanes can remain in service for decades. To ensure that an airplane's critical systems and back-up systems continue to meet FAA requirements, such as those in 14 CFR 25.1309, manufacturers may develop and rely on required actions that include CMRs. CMRs are limitations documented in the airplane's instructions for continued airworthiness (ICA) that require operators to periodically check systems or replace certain equipment in order to ensure the continued availability and functionality of those systems over time. 1 Air carriers have existing programs to schedule CMRs and comply with their requirements.

The FAA's recent review of the 737 MAX flight control system resulted in the determination that three additional CMR items are necessary to ensure the continued functioning of certain systems throughout the life of the airplane. The manufacturer proposed, and the FAA reviewed and approved, these three new CMRs ( i.e., 22-CMR-01, 22-CMR-02, and 27-CMR-09), which are described in Boeing Certification Maintenance Requirements Document D626A011-9-03, dated July 2020, and available in the docket for this AD.

Prior to return to service, initial inspections of these systems were completed when necessary on affected airplanes; this ensured the safety of the 737 MAX return to service. Due to most of the fleet being well below flight-hour thresholds that would require inspection, and Boeing's coordination with operators of affected airplanes to do initial inspections prior to return to service, the FAA determined this AD to incorporate the new CMR items could be issued subsequent to return to service. Consistent with that approach, Boeing released a Multi-Operator Message. This approach protects both the safety of the return to service and the long term safety of the fleet.

For newly produced airplanes, Boeing has incorporated the three additional CMRs into the ICA for every airplane delivered on or after November 20, 2020 (the effective date of AD 2020-24-02 (85 FR 74560, November 20, 2020) (AD 2020-24-02)). These CMRs have also already been incorporated into the maintenance programs for all U.S.-registered 737 MAX airplanes that had been delivered before the effective date of AD 2020-24-02 and are included in the applicability of AD 2020-24-02.

The manufacturer has also communicated guidance to incorporate these CMRs into the maintenance programs of all affected 737 MAX operators, via Boeing Multi Operator Message MOM-MOM-20-0891-01B, dated December 22, 2020.

Since these CMRs are part of the ICA for all 737 MAX airplanes delivered on or after November 20, 2020 (the effective date of AD 2020-24-02), this AD is applicable only to airplanes with an original airworthiness certificate or original export certificate of airworthiness issued prior to that date.

These CMRs are necessary because a potential latent failure of a flight control system function, as tested by one of these three CMRs, if combined with unusual flight maneuvers or with another flight control system failure, could result in reduced controllability of the airplane.

After these CMRs have been incorporated into the operator's maintenance and inspection program, they may be treated as other CMRs on the airplane ( i.e., operators may propose any change, escalation, or cancellation of these CMRs by following the processes described in AC 25-19A, and no AMOC would be required).

The FAA is issuing this AD because the agency has determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This AD requires a revision of the existing maintenance or inspection program, as applicable, to incorporate additional CMR item information.

Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq. ) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for “good cause,” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without providing notice and seeking comment prior to issuance. Further, section 553(d) of the APA authorizes agencies to make rules effective in less than thirty days, upon a finding of good cause.

As discussed previously, all U.S.-registered airplanes are already in compliance with the requirements of this AD. Accordingly, notice and opportunity for prior public comment are unnecessary, pursuant to 5 U.S.C. 553(b)(3). In addition, for the foregoing reason, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days.

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include Docket No. FAA-2021-0013 and Project Identifier AD-2021-00087-T at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to https://www.regulations.gov, including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this final rule.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Ken Fairhurst, Manager, Systems and Equipment Section, FAA, Seattle ACO Branch, 2200 South 216th St., Des Moines, WA 98198; phone and fax: 206-231-3500; email: 9-FAA-SACO-AD-Inquiry@faa.gov. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.

Although the FAA estimates that 72 airplanes of U.S. registry are included in the applicability of this AD, all of these airplanes are already in compliance with the requirements of this AD. Nevertheless, the FAA provides the following cost estimate.

The FAA has determined that revising the existing maintenance or inspection program takes an average of 90 work-hours per operator, although the agency recognizes that this number may vary from operator to operator. Since operators incorporate maintenance or inspection program changes for their affected fleets, the FAA has determined that a per-operator estimate is more accurate than a per-airplane estimate. Therefore, the FAA estimates the average total cost per operator to be $7,650 (90 work-hours × $85 per work-hour).

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

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

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

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

(2) Will not affect intrastate aviation in Alaska.

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

The National Marine Sanctuaries Act (NMSA) (16 U.S.C. 1431 et seq. ) authorizes the Secretary of Commerce (Secretary) to designate and protect as national marine sanctuaries areas of the marine or Great Lakes environment that are of special national significance due to their conservation, recreational, ecological, historical, scientific, cultural, archeological, educational, or aesthetic qualities. Day-to-day management of national marine sanctuaries has been delegated by the Secretary to the Office of National Marine Sanctuaries (ONMS) within the National Oceanic and Atmospheric Administration (NOAA). The primary objective of the NMSA is to protect the sanctuary system's biological and cultural resources, such as marine ecosystem, marine animals, historic shipwrecks, and archaeological sites.

The approximately 962 square-mile area designated as the Wisconsin Shipwreck Coast National Marine Sanctuary (WSCNMS) encompasses a portion of the waters and submerged lands of Lake Michigan adjacent to Ozaukee, Sheboygan, Manitowoc, and Kewaunee Counties. Principal cities in this area include Port Washington, Sheboygan, Manitowoc, and Two Rivers. The boundary includes approximately 82 miles of shoreline and extends approximately 7 to 16 miles from the shoreline, and is entirely located within Wisconsin state waters.

The area includes a nationally significant collection of underwater cultural resources, including 36 known shipwrecks and approximately 59 suspected shipwrecks. The historic shipwrecks in the sanctuary are representative of the vessels that sailed and steamed on Lake Michigan during the nineteenth and twentieth centuries, carrying grain and raw materials east and coal, manufactured goods, and people west. During this period entrepreneurs and shipbuilders on the Great Lakes launched tens of thousands of ships of many different designs. Sailing schooners, grand palace steamers, revolutionary propeller-driven passenger ships, and industrial bulk carriers transported materials that were essential to America's business and industry. In the process they brought hundreds of thousands of people to the Midwest and made possible the dramatic growth of the region's farms, cities, and industries. The Midwest, and indeed the American Nation, could not have developed with such speed and with such vast economic and social consequences without the Great Lakes. Twenty-one of the 36 shipwreck sites in the sanctuary are listed on the National Register of Historic Places. Many of the shipwrecks retain an unusual degree of archeological and architectural integrity, with several vessels nearly intact. Well preserved by Lake Michigan's cold, fresh water, the shipwrecks in the WSCNMS possess exceptional historical, archaeological and recreational value. Additional underwater cultural resources, such as submerged aircraft, docks, piers, and isolated artifacts also exist, as does the potential for prehistoric (pre-contact) sites and artifacts.

Establishing a national marine sanctuary in Wisconsin waters will complement and supplement existing state-led preservation efforts, research programs, and public outreach initiatives. Threats to the nationally significant underwater cultural resources in the area include both natural processes and human activities. In some cases human activities can threaten the long term sustainability of historic shipwrecks and other underwater cultural resources, and negatively impact their recreational and archaeological value. These negative impacts include anchor damage from visiting dive boats, damage from poorly attached mooring lines, looting of artifacts, movement of artifacts within a shipwreck site, entanglements of remotely-operated vehicle tethers, and entanglements of fishing gear. Additional threats to the national marine sanctuary's resources include human-introduced invasive mussels and the human disturbance and natural deterioration also threaten known and undiscovered sanctuary resources. Future discoveries may include newly uncovered shipwrecks in shallow, sandy lake bottom, as well as yet-to-be-discovered intact shipwrecks the lie in deeper areas.

Consistent with the community-based sanctuary nomination (described below), the national marine sanctuary will also: (a) Build on the 30-year investment the citizens of Wisconsin have made in the identification, interpretation, and preservation of shipwrecks and other maritime resources; (b) build on state and local tourism initiatives within the many communities that have embraced their centuries-long maritime relationship with Lake Michigan, the Great Lakes region, and the nation; (c) enhance the existing state management program; and (d) provide access to NOAA's extended network of scientific expertise and technological resources, increase research efforts, and provide an umbrella for the coordination of these activities. The national marine sanctuary will also enhance existing educational initiatives and provide additional programming and technology for K-12, post-graduate, and the general public across the state.

On December 2, 2014, pursuant to section 304 of the NMSA and the Sanctuary Nomination Process (SNP; 79 FR 33851), Wisconsin Governor Scott Walker, on behalf of the State of Wisconsin; the cities of Two Rivers, Manitowoc, Sheboygan, and Port Washington; and the counties of Ozaukee, Sheboygan, and Manitowoc, submitted a nomination asking NOAA to consider designating this area of Wisconsin's Lake Michigan waters as a national marine sanctuary. The State of Wisconsin's selection of this geographic area for the nomination drew heavily from a 2008 report conducted by the Wisconsin History Society and funded by the Wisconsin Coastal Management Program (Wisconsin's Historic Shipwrecks: An Overview and Analysis of Locations for a State/Federal Partnership with the National Marine Sanctuary Program, 2008, https://www.wisconsinshipwrecks.org/Files/Wisconsins%20Historic%20Shipwrecks.pdf ).

The nomination also identified opportunities for NOAA to strengthen and expand on resource protection, education, and research programs by State of Wisconsin agencies and in the four communities along the Lake Michigan coast. NOAA completed its review of the nomination, and on February 5, 2015, added the area to the inventory of nominations that are eligible for designation. All nominations submitted to NOAA can be found at http://www.nominate.noaa.gov/nominations/.

On October 7, 2015, NOAA initiated the public scoping process with the publication of the Notice of Intent (NOI) in the Federal Register (80 FR 60631), soliciting public input on the proposed designation and informing the public of the Agency's intention to prepare a draft environmental impact statement (DEIS) to evaluate alternatives related to the proposed designation of WSCNMS under the NMSA. That announcement initiated a 90-day public comment period during which NOAA solicited additional input related to the scale and scope of the proposed sanctuary, including ideas presented in the community nomination. The NOI also announced NOAA's intent to fulfill its responsibilities under the requirements of the National Historic Preservation Act (NHPA).

In November 2015, NOAA hosted three public meetings and provided additional opportunities for public comments through the www.regulations.gov web portal and by traditional mail. The comment period closed January 15, 2016. All comments received, through any of these formats, were publicly posted on the www.regulations.gov web portal (see: https://www.regulations.gov/docket?D=NOAA-NOS-2015-0112. The public comments submitted during the scoping process were used by NOAA in preparing the proposed sanctuary regulations and the draft environmental impact statement and draft management plan (DEIS/DMP) associated with the proposed sanctuary designation.

On January 9, 2017, NOAA published a notice in the Federal Register announcing the proposed designation of approximately 1,075 square miles of waters and submerged lands of Lake Michigan adjacent to Manitowoc, Sheboygan, and Ozaukee counties in the State of Wisconsin. (82 FR 2269). NOAA also provided public notice of the availability of the related DEIS/DMP (82 FR 2269; 82 FR 1733). All three documents (proposed rule, DEIS, and DMP) were prepared in close consultation with the State of Wisconsin. NOAA opened an 81-day comment period on the proposed rule and the DEIS/DMP, which closed on March 31, 2017. During the public comment period, NOAA held four public meetings in the Wisconsin cities of Algoma, Manitowoc, Sheboygan, and Port Washington.

All public comments on the proposed designation are available at https://www.regulations.gov/docket?D=NOAA-NOS-2016-0150. NOAA's response to the public comments are included in Appendix B of the FEIS, which was made available on June 5, 2020 (85 FR 34625) and in this document (Section IV).

Based on public comments received between January and March 2017, internal deliberations, interagency consultations, meetings with constituent groups, and evaluation of this input with the State of Wisconsin, NOAA has made the following changes to the proposed rule. NOAA has also made conforming changes to the FEIS/FMP.

In response to public comments and discussions with the state, NOAA chose to modify the sanctuary boundary area from 1,075 square miles, as originally proposed, to 962 square miles. This new boundary includes 36 known shipwrecks and the potential for approximately 59 new sites to be discovered. Specific changes include: (1) In response to comments raised by the commercial shipping industry, excluding all federally authorized areas (navigation channels) from the sanctuary; (2) in response to comments raised by shoreline property owners and certain industry groups and in consultation with the State of Wisconsin, using the Low Water Datum rather than the Ordinary High Water Mark as the sanctuary's western/shoreline boundary; (3) in consultation with the State of Wisconsin, moving the southern sanctuary boundary northward to approximately 650 feet south of the shipwreck Northerner, putting the boundary closer to the nominating community of Port Washington and using a known shipwreck site to demarcate the sanctuary boundary, rather than a political boundary ( i.e., a county or city line); and (4) in response to public comments, moving the northern boundary approximately 1.7 miles northward to include the shipwreck America (in Kewaunee County). A detailed description of these boundary modifications can be found in Chapter 3 of the FEIS. NOAA's response to these and other public comments can be found in Appendix B of the FEIS and in this document (Section IV).

In the proposed rule, NOAA referred to the proposed sanctuary as the “Wisconsin-Lake Michigan National Marine Sanctuary (WLMNMS).” However, based on comments received from the public and community partners, NOAA changes the sanctuary name with this final rule to Wisconsin Shipwreck Coast National Marine Sanctuary (WSCNMS), which better describes the purpose of the sanctuary, and, as indicated by local communities, provides stronger opportunities for marketing and branding.

In response to public comments, NOAA revises the definitions of “sanctuary resource” and “shipwreck site” for clarity. In the proposed rule, NOAA defined “sanctuary resource” as “prehistoric, historic, archaeological, and cultural sites and artifacts within the sanctuary boundary, including but not limited to, all shipwrecks and related components.” With this final rule, NOAA deletes “including but not limited to, all shipwrecks and related components” and replaces it with “including all shipwreck sites,” thus revising the site-specific definition of “sanctuary resources,” located in section 922.211(a)(1), to now mean “all prehistoric, historic, archaeological, and cultural sites and artifacts within the sanctuary boundary, including all shipwreck sites.” NOAA made this revision to clarify this sanctuary's emphasis on the protection of shipwrecks and shipwreck sites, and to better align with state definitions.

Additionally, the proposed rule broadly defined “shipwreck site” to mean any sunken watercraft, its components, cargo, contents, and associated debris field (section 922.211(a)(2)). However, with this final rule, NOAA revises the definition in section 922.211(a)(2) for “shipwreck site” by adding “historic” to clarify that NOAA is focused on historic shipwrecks ( i.e., not all shipwrecks, but those that demonstrate an important role in or relationship with maritime history). This addition is specifically added to respond to concerns about defining recent or contemporary sunken craft or objects as sanctuary resources. For the purposes of this rule, “historic” takes its definition from “historical resource” located in section 922.3 of the National Marine Sanctuary Program regulations.

As explained above in the DATES section of this document, NOAA postpones the effective date for the regulation that prohibits grappling into or anchoring on shipwreck sites until October 1, 2023. The purpose of this postponement is to provide NOAA with adequate time to develop a shipwreck mooring program and plan, begin installing mooring buoys, seek input from the dive community about the mooring buoy plan, and develop best practices for accessing shipwrecks when mooring buoys are not present. During this period, NOAA will also work with stakeholders to explore the concept of permitting certain prohibited activities ( e.g., allowing divers to attach mooring lines directly to some shipwreck sites).

All other regulations will become effective as described in the DATES section above.

With this final rule, NOAA is implementing the following site-specific regulations for WSCNMS.

NOAA amends the National Marine Sanctuary Program regulations at 15 CFR part 922 by adding a new subpart (subpart T) that contains site-specific regulations for the WSCNMS. This subpart includes the boundary description, contains definitions of common terms used in the new subpart, provides a framework for co-management of the sanctuary, identifies prohibited activities and exceptions, and establishes procedures for certification of existing uses, permitting otherwise prohibited activities, and emergency regulation procedures. Several conforming changes are also made to the national sanctuary regulations as described below.

The sanctuary name is “Wisconsin Shipwreck Coast National Marine Sanctuary (WSCNMS).”

NOAA designates a 726 square nautical mile (962 square mile) area of Lake Michigan waters off Ozaukee, Sheboygan, Manitowoc, and Kewaunee counties of Wisconsin as WSCNMS. The sanctuary's western/shoreward boundary is defined by the Low Water Datum as defined by the International Great Lakes Datum, 1985 (IGLD 1985) as an elevation of 577.5 ft above sea level, while the lakeward boundary is drawn to include all known shipwrecks between the shipwreck America to the north and shipwreck Northerner to the south. The sanctuary extends approximately 16 miles offshore at its greatest extent. Within this boundary are 36 known shipwrecks, including 21 on the National Register of Historic Places. The harbors and marinas of Two Rivers, Manitowoc, Sheboygan, and Port Washington are not included in the sanctuary boundary, nor are federally authorized areas (channels). These are channels that have been dredged by U.S. Army Corps of Engineers adjacent to the ports and harbors. The detailed legal sanctuary boundary description is included in section 922.210 and the coordinates are located in 15 CFR part 922, subpart T, appendix A.

A map of the area is shown in the FEIS on page 4, and can also be found at https://sanctuaries.noaa.gov/wisconsin/.

NOAA is including a site-specific definition of “sanctuary resources” for the WSCNMS to include only the underwater cultural resources found in this area in accordance with the purpose of this designation. The definition does not include biological and ecological resources of the area. Creating this narrow, site-specific definition requires NOAA to modify the national definition of “sanctuary resource” in the national regulations at section 922.3 to add an additional sentence that defines the site-specific definition for WSCNMS at section 922.211(a). This is similar to the approach taken for other national marine sanctuaries, such as Thunder Bay National Marine Sanctuary, that do not make use of the full national “sanctuary resource” definition. The WSCNMS definition of “sanctuary resources,” located in section 922.211(a)(1), means all prehistoric, historic, archaeological, and cultural sites and artifacts within the sanctuary boundary, including all shipwreck sites. The term “shipwreck site” is further defined as any historic sunken watercraft, its components, cargo, contents, and associated debris field. This rule also incorporates and adopts other common terms defined in the existing national regulations at section 922.3. One of the common terms adopted (without modification) is “National Marine Sanctuary” or “Sanctuary,” which means an area of the marine environment of special national significance due to its resource or human-use values, which is designated as such to ensure its conservation and management.

To enhance opportunities and build on existing protections, NOAA and the State of Wisconsin will collaboratively manage the sanctuary. NOAA establishes the framework for co-management at section 922.212 and will develop a Memorandum of Agreement (MOA) with the state to provide greater details of co-management. NOAA and the state may develop additional agreements as necessary that would provide details on the execution of sanctuary management, such as activities, programs, and permitting programs that can also be updated to adapt to changing conditions or threats to the sanctuary resources. Any proposed changes to sanctuary regulations or boundaries will be jointly coordinated with the state and will be subject to public review as mandated by the NMSA and other Federal statutes.

The regulations for WSCNMS prohibit any person from moving, removing, recovering, altering, destroying, possessing or otherwise injuring, or attempting to move, remove, recover, alter, destroy, possess or otherwise injure a sanctuary resource. This prohibition supplements existing Wisconsin laws that prohibit damaging shipwrecks. Wisconsin State statute (Wis. Stat. § 44.47), which has been in effect since 1991 and is related to removing or damaging shipwrecks, currently applies to the area and will continue to apply to these resources after sanctuary designation.

The regulations for WSCNMS prohibit the use of grappling into or anchoring on shipwreck sites to protect fragile shipwrecks within the sanctuary from damage. To provide the public adequate notice of shipwreck locations, NOAA will prepare and make available sanctuary maps with known and suspected shipwreck sites. Shipwreck sites not listed on maps ( i.e., new discoveries as they occur) are considered sanctuary resources and the prohibition on anchoring and grappling still apply. The final management plan includes activities related to surveying the sanctuary area and locating additional shipwreck sites. As appropriate, NOAA will update the maps as new shipwreck sites are found.

Because NOAA seeks to promote public access, while also ensuring sound resource protection, an initial focus of the sanctuary management plan will be the installation of permanent mooring systems at priority sanctuary shipwreck sites. The moorings will provide a secure, visible, and convenient anchoring point for users, and eliminate the need for grappling. NOAA intends to publish guidelines on best practices for accessing shipwrecks when mooring buoys are not present. An example of a best practice could include instructions on using a weighted line and surface float to mark a wreck for divers to descend and ascend. This weighted line would not be used as an anchoring line; it would need to be continuously tended and removed before the dive boat left the area.

NOAA is postponing the effective date for this prohibition for October 1, 2023. The purpose of this postponement is to provide NOAA with adequate time to develop a shipwreck mooring program and plan, begin installing mooring buoys, seek input from the dive community about the mooring buoy plan, and develop best practices for accessing shipwrecks when mooring buoys are not present. During this period, NOAA will also work with stakeholders to explore the concept of permitting certain prohibited activities ( e.g., allowing divers to attach mooring lines directly to some shipwreck sites). All other regulations would remain in effect during this postponement.

The regulations for WSCNMS prohibit interfering with sanctuary enforcement activities. This regulation will assist in NOAA's enforcement of the sanctuary regulations and strengthen sanctuary management.

The regulations for WSCNMS exempt from the three prohibitions described above activities that respond to emergencies that threaten lives, property, or the environment, or are necessary for law enforcement purposes.

As part of the designation, NOAA will have the authority to issue emergency regulations for this sanctuary. Emergency regulations will be used in limited cases and under specific conditions when there is an imminent risk to sanctuary resources and a temporary prohibition would prevent the destruction or loss of those resources. NOAA will only issue emergency regulations that address an imminent risk for a fixed amount of time for a maximum of 6 months, which can be extended a single time for not more than an additional six months. Emergency regulations will only be exempted from notice and comment requirements under Administrative Procedures Act when the agency “for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” A full rulemaking process must be undertaken, including a public comment period, to consider making an emergency regulation permanent. NOAA modifies the national regulations at § 922.44 to include WSCNMS in the list of sanctuaries that have site-specific regulations related to emergency regulations, and adds detailed site-specific emergency regulations to the WSCNMS regulations at § 922.214.

The regulations for WSCNMS include the authority for NOAA to issue permits to allow certain activities that would otherwise violate the prohibitions listed and described above. Similar to other national marine sanctuaries, NOAA considers these permits for the purposes of education, research, or management. To address the above additions to the ONMS general permit authority for WSCNMS, NOAA is amending regulatory text in the program-wide regulations in part 922, subpart E, to add references to subpart T, as appropriate. NOAA would also add a new § 922.215 in subpart T titled “Permit procedures and review criteria” that would address site-specific permit procedures for WSCNMS.

The regulations for WSCNMS include language at section 922.216 describing the process by which NOAA may certify pre-existing authorizations or rights within the WSCNMS area. Here the term pre-existing authorizations or rights refers to any leases, permits, licenses, or rights of subsistence use or access in existence on the date of sanctuary designation ( see 16 U.S.C. 1434(c); 15 CFR 922.47). Consistent with this definition, WSCNMS regulations at section 922.216 states that certification is the process by which these pre-existing authorizations that violate sanctuary prohibitions may be allowed to continue, and the sanctuary may regulate the exercise of the pre-existing authorizations consistent with the purposes for which the sanctuary was designated. Applications for certifying pre-existing authorizations must be received by NOAA within 180 days of the Federal Register notice announcing the effective date of the designation.

NOAA may also allow an otherwise prohibited activity to occur in the sanctuary, if such activity is specifically authorized by any valid Federal, state, or local lease, permit, license, approval, or other authorization issued after sanctuary designation. Authorization authority is intended to streamline regulatory requirements by reducing the need for multiple permits and would apply to all proposed prohibitions at § 922.213. As such, NOAA is amending the regulatory text at § 922.49 to add reference to subpart T.

NOAA has the authority under the NMSA to issue special use permits (SUPs) at national marine sanctuaries as established by section 310 of the NMSA. SUPs can be used to authorize specific activities in a sanctuary if such authorization is necessary to: (1) Establish conditions of access to and use of any sanctuary resource; or (2) promote public use and understanding of a sanctuary resource. The activities that qualify for a SUP are set forth in the Federal Register (82 FR 42298; September 7, 2017). Categories of SUPs may be changed or added to through public notice and comment. NOAA would not apply the SUP to activities in place at the time of the WSCNMS designation.

SUP applications are reviewed to ensure that the activity is compatible with the purposes for which the sanctuary is designated and that the activities carried out under the SUP be conducted in a manner that do not destroy, cause the loss of, or injure sanctuary resources. NOAA also requires SUP permittees to purchase and maintain comprehensive general liability insurance, or post an equivalent bond, against claims arising out of activities conducted under the permit. The NMSA allows NOAA to assess and collect fees for the conduct of any activity under a SUP. On November 19, 2015, NOAA published public notice (80 FR 72415) of the methods, formulas and rationale for the calculations it will use in order to assess fees associated with SUPs. The fees collected could be used to recover the administrative costs of issuing the permit, the cost of implementing the permit, monitoring costs associated with the conduct of the activity, and the fair market value of the use of sanctuary resources.

The general regulations in part 922, subpart A, and part 922, subpart E, for regulations of general applicability are amended by this action so that the regulations are accurate and up-to-date. The following 10 sections are updated to reflect the increased number of sanctuaries or to add subpart T to the list of sanctuaries:

Section 304(a)(4) of the NMSA requires that the terms of designation include the geographic area included within the sanctuary; the characteristics of the area that give it conservation, recreational, ecological, historical, research, educational, or aesthetic value; and the types of activities that will be subject to regulation by the Secretary of Commerce to protect these characteristics. Section 304(a)(4) also specifies that the terms of designation may be modified only by the same procedures by which the original designation was made.

NOAA is establishing terms of designation that describe the geographic area, resources, and activities as described above. NOAA is adding the terms of designation language as appendix B to the WSCNMS regulations at 15 CFR part 922, subpart T.

Upon further examination, NOAA has decided to remove Article V., Section 2 from the proposed Terms of Designation. NOAA proposed this provision to incorporate the generally prevailing judicial precedent and regulatory practice that, to the extent two laws appear to conflict ( e.g., two laws apply to the same activity), the courts or the agencies will attempt to harmonize them to give effect to both laws if possible. See, e.g., Swinomish Indian Tribal Cmty. v. BNSF Ry. Co., 951 F.3d 1142, 1156 (9th Cir. 2020). NOAA has, however, determined that this proposed provision is not a fundamental component of the Terms of Designation ( e.g., the establishment of the sanctuary) or the regulatory scheme finalized herein. In the face of any potential conflicts of federal laws in the waters of the sanctuary, such as where a sanctuary prohibition may interfere with Federal safety laws, NOAA would work with that agency to ensure that the purpose of each law is given fullest effect. The remaining language in that section referencing pre-existing authorizations such as a lease, license or permit is found in section 304(c) of the NMSA, so the removal of the language in the Terms of Designation does not change NOAA's authorities. NOAA will coordinate with the State of Wisconsin regarding any such authorization as specified in §  922.212 of these regulations regarding co-management of the site.

During the January 2017 through March 31, 2017, public review comment period, NOAA received 566 written comments on the DEIS/DMP and proposed rule. Approximately 400 people attended four public meetings during the week of March 13, 2017, in the Wisconsin towns of Algoma, Manitowoc, Sheboygan, and Port Washington, with 75 people providing verbal comments. Four petitions were submitted with public comments: One with 163 signatures of individuals supporting the Wisconsin sanctuary proposal exclusively; one with 128 businesses supporting both the Wisconsin and Maryland (Mallows Bay National Marine Sanctuary) sanctuary proposals; and two petitions with 51 total signatures in opposition to the Wisconsin sanctuary.

For the purposes of managing responses to public comments, NOAA grouped similar comments by theme. These themes align with the content of the draft proposed rule that identified the purposes and needs for a national marine sanctuary, and the draft management plan that identified the proposed non-regulatory programs and sanctuary operations. The themes are identified below, followed by NOAA's response.

1. Comment: NOAA received many comments supporting the opportunity for a new sanctuary to promote tourism to coastal communities. Commenters believe that national exposure and increased cooperation among the communities will result in increased numbers of visitors to the region.

Response: NOAA agrees that Wisconsin Shipwreck Coast National Marine Sanctuary (WSCNMS) would create positive impacts to tourism. The partnerships developed between NOAA, the State of Wisconsin, and the communities during the nomination and designation processes will help in achieving this goal. The WSCNMS final management plan includes a strategy and action plan that supports this goal.

2. Comment: NOAA received many comments supporting educational opportunities for a sanctuary to work with local museums and school districts to engage people in Wisconsin's maritime history and the Great Lakes.

Response: National marine sanctuaries across the system have robust education programs. It is a priority for NOAA to educate and engage people in national marine sanctuaries. The final management plan includes strategies and action plans to develop education programs with state and community partners that will provide a variety of educational experiences. The WSCNMS final management plan includes actions that support this goal.

3. Comment: NOAA received many comments highlighting the opportunity for a new sanctuary to promote Wisconsin's maritime heritage.

Response: The sanctuary designation is an opportunity to partner with the State of Wisconsin and communities to tell the many stories of centuries of exploration, travel, and commerce on the Great Lakes. The sanctuary provides a platform to share Wisconsin's stories with local, regional, and national audiences. The WSCNMS final management plan includes actions that support this goal.

4. Comment: NOAA received several comments by researchers expressing interest in partnering with the sanctuary on both archaeological and multidisciplinary projects.

Response: Across the nation, national marine sanctuaries partner with researchers to explore, document, and better understand sanctuary resources. NOAA expects to attract and partner with a variety of researchers in the sanctuary, and the final management plan includes actions that support this goal.

5. Comment: NOAA received many comments from lakeshore landowners expressing concern about the proposal to use the ordinary high water mark (OHWM) as the sanctuary's western/shoreline boundary. The key concerns were: (1) That this boundary choice would negatively impact riparian rights of lakeshore property owners; (2) that the proposal would allow public access to areas below the OHWM where riparian owners currently have exclusive access; (3) that using the OHWM as the sanctuary's western boundary would impact property values because the land would change from state to federal ownership; and (4) that, more generally, using the OHWM was seen as federal overreach and would result in more “red tape” and permitting.

Response: NOAA's proposal to designate a national marine sanctuary recognizes the state's sovereignty over its waters and submerged lands and does not change state ownership of public bottomlands; that is, no federal ownership of Wisconsin public lands is created by the sanctuary designation. Likewise, NOAA's proposal to designate a national marine sanctuary would not change existing riparian rights of the property owners of Wisconsin, nor would it change state law regarding public access to the area in which shoreline property owners have exclusive access. NOAA proposed the OHWM in the draft designation because it would be consistent with the state's regulatory boundary. Furthermore, after considering public comments about using the OHWM as the western/shoreline sanctuary boundary, NOAA is now proposing adopting the low water datum (LWD) as that boundary. NOAA is doing so because the LWD is more lakeward than the OHWM, and would move the sanctuary boundary “lower down the beach” than the OHWM, thereby removing much of the beach from NOAA jurisdiction and related riparian rights concerns.

Notably, the LWD is set at an elevation of 577.5 feet. The lowest recorded water level on Lake Michigan is 576.02 feet. This effectively places the sanctuary boundary nearly at the all-time low water level mark for Lake Michigan. Since riparian owners have exclusive use of the beach between the OHWM and the water's edge, using the LWD effectively places the sanctuary boundary at the most lakeward extent of this area as practicable. See Section 3.3.2 in the final environmental impact statement for a detailed discussion of the difference between OHWM and LWD.

NOAA realizes that proposing using the LWD rather than the OHWM differs from its original proposal in that it leaves a portion of the shoreline (the area between the OHWM and LWD) outside of sanctuary management; any cultural resources found in this area would not benefit from sanctuary resource protection. NOAA and the State of Wisconsin are not currently aware of shipwrecks in the sanctuary that come up to the OWHM, but depending on lake levels, it is possible that shipwrecks or parts of shipwrecks that are currently buried can become unburied. The Wisconsin Historical Society has determined that several undiscovered shipwrecks may lie in the surf zone. If a cultural resource was discovered between the OHWM and the LWD that resource would still be under state jurisdiction because all land from the OHWM lakeward are state bottomlands.

6. Comment: Certain industry stakeholders commented that NOAA should use the low water datum as the shoreward boundary of the sanctuary to ensure that the current beneficial practice of beach nourishment using dredged materials is continued.

Response: NOAA agrees and proposes that the LWD should be used as the sanctuary's landward boundary. In addition, NOAA recognizes in the FEIS several activities important to commercial shipping, including beach nourishment, and has not proposed regulations specifically prohibiting use of dredge spoil within the sanctuary. Beach nourishment using dredge spoil is already regulated by the USACE and the State of Wisconsin. NOAA, through its co-management arrangement with the state and relationship with USACE, intends to coordinate a response if a particular renourishment project has the potential to injure known or suspected cultural resources within the sanctuary.

7. Comment: NOAA received comments from industry stakeholders stating that certain areas important to commercial shipping should be excluded from the sanctuary. NOAA also received suggested clarifying language to be included in the FEIS on the topic of dredging, and questions about the impact of the designation on dredging.

Response: To ensure compatible use with commercial shipping and other activities (such as dredging for commercial ship traffic), NOAA in the DEIS excluded the ports, harbors, and marinas of Two Rivers, Manitowoc, Sheboygan, and Port Washington from the sanctuary boundary. In the FEIS, NOAA has also excluded federally authorized areas (channels) from the sanctuary.

NOAA also included in Section 3.4.3.3 of the FEIS additional language, as suggested by the USACE, that specifies the types of activities important to commercial shipping. Specifically, “. . . routine operations and maintenance activities such as dredging, dredge material placement (nearshore/beach nourishment), and breakwater maintenance.” Although NOAA would not regulate these activities per se, the sanctuary prohibition on injuring a sanctuary resource would ensure that these activities would not negatively impact underwater cultural resources.

8. Comment: NOAA received several comments noting that the water's edge should be used as the sanctuary's western/shoreline boundary.

Response: NOAA did not consider using the water's edge for a boundary, because it would create a dynamic “moving” sanctuary boundary where cultural resources were variously within or beyond the sanctuary boundary, depending on lake levels at a given time. NOAA proposes using the LWD as the sanctuary's western/shoreline boundary. See Comment 5 for more information.

9. Comment: NOAA received several comments stating that the sanctuary's western/shoreline boundary should be consistent with state law.

Response: As indicated in the DEIS, NOAA selected the OHWM as the landward boundary as its preferred alternative because it was consistent with the state's jurisdiction for managing underwater cultural resources. However, as indicated above in response to Comment 5, NOAA proposes to use the LWD as the sanctuary's landward boundary. Addressing the public's concern about riparian interests outweighs the benefit of an identical shoreline boundary.

10. Comment: NOAA received several comments asking how the establishment of the sanctuary would impact the findings of the Wisconsin Supreme Court case regarding property owner rights ( Doemel v. Jantz, 1923).

Response: Sanctuary designation would not change the interpretation or application of the Wisconsin Supreme Court case ( Doemel v. Jantz, 1923 ).

11. Comment: NOAA received a few comments urging use of a different boundary, because no shipwrecks come up to the OHWM.

Response: Refer to Comment 5 above. This comment is addressed by NOAA use of the LWD as the sanctuary's western/shoreline boundary.

12. Comment: NOAA received many comments supporting Boundary Alternative B (1,260 square miles, includes additional waters off Kewaunee County), which was larger than NOAA's preferred alternative in the DEIS.

Response: NOAA's preferred boundary alternative includes one shipwreck in Kewaunee County (schooner America ), but does not include additional waters off Kewaunee County. America is listed on the National Register of Historic Places, supporting its inclusion in the sanctuary and the aim of protecting nationally significant resources.

13. Comment: NOAA received one comment stating that Kewaunee County should not be included because a diverse group of stakeholders has not been involved to ensure there is no negative impact to the county. The commenter noted it would be better to see first how the sanctuary impacts the counties in NOAA's preferred boundary alternative.

Response: Overall, public comments from Kewaunee County were in favor of including Kewaunee County. Additionally, NOAA held one of its public comment meetings in Algoma (located in Kewaunee County), and any member of the public could comment via online or mail. Based on an evaluation of public comments and discussions with the State of Wisconsin, NOAA's preferred boundary includes a small portion of Kewaunee County waters which contains the county's only known shipwreck (schooner America ).

14. Comment: NOAA received one comment stating that no formal comprehensive remote sensing surveys have been conducted within the proposed boundary, which suggests more shipwrecks will be found in Kewaunee County. Consequently, NOAA should consider adding the entire county to the sanctuary boundary.

Response: Based on historical research by the Wisconsin Historical Society, NOAA agrees that there is high potential for new historic sites to be discovered in the entirety of waters off Kewaunee County. Refer also to Comment 12.

NOAA's draft environmental impact statement published on January 9, 2017, includes a clarification that places the shipwreck Daniel Lyons in Door County rather than Kewaunee County, leaving only one known shipwreck in Kewaunee County (schooner America ). This clarification was made by the Wisconsin Historical Society when more accurate GPS coordinates of the shipwreck became available.

15. Comment: NOAA received several comments supporting the addition of the waters of Door County to the sanctuary, now or in the future.

Response: Because the addition of Door County would have been well beyond the geographic scope of the originally nominated area, NOAA chose not to include it in the final boundary.

16. Comment: NOAA received several comments asking for clarification on why a large geographic area was required for the protection of 37 shipwreck sites. In particular, one commenter asked why NOAA did not propose creating a regulatory area around each individual shipwreck.

Response: Research by the Wisconsin Historical Society suggests that as many as 59 shipwrecks are yet to be discovered in the sanctuary. Consequently, NOAA, in consultation with the State of Wisconsin, chose to propose a management area that would include these potential historic sites and facilitate resource management as these new sites are discovered. This would ensure that newly discovered sites are protected and managed under sanctuary regulations at the time of discovery. Thunder Bay National Marine Sanctuary has used this management approach successfully. The sanctuary area also reflects what the State of Wisconsin put forth in its nomination to NOAA.

17. Comment: NOAA received a few comments expressing concern that it would expand the boundaries at a later time without public input. One comment suggested that the boundary could be expanded inland via Lake Michigan watershed tributaries.

Response: If NOAA expanded the sanctuary's boundary in the future, including via Lake Michigan watershed tributaries, that would constitute a change in the sanctuary's terms of designation. Under the National Marine Sanctuaries Act, a change in the terms of designation, including a boundary change, would require the same process that was undertaken for designation, including public notice and comment, public hearings, preparation of an environmental impact statement, and review periods for the governor and Congress. These statutory requirements also include Section 304(b)(1), which provides the governor of Wisconsin authority to certify that a term of a designation, including a proposed boundary expansion, is unacceptable, and the expansion of the boundary will not take effect in state waters. The State of Wisconsin, as a co-manager, would be involved in all discussions about proposed changes. Additionally, NOAA would follow the procedures of the Administrative Procedure Act, requiring that adequate public notice and opportunity for public comment be given for new regulations, including boundary changes.

18. Comment: NOAA received a few comments stating that the agency did not explain why the preferred boundary alternative was selected. One comment asked if cost was a factor in choosing the smaller of the two boundary alternatives.

Response: Chapter 3 of the DEIS and FEIS provide details regarding NOAA's analysis of boundary alternatives. Cost is not a primary factor in NOAA's selection of a boundary alternative.

19. Comment: NOAA received several comments that the prohibition on anchoring could be problematic for commercial vessels, and that NOAA should publish both the known and potential locations of shipwreck sites. A related comment noted that if the no-anchoring prohibition extends to undiscovered shipwrecks, shippers might not be able to avoid anchoring on a shipwreck if they do not know where it is, and as such, all locations, known or approximated, should be published by NOAA in a format accessible and useful to all mariners.

Response: Under the proposed regulations, anchoring within the sanctuary is not prohibited. However, grappling into or anchoring on a shipwreck site (sanctuary resource) is prohibited. This regulation is narrowly worded to protect historic shipwreck sites from anchor damage, while still allowing anchoring inside the sanctuary outside of these discrete areas. The prohibition does not apply to any activity necessary to respond to an emergency threatening life or the environment.

Existing state regulations already prohibit damaging historic shipwrecks sites within the area proposed as a sanctuary. To help vessels avoid inadvertently anchoring on known shipwrecks sites, NOAA will publish maps with coordinates of known and estimated shipwreck locations. It should be noted that historical research on shipwrecks yet to be found (potential/estimated shipwrecks) only approximates a potential shipwreck location. This information is currently available via the UW Sea Grant and Wisconsin Historical Society maintained website www.wisconsinshipwrecks.org. NOAA will work with the state to update and publish this information and share directly with stakeholders such as the Lake Carriers' Association. Additionally, NOAA will prioritize its sonar-based cultural resource surveys in areas where commercial shipping vessels are likely to anchor, such as off Manitowoc. This will help locate cultural resources and provide information useful to both the sanctuary and commercial shippers.

20. Comment: NOAA received a comment requesting that language be added to Section 922.213(b) that not only considers emergency situations but adds: “. . . or anchoring to prevent unsafe conditions, as determined by the vessel's master and recorded in the vessel's official log book.”

Response: The proposed regulations provide for an exemption from the prohibitions in unsafe conditions. The proposed regulations specify, at 15 CFR 922.213(b): “The prohibitions in paragraphs (a)(1) through (3) of this section do not apply to any activity necessary to respond to an emergency threatening life, property or the environment . . .” As such, NOAA believes that anchoring to prevent unsafe conditions is covered under current sanctuary regulations.

21. Comment: NOAA received one comment expressing concern that if NOAA broadens the scope of the Wisconsin sanctuary beyond maritime heritage resources, this would negatively impact the ability of shippers to conduct ballast water exchange.

Response: NOAA is committed to ensuring that the creation of the sanctuary would support businesses and organizations that use the lake and surrounding ports. NOAA has not proposed any regulations prohibiting ballast water exchange in the sanctuary. Also, the Coast Guard Authorization Act of 2015 (Pub. L. 114-120) prevents the Coast Guard and U.S. Environmental Protection Agency from prohibiting ballast water exchange in national marine sanctuaries in the Great Lakes that protect maritime heritage resources. Ballast water operations would continue as currently conducted. In terms of future changes to the sanctuary's scope beyond underwater cultural resources, such a change would require a public process similar to the original designation, thereby affording commercial interests and the public an opportunity to comment on how any change in the scope might affect ballast water exchange.

22. Comment: NOAA received several comments stating that the sanctuary would have a negative impact on shipping and could result in businesses being closed. The comments indicated that the proposed sanctuary, as a cultural asset, should not encumber critical commercial activity related to maritime transportation into Wisconsin ports and through Wisconsin waters. Current legal navigational practices should continue to be allowed.

Response: NOAA's proposal does not include restrictions to shipping. The proposal excludes the ports, marinas, and harbors of Two Rivers, Manitowoc, Sheboygan, and Port Washington from the sanctuary boundaries to avoid any unintended consequences of sanctuary designation on those operations. In addition, NOAA is proposing to eliminate the federally authorized areas (channels) from the sanctuary.

23. Comment: Several commenters asked if the sanctuary designation gives NOAA the right to regulate commercial and recreational fishing. One comment indicated that federal regulations as a result of sanctuary designation should not affect the ability of commercial fishermen to conduct their fishing operations (particularly in “Zone 3”).

Response: Sanctuary regulations and terms of designation are narrowly defined to protect underwater cultural resources, and under the current terms of designation for WSCNMS, NOAA does not regulate commercial or recreational fishing activities. There are no restrictions on where fishing activities can occur or what gear fishermen can use, as long as the fishing activities do not injure underwater cultural resources. NOAA would need to amend the terms of designation through a public process in order to regulate commercial and recreational fishing. Through its ongoing lakebed mapping surveys, the sanctuary will work with commercial fishermen to identify and share shipwreck locations to help avoid net entanglements.

24. Comment: NOAA received a comment indicating that the definition of sanctuary resource is too broad and could mean any “debris” ( e.g., beach glass, etc.) along the beach and below the ordinary high water mark. This could lead to people being fined for gathering such items along the beach.

Response: NOAA is proposing the LWD as the sanctuary's landward boundary. Consequently, the area between the OHWM and the LWD ( i.e., most of the beach area) is not included in the preferred alternative for the sanctuary. Under the preferred alternative, cultural resources found along the beach between the OHWM and the LWD are not subject to the sanctuary regulations, but will remain subject to state regulation.

25. Comment: One commenter asked whether NOAA could impose legally enforceable restrictions on lake activities that are currently permissible by state authorities.

Response: No current state laws would be superseded by the proposed national marine sanctuary. The NMSA gives NOAA the authority to manage national marine sanctuaries in a manner that complements existing regulatory authority (16 U.S.C. 1431(b)(2)). Prior to designation, Section 304(6)(1) of the NMSA provides the governor with authority to certify that the designation or terms thereof are unacceptable, and preclude the designation or terms thereof from taking effect in state waters (16 U.S.C. 1434(6)(1)). This feature of the NMSA ensures the harmony of federal and state regulations, as well as provides the states with final approval of the designation and its regulations.

For example, one of the proposed Wisconsin sanctuary regulations, developed in consultation with the State of Wisconsin, is to prohibit anchoring at shipwreck sites. While there is no state prohibition on this activity, it is a violation of state law to damage shipwrecks, including damage from anchoring. To facilitate public access to shipwrecks and to eliminate the need for anchoring at these often fragile sites, NOAA would install moorings at these sites. In this way, the sanctuary strengthens and complements state regulations and facilitates public access through a combination of regulation and proactive resource protection measures.

26. Comment: NOAA received questions on who enforces sanctuary regulations, fines associated with violations of sanctuary regulations (including how the fines are calculated), examples of fines, and what happens to the funds NOAA receives from violations.

Response: NOAA views law enforcement as just one aspect of a sanctuary's comprehensive resource management strategy. Developing a plan to facilitate voluntary compliance with sanctuary regulations is another element of proactive enforcement included in the proposed sanctuary's draft management plan.

NOAA's Office of Law Enforcement enforces all of NOAA's natural and cultural resource laws, while also working with the U.S. Coast Guard (USCG) to enforce sanctuary regulations in the Great Lakes.

Violations of federal sanctuary regulations are violations of the NMSA, a federal statute. Civil violations are governed under NOAA's civil procedure regulations found at 15 CFR part 904. NOAA's Office of General Counsel assesses civil penalties in accordance with the nature, gravity, and circumstances of a violation. NOAA assesses civil penalties through the issuance of a notice of violation and assessment of civil penalty (NOVA). NOAA General Counsel publishes its penalty policy online to provide notice to the public about how it calculates penalties in any given case and to provide information about a typical penalty for a given type of violation. That information can be found at https://www.gc.noaa.gov/documents/Penalty-Policy-CLEAN-June242019.pdf.

Persons charged with civil violations are entitled to an opportunity for an administrative hearing before an administrative law judge (ALJ), and may seek reconsideration of the ALJ's ruling and appeal of the ALJ decision to the NOAA administrator. Persons may seek judicial review of the administrator's decision before a federal district court. Criminal violations are referred to the U.S. Department of Justice for prosecution.

NOAA's Office of General Counsel does not produce an annual report detailing violations and fines levied. However, administrative decisions regarding NOAA violations that are decided by an ALJ and/or decided on appeal to the NOAA administrator are published at http://www.gc.noaa.gov/enforce-office6.html.

Under the NMSA (16 U.S.C. 1437(f)), amounts received from civil penalties must be used by NOAA in the following priority order: First, to manage and improve the sanctuary with respect to which the violation occurred that resulted in the penalty ( e.g., used to restore any damage to a vessel caused by violating the anchoring restrictions); second, to pay a reward to a person who furnishes information leading to the civil penalty; or, third, to manage and improve any other national marine sanctuary.

27. Comment: NOAA received a comment asking about the definition of “interfering with” federal investigations and how NOAA would determine if an action constitutes interference.

Response: The NOAA Office of Law Enforcement, along with state officers where authorized under cooperative enforcement agreements, monitor compliance and investigates potential violations of the NMSA and its regulations. The NMSA specifies the authorities of those officers and agents, which includes general authorities to investigate violations of the statute, regulations, or a permit issued pursuant to the NMSA; seize evidence of violations or sanctuary resources taken in violation of the NMSA; and exercise other lawful authorities as sworn federal law enforcement authorities. Sanctuary regulations would prohibit interfering with these investigations.

Violations of the NMSA are primarily handled as civil administrative matters, pursuant to the Administrative Procedure Act. NOAA assesses civil penalties through the issuance of a NOVA. NOAA's Office of General Counsel assesses civil penalties in accordance with the nature, gravity, and circumstances of a violation. NOAA General Counsel publishes its penalty policy on its website to provide notice to the public as to how it calculates penalties in any given case and to provide information as to a typical penalty for a given type of violation. That information can be found at https://www.gc.noaa.gov/documents/Penalty-Policy-CLEAN-June242019.pdf.

28. Comment: Several comments indicated that because NOAA has the authority to regulate a wide variety of resources through the National Marine Sanctuaries Act, there is concern that in the future NOAA will expand its authority beyond protecting maritime heritage resources.

Response: Refer to comment 21 above.

29. Comment: NOAA received a comment asking what happens if a modern vessel sinks or wrecks in the sanctuary boundaries. Does the owner of the sunken property get to salvage his/her vessel or does this become a sanctuary resource?

Response: Current salvage rules and regulations would continue to apply within WSCNMS. A recently sunken vessel would not be included in the definition of “sanctuary resources” which means “all prehistoric, historic, archaeological, and cultural sites and artifacts within the sanctuary boundary, including all shipwreck sites.” Additionally, “shipwreck site” means “any historic sunken watercraft, its components, cargo, contents, and associated debris field.”

NOAA revised the definition in § 922.211(a)(2) for “shipwreck site” by adding “historic” to clarify its focus on historic shipwrecks ( i.e., not all shipwrecks, but those that demonstrate an important role in or relationship with maritime history). This addition specifically responded to concerns about defining recent or contemporary sunken craft or objects as sanctuary resources. For the purposes of the final rule, “historic” takes its definition from “historical resource” located in § 922.3 of the generally applicable sanctuaries regulations.

30. Comment: Several commenters indicated that shipwrecks are not mentioned in the 1972 Marine Protection, Research, and Sanctuaries Act, so NOAA does not have the authority to designate a “shipwreck” sanctuary.

Response: The NMSA expressly provides that “the Secretary may designate any discrete area of the marine environment as a national marine sanctuary . . . (if) the area is of special national significance due to its conservation, recreational, ecological, historical, scientific, cultural, archaeological, educational, or esthetic qualities” (16 U.S.C. 1431(a)(2)).

31. Comment: One commenter requested to know what NOAA means by the term “lakebottom associated with underwater cultural resources.”

Response: NOAA did not propose any regulation containing the language cited by the commenter.

32. Comment: A few commenters suggested that NOAA should not take away the public's right to use metal detectors.

Response: NOAA is not proposing to prohibit metal detecting in the sanctuary. In addition, the area between the OHWM and the LWD (where metal detecting on the beach would likely take place) is not included in the sanctuary boundary.

33. Comment: One commenter raised concerns that NOAA would prohibit exploration for and development of minerals or other natural resources in the proposed sanctuary.

Response: NOAA is not proposing to prohibit natural resources exploration and development in the sanctuary. The regulations are narrowly defined to protect underwater cultural resources. There are no restrictions to natural resources exploration and development as long as these activities do not injure underwater cultural resources or otherwise conflict with regulations specific to WSCNMS.

34. Comment: One commenter asked if the proposed sanctuary could ever be abandoned or decommissioned.

Response: Although the NMSA does not contemplate de-designation of a national marine sanctuary, NOAA engages closely with the state and public to review and revise its sanctuary management plan every five years. The management plan prioritizes resource management goals and describes actions by NOAA and its partners to accomplish them. The plan encompasses all non-regulatory programming—research, resource protection, education, outreach, volunteers, operations—that protects the cultural resources of the sanctuary while supporting responsible uses and enjoyment. A full management review process may take two to three years and involve several opportunities for public participation through scoping and review and comment on a draft and final plan. The Sanctuary Advisory Council would have a key role in the management plan review process.

35. Comment: A few commenters requested that sanctuary regulations protect natural and biological resources in the Great Lakes ecosystem. Comments suggested regulations to prevent wastewater discharges, discharge of mercury and other toxic materials, risks from aging infrastructure, spread of invasive species, and other risks to wildlife and habitat.

Response: This is beyond the scope of NOAA's stated need for action, which focused on the protection and interpretation of nationally significant underwater cultural resources.

36. Comment: NOAA received comments asking whether the sanctuary would create any additional restrictions or regulatory requirements related to dredging, pier structure maintenance, or extension of pier structures, and if local entities would require NOAA permission to install a new water intake line into Lake Michigan or to continue grooming beaches, including areas below the OHWM. A related comment requested that all necessary maintenance activities regarding Lake Michigan water intakes should be allowed to proceed uninhibited within the sanctuary boundaries.

Response: WSCNMS regulations are narrowly focused on protecting underwater cultural resources. If an activity does not injure these sanctuary resources, it is not restricted or prohibited, and does not require a sanctuary permit. Dredging, pier construction and maintenance, and other construction activities are not expressly prohibited activities under the proposed regulations. However, should these types of activities violate the sanctuary prohibition on “moving, removing, recovering, altering, destroying, possessing, or otherwise injuring” a resource, they would be prohibited.

Activities mentioned in this comment are already regulated by state and other federal entities. Section 106 of the National Historic Preservation Act requires the State of Wisconsin to identify known and potential historic resources that may be impacted by dredging and other activities that affect the lakebed. NOAA, through its co-management arrangement with the state and through the consultation requirement for federal agencies under the NMSA Section 304(d), would coordinate its response, including potential permitting and Section 106 consultation, when historic/cultural resources may be impacted.

As for grooming beaches, NOAA proposes to adopt a boundary of the LWD, which will effectively exclude beaches from the boundaries of the sanctuary.

37. Comment: NOAA received a comment requesting that it refrain from depicting the national marine sanctuary on Federal Aviation Administration's aeronautical charts to avoid confusion and misinterpretation of the area by general aviation pilots.

Response: NOAA is not proposing including overflight restrictions as part of the sanctuary prohibitions, and not proposing that the sanctuary be depicted on aeronautical charts.

38. Comment: NOAA received one comment that the proposed sanctuary overlaps the boundaries of a restricted area (R-6903) used by the Volk Field Combat Readiness Training Center. In the unlikely event that the Wisconsin Air National Guard or users of R-6903 would need to conduct some sort of unconventional and/or kinetic operation in R-6903, close coordination with NOAA and the Federal Aviation Administration would be a necessity.

Response: NOAA agrees and will coordinate with the Air National Guard to ensure compatible use of the sanctuary.

39. Comment: NOAA received a comment asking if the sanctuary would impact municipal lakebed grants.

Response: No. The sanctuary proposal recognizes the state's sovereignty over its waters and submerged lands, including any state lakebed leases.

40. Comment: NOAA received a comment stating that it did not provide enough time for the public to comment and did not provide the public with enough information about the proposed sanctuary. NOAA also received one comment asking NOAA to hold a public session to help the public understand the sanctuary proposal.

Response: NOAA held an 81-day public comment period, which exceeds the comment period generally recommended under Executive Order 12866 and the 45-day required comment period for a DEIS under NEPA, to allow the public time to review the proposal and provide comments. NOAA also held four public meetings to discuss the proposal and gather public comments. These meetings were held in four cities along the coastal area to ensure public access. NOAA also published a Federal Register notice and a website ( http://sanctuaries.noaa.gov/wisconsin/ ) with the proposed sanctuary information for the public, meeting NMSA notification requirements. Additionally, NOAA issued a press release and received coverage in the local, regional, and national press. NOAA staff presented at city council meetings in Two Rivers, Sheboygan, Port Washington, and Mequon, and at county council meetings in Sheboygan and Ozaukee counties. A timeline of the sanctuary designation process can be found in the FAQ section at https://sanctuaries.noaa.gov/wisconsin/.

41. Comment: NOAA received several comments asking how the state government is involved in the sanctuary designation and how a sanctuary designation can be done without the state legislature's involvement.

Response: Throughout the sanctuary designation process, NOAA worked closely with the Wisconsin Historical Society, Wisconsin Department of Natural Resources, Wisconsin Coastal Management Program, Wisconsin Department of Transportation, Wisconsin Department of Tourism, Wisconsin Public Service Commission, and the Wisconsin Public Lands Commission. Should NOAA and the Wisconsin governor ultimately concur on the designation, both NOAA and the state would co-manage WSCNMS.

Furthermore, in national marine sanctuaries that include state waters, the NMSA provides the governor of the state with the opportunity to certify to the Secretary of Commerce that the designation or any of its terms is unacceptable ( i.e., objects), in which case the designation or the unacceptable term shall not take effect.

42. Comment: Many commenters suggested that a federal government program or involvement in Wisconsin is an intrusion into sovereign state waters. Designation of the sanctuary will result in the loss of state control of Lake Michigan, and a takeover of both management and regulation of the Wisconsin waters by the federal government.

Response: Wisconsin Shipwreck Coast National Marine Sanctuary will not change the ownership or control of state lands or waters; that is, no loss of state sovereignty will occur as a result of designation of a national marine sanctuary. The state's jurisdiction and rights will be maintained and NOAA will not intrude upon or change existing state or local authorities. All existing state laws, regulations, and authorities will remain in effect. The state will maintain ownership of the shipwrecks within the sanctuary.

43. Comment: NOAA received several comments stating that while the proposal highlights co-management with the State of Wisconsin, the governor only gains power through Section 922.214, Emergency Regulations. NOAA should consider allowing the governor to hold form of a veto, or check and balanced action, or at least part of the leasing or licenses action.

Response: The co-management of the sanctuary provides a number of opportunities for the State of Wisconsin, either through the governor or by state agencies, to participate in the management of the sanctuary. For sanctuaries in state waters, pursuant to the National Marine Sanctuaries Act 304(b)(1), whenever a sanctuary is proposed to be designated, or the terms of designation changed, the governor has the opportunity to certify to the Secretary of Commerce that the designation or any of its terms is unacceptable, in which case the designation or the unacceptable term shall not take effect.

The memorandum of agreement between NOAA and the State of Wisconsin will describe the details of co-management. The governor and state agencies will have considerable latitude in shaping the future of the state's co-management framework with NOAA, including the type of regulations that would apply to WSCNMS.

44. Comment: NOAA received a comment asking if NOAA does not ultimately establish a sanctuary, where the factors affecting this decision will be published. Will these factors be made a part of public record for future awareness and decision-making?

Response: Should NOAA decide not to designate a sanctuary, it would publish a notice in the Federal Register to withdraw the proposed rule. The Federal Register notice would describe the reasons for NOAA's decision.

45. Comment: NOAA received a comment asking if it would ever have any accountability to existing state government lake regulations or laws, specifically those of the Wisconsin Department of Natural Resources.

Response: The NMSA gives NOAA the authority to manage national marine sanctuaries in a manner that complements existing regulatory authority (16 U.S.C. 1431(b)(2)). In a co-management framework with a respective state government, NOAA and the state would work collaboratively on the proposed sanctuary. A memorandum of agreement between NOAA and the state would ensure that state and federal authorities are harmonized and coordinated. In addition, during the designation process and any future changes to the terms of designation, the governor has the authority to certify as unacceptable all or parts of the designation, which prevents the unacceptable terms from taking effect in state waters (16 U.S.C. 1434(b)(1)).

46. Comment: NOAA received one comment about the importance of NOAA defining what it means to not be able to anchor in areas “associated with a shipwreck.”

Response: The definition of “shipwreck site” in the WSCNMS regulations at 15 CFR 922.211(a)(2) means “any historic sunken watercraft, its components, cargo, contents, and associated debris field.” Debris fields associated with shipwrecks sites can have significant archaeological value, including the existence of fragile ship structure and artifacts. By “associated debris field,” NOAA means all cultural material adjacent to a shipwreck site, but not necessarily contiguous with it. Each shipwreck site is unique, and the resultant debris field forms through a variety of site-specific factors including depth, circumstances of sinking, and other factors. As more data are gathered ( e.g., through sonar surveys) on individual shipwrecks sites and associated debris fields, NOAA will publish information that helps visitors anchor outside of areas that could be damaged.

47. Comment: NOAA received several comments indicating that divers are a small percentage of the population, and questioned why a sanctuary should be established to serve such a small group.

Response: As demonstrated in many sanctuaries, much of the public often benefits from the sanctuary through diving, kayaking, and snorkeling, as well as through museums, interpretive displays, websites, formal and informal educational programs, enhanced tourism opportunities, multidisciplinary research opportunities, and other unique sanctuary-related partnerships and activities. The sanctuary's final management plan outlines priorities in these areas for the first five years of the sanctuary's operation. These priorities substantially expand the public benefit of the sanctuary beyond that of divers.

48. Comment: NOAA received one comment that if NOAA does not install mooring buoys on all shipwrecks, the prohibition on anchoring will be detrimental to public access.

Response: NOAA promotes public access to shipwrecks, and believes this is a fundamental way to increase their cultural and recreational value. Permanent moorings are an important resource protection measure that eliminates the need to grapple or anchor into the often fragile sites. This priority is described in the final management plan as Strategy RP-3.

NOAA recognizes that it will take time to install moorings at all shipwrecks sites, and that some sites (particularly deep sites) create challenges for ideal mooring systems. Consequently, NOAA is proposing a two-year delay in the implementation of the no-anchoring prohibition. During this period, the sanctuary will work with the state, Sanctuary Advisory Council, a diver working group, and other relevant stakeholders to develop a moorings implementation plan and best practices document. During the two-year delay, NOAA will also consider guidelines for allowing divers to tie moorings directly on certain shipwrecks sites via a no-fee sanctuary permit.

49. Comment: NOAA received one comment that anchoring outside the shipwreck with the “shot line” method is not practical and it increases the dangers of diving.

Response: NOAA recognizes that anchoring outside the wreck and using a shot line (a weighted line with surface buoy dropped onto a shipwreck site to mark its location and provide reference for divers) may be a new practice for some users and not possible for all users. NOAA recognizes, too, that it will take time to install sanctuary-maintained moorings (see previous comment). Consequently, NOAA is considering allowing users to apply for a sanctuary permit to tie a suitable long-term mooring line directly into some shipwreck sites, which is a common and more familiar practice. Among other resource protection benefits, a no-fee permit would allow the sanctuary to work directly with users to determine which shipwrecks are most popular, and thereby prioritize future sanctuary-maintained permanent moorings located adjacent to the shipwreck.

50. Comment: NOAA received a few comments about who would be in charge of placing mooring buoys, how early in the season buoys would be placed, if there would be online resources outlining the status of shipwrecks as marked or unmarked, and how members of a local community could be involved in buoy management.

Response: As indicated in the final management plan at Strategy RP-3 (Activity 3.1), NOAA will develop a five-year plan to develop and begin implementation of a plan for design, implementation, and maintenance of mooring buoy system, including priorities for which shipwrecks to buoy. Activity 3.1 includes an item to “work with local dive charters to monitor moorings throughout the dive season.” Overall, while NOAA will have the lead responsibility for the mooring buoys in the sanctuary, it will work in close cooperation with the state and with local partners. With regard to online status, in time WSCNMS will have a GIS-based map similar to that of Thunder Bay National Marine Sanctuary ( https://thunderbay.noaa.gov/shipwrecks/mooring_program.html ). The online tool shows the seasonal status of mooring buoys at shipwreck sites. As indicated in Comment 47, the sanctuary will convene a working group to explore how best to implement the mooring buoy plan, which includes the potential use of volunteers.

51. Comment: NOAA received several comments about the importance of NOAA providing additional protection to shipwrecks.

Response: Protecting shipwrecks and other underwater cultural resources will be a priority of Wisconsin Shipwreck Coast National Marine Sanctuary. As described in the final management plan, there are several ways to accomplish the resource protection goal, including enhanced regulations, installing mooring buoys, engaging with divers about best practices for diving, providing general education regarding the significance of these resources, and enforcing federal and state regulations to address protecting shipwrecks.

52. Comment: NOAA received a few comments that people should not be restricted from searching for shipwrecks.

Response: NOAA is not restricting the ability of the public to search for shipwrecks, or proposing requiring a sanctuary permit for this activity.

53. Comment: NOAA received several comments stating that there should not be any restrictions on access to shipwrecks.

Response: NOAA is not proposing regulation of, or restrictions on, recreational diving activities within the sanctuary, as long as the activities do not injure sanctuary resources or result in anchoring on or grappling onto a shipwreck site. NOAA is not proposing requiring a permit to dive in the sanctuary.

54. Comment: NOAA received a few comments asking how locations of newly discovered shipwrecks would be made public.

Response: While it is the intention of the sanctuary to release coordinates of known shipwrecks, NOAA may decide to withhold the release of coordinates of a newly discovered, historically significant shipwreck for a period of time so that NOAA and the state can document the site and its artifacts. Under this scenario, NOAA will use agency and partner resources (and possibly volunteers) to document the site. A newly discovered site may be particularly fragile or possess a large number of artifacts, and specific management or monitoring measures would need to be put into place before site coordinates are published on the sanctuary's website.

55. Comment: NOAA received several comments asking how the sanctuary would actually protect shipwrecks, including whether there is sufficient enforcement to protect shipwrecks.

Response: The goal of WSCNMS is to comprehensively manage the underwater cultural resources of Lake Michigan. Enforcement is one aspect of the resource protection strategy as indicated in Strategy RP-5 of the final management plan, which states “Develop a plan to increase awareness of sanctuary regulations and state law and to enhance law enforcement efforts.” Since NOAA does not currently have enforcement officers in the Great Lakes, NOAA works with the U.S. Coast Guard to enforce sanctuary regulations. NOAA would also work with state partners to explore options for assistance in the enforcement of sanctuary regulations. Developing a plan to facilitate voluntary compliance with sanctuary regulations is another element of proactive enforcement included in the sanctuary's management plan.

56. Comment: NOAA received one comment asking if future maritime archaeological research in the sanctuary would be restricted.

Response: NOAA encourages research and documentation of underwater cultural resources, and in many cases can facilitate and act as a partner in these activities. NOAA is not restricting archaeological research, including Phase 1 (searching for shipwrecks) and Phase 2 (documenting shipwrecks) archaeology. However, given the sanctuary's proposed prohibition on injuring/damaging shipwreck sites, NOAA encourages researchers to obtain a Phase I archaeology permit from the State of Wisconsin, and consult with the sanctuary superintendent ahead of conducting research. For archaeological projects that will alter a site, or seek to remove artifacts, both a state and sanctuary permit would be required. Through a programmatic agreement, NOAA and the state will seek to simplify this process.

57. Comment: NOAA received several comments stating that the threat to shipwrecks will increase with increased tourism. The commenters asked who would monitor the shipwrecks, how the shipwrecks would be protected, and who would pay for these costs.

Response: NOAA believes that increasing public access and tourism to shipwrecks sites is an important way to foster awareness, appreciation, and ultimately protection of these special places. While NOAA encourages public access to shipwrecks, we are aware that increased use can result in additional pressure to these resources. The final management plan takes a broad approach to ensuring that the shipwrecks are protected to the greatest extent possible through the resource protection, education, and research. Monitoring is captured Strategy RP-2 of the final management plan.

Other elements of the final management plan that address increased use of sanctuary resources are the installation of additional mooring buoys, and public outreach programs on the value and fragility of shipwrecks. Appendix 1 of the final management plan addresses potential sanctuary operating budgets and partner contributions.

58. Comment: NOAA received many comments stating that the State of Wisconsin already protects shipwrecks, and that this effort should not be duplicated by the federal government.

Response: NOAA and the state will be co-managers of the sanctuary and work together to ensure that their efforts are complementary and not duplicative. Importantly, this co-management arrangement affords opportunities that neither NOAA nor the state could realize on its own. As detailed in the FEIS (see Chapter 2), designation as a national marine sanctuary would provide increased resources to carry out the research, education, and law enforcement activities necessary to more comprehensively manage, protect, and increase the public benefit of these resources. For example, the sanctuary would bring national attention, interest, resources, and partners to the area. The sanctuary nomination put forth in 2014 by the State of Wisconsin on behalf of several lakeshore communities states the reasons the state wanted to partner with NOAA to protect the shipwrecks. The sanctuary nomination can be found at https://nominate.noaa.gov/media/documents/nomination_lake_michigan_wisconsin.pdf. An example of the types of research programs and activities that a national marine sanctuary could provide in Wisconsin can be found in Thunder Bay National Marine Sanctuary's 2013 condition report ( https://sanctuaries.noaa.gov/science/condition/tbnms/ ).

59. Comment: NOAA received a few comments suggesting that shipwrecks are not threatened to the degree that necessitates NOAA involvement, and that shipwrecks are already preserved by the fresh water of the Great Lakes.

Response: While it is true that the cold, fresh water of the Great Lakes preserves shipwrecks better than a saltwater environment, this alone does not negate negative impacts to Wisconsin's shipwrecks. These threats, as described in the FEIS (see Chapter 2), include both natural processes and human activities. Human threats to underwater cultural resources include looting and altering shipwreck sites and damaging shipwreck sites by anchoring. The proposed final rule for WSCNMS includes a prohibition on the use of grappling hooks and anchors at shipwreck sites. This prohibition will more directly address damage to shipwrecks than the state is able to address. Additionally, as steward of these nationally significant cultural resources, NOAA believes that creating public awareness and engagement in the sanctuary through research, education, and community engagement is an essential means of resource protection and increasing public benefit.

60. Comment: NOAA received a comment asking whether NOAA could charge new fees (for a permit or otherwise) on citizens for lake activities that are currently free.

Response: NOAA is not proposing to charge any fees on any activity within the proposed Wisconsin sanctuary.

61. Comment: NOAA received several comments related to the cost of designating a national marine sanctuary. The comments included a concern about higher taxes as a result of the designation; a concern that the federal government does not have sufficient funds to manage the area; a statement that federal funds would be better used to protect natural resources; a concern that NOAA has not provided a cost or budget analysis; a comment about financial accountability; and two questions asking about the sources of funding for the sanctuary.

Response: The National Marine Sanctuaries Act (16 U.S.C. Chapter 32) directs NOAA to protect these nationally significant ecological and historical resources. As a federal agency, appropriations for NOAA programs are enacted by Congress, and signed into law by the president. An annual allocation for the management of all the national marine sanctuaries is included in each annual appropriation. NOAA makes funding decisions for each sanctuary based on the funding level, program priorities, and site needs. As a result, funding for a given site can vary with fluctuations in annual appropriations, which may impact the level of activities completed in the management plan each year. As part of the final management plan for this sanctuary, NOAA included a summary of the sanctuary activities that are possible at several funding levels. NOAA also anticipates that a varying level of in-kind contributions from co-managers and partners, as well as grants and other outside funding, will contribute to the overall sanctuary goals. Additionally, ONMS has received roughly $2 million in donations and in-kind contributions and 120,000 volunteer hours per year at its sites nationwide.

62. Comment: One commenter asked what would happen if Congress chose to not appropriate sufficient funds for the proposed sanctuary's operations in any given fiscal year?

Response: The NMSA (16 U.S.C. 1431 et seq. ) directs NOAA to protect these nationally significant areas and their ecological and historical resources. A program allocation in NOAA's annual appropriations typically provides funding for the management of all of the national marine sanctuaries. While NOAA makes funding decisions for each sanctuary based on the ONMS funding level, program priorities, and site needs, it executes the ONMS budget to ensure basic operating costs at all national marine sanctuaries are met.

63. Comment: NOAA received several comments that the economic impact of the sanctuary would be limited because not many people dive, and local museums already do the outreach that NOAA is proposing. Similarly, NOAA received several comments stating that the socioeconomic impact study on Thunder Bay National Marine Sanctuary by the University of Michigan does not demonstrate positive impacts. The commenters asked why NOAA expects positive economic impacts in Wisconsin.

Response: As demonstrated at other national marine sanctuaries, NOAA believes that broader public outreach and education are also important resource protection activities, because they increase awareness, appreciation, and value of our nation's maritime heritage and nationally significant historic sites. That sanctuary activities aimed at the non-diving public could benefit the region was recognized in the 2014 sanctuary nomination, which indicated that a chief goal for the state and communities was to leverage the sanctuary to “Build and expand on state and local tourism initiatives and enhance opportunities for job creation.” Letters of support from many area museums accompanied the sanctuary nomination ( https://nominate.noaa.gov/media/documents/nomination_lake_michigan_wisconsin.pdf ). Consequently, education and outreach activities constitute a significant part of the sanctuary's final management plan.

Initiatives at NOAA's Thunder Bay National Marine Sanctuary in Alpena, Michigan, provide an example of a wide range of education, outreach, interpretation, tourism, and partnerships aimed at the benefitting the general public. NOAA disagrees with the comment on the 2013 economic study for Thunder Bay National Marine Sanctuary.

64. Comment: NOAA received one comment that NOAA should consider modifying the goal statement in the education and outreach plan to include education and dissemination of the maritime cultural landscape perspective as well as the shipwrecks to be protected by the proposed sanctuary, and that all of the strategies should address the maritime cultural landscape.

Response: NOAA believes the maritime cultural landscape is an essential component of interpreting, understanding, and appreciating historic shipwrecks. The final management plan contains a strategy and two activities aimed at characterizing the sanctuary's maritime cultural landscape. NOAA added a reference to maritime cultural landscapes in the “Objectives” section of the education management plan. As described by the National Park Service, a cultural landscape is a geographic area including cultural and natural resources, coastal environments, human communities, and related scenery that is associated with historic events, activities, or persons, or exhibits other cultural or aesthetic value.

65. Comment: NOAA received one comment stating that NOAA should fund the sanctuary at the $700,000 level (as indicated in a summary of potential funding scenarios in Appendix 1 of the final management plan), as this would include enough resources to hire an education coordinator and implement an education program.

Response: NOAA agrees it is important to implement elements of the Education and Outreach Action Plan. NOAA makes funding decisions based on annual appropriations to the program, which drive decisions for each sanctuary based on the funding level, program priorities, and site needs. As a result, site level funding can vary from year to year, which may impact the level of activities completed in the management plan each year.

66. Comment: NOAA received one comment stating that NOAA needs to have a presence in each community working on this designation process. Rather than having a new visitor center created post-designation, NOAA should capitalize on the existing informal learning institutions and allied organizations already working to educate and inspire public appreciation of—and involvement in—the Great Lakes.

Response: One of the strengths of the WSCNMS designation is the many opportunities to partner with, leverage, and complement assets in each of the sanctuary communities. Per final management plan Strategy SO-1, the sanctuary will “Develop a `NOAA presence' within sanctuary communities that supports the sanctuary's mission and infrastructure needs, and that recognizes, leverages, and complements individual assets in sanctuary communities.” NOAA will develop the strategic plan supporting Strategy SO-1 after designation in cooperation with local communities, other appropriate partners, and the Sanctuary Advisory Council to ensure that NOAA is capitalizing on existing efforts and institutions in the region.

67. Comment: NOAA received one comment stating that the proposal should provide more specificity about educational programming and technology for K-12.

Response: NOAA's final management plan is the initial management plan for this site, and as such describes general objectives for education and outreach activities. As sanctuary staff are hired and as NOAA engages with its education partners after designation, more specificity will emerge for the sanctuary's education and outreach activities.

68. Comment: NOAA received one comment suggesting that the sanctuary should be named “Wisconsin Marine Protection Area” as the name is shorter and easier to say, it would result in less clutter on a map, and people could identify the name easier.

Response: Community and partner discussions during a sanctuary branding workshop sponsored by the Wisconsin Department of Tourism produced the name Wisconsin Shipwreck Coast National Marine Sanctuary, which NOAA proposes as the sanctuary's official name. The new name reflects the sanctuary's cultural heritage focus, is responsive to community input, and is conducive to marketing and branding efforts.

69. Comment: NOAA received one comment stating that Sheboygan would be the ideal location for a sanctuary office because it is centrally located, has the most developed riverfront, has Blue Harbor Resort and charter fishing fleets, and is the largest of the cities in the proposed sanctuary. NOAA also received other comments identifying specific communities in a similar way, such as Port Washington.

Response: One of the strengths of the WSCNMS designation is the many opportunities to partner with, leverage, and complement assets in each of the sanctuary communities. Per final management plan Strategy SO-1, the sanctuary will “Develop a `NOAA presence' within sanctuary communities that supports the sanctuary's mission and infrastructure needs, and that recognizes, leverages, and complements individual assets in sanctuary communities.” NOAA has not made any decisions about sanctuary office locations.

70. Comment: NOAA received one comment from the U.S. Environmental Protection Agency stating that NOAA should address green building practices and climate change and greenhouse gases in the FEIS. EPA recommended that the FEIS explain the geographic and policy definitions of the term “coastline” as it applies to this proposed designation.

Response: The FEIS does not include a plan for facility construction or operation as part of the proposed action. However, should NOAA propose any of these activities in the future, it will consider environmentally responsible practices suggested in EPA's recommendations. In using the term “coastline,” NOAA does not define it as a legal term; instead it is used generally to refer to the land-water interface. The shore side boundary is defined as the LWD.

NOAA has determined that the designation of the Wisconsin Shipwreck Coast National Marine Sanctuary will not have a negative impact on the National Marine Sanctuary System and that sufficient resources exist to effectively implement sanctuary management plans. The final finding for NMSA section 304(f) is published on the ONMS website for Wisconsin Shipwreck Coast designation at http://sanctuaries.noaa.gov/wisconsin/.

NOAA has prepared a final environmental impact statement to evaluate the environmental effects of the rulemaking and alternatives as required by NEPA (42 U.S.C. 4321 et seq. ) and the NMSA. The Notice of Availability is available at 85 FR 34625. NOAA has also prepared a Record of Decision (ROD). Copies of the ROD and the FEIS are available at the address and website listed in the ADDRESSES section of this rule.

Section 307 of the Coastal Zone Management Act (CZMA; 16 U.S.C. 1456) requires Federal agencies to consult with a state's coastal program on potential Federal activities that have reasonably foreseeable effects on any coastal use or resource. Such activities must be consistent with approved state coastal policies to the maximum extent possible. Because WSCNMS encompasses a portion of the Wisconsin state waters, NOAA submitted a copy of the proposed rule and supporting documents to the State of Wisconsin Coastal Zone Management Program for evaluation of Federal consistency under the CZMA. NOAA has presumed the state's concurrence pursuant to 15 CFR 930.41(a), whereby a federal agency may presume concurrence if a response is not received within 60 days.

This rule has been determined to be significant for purposes of Executive Order 12866.

NOAA has concluded that this regulatory action does not have federalism implications sufficient to warrant preparation of a federalism assessment under Executive Order 13132. These sanctuary regulations are intended only to supplement and complement existing state and local laws under the NMSA.

The National Historic Preservation Act (NHPA; 16 U.S.C. 470 et seq. ) is intended to preserve historical and archaeological sites in the United States of America. The act created the National Register of Historic Places, the list of National Historic Landmarks, and State Historic Preservation Offices. Section 106 of the NHPA requires Federal agencies to take into account the effects of their undertakings on historic properties, and afford the Advisory Council on Historic Preservation (ACHP) a reasonable opportunity to comment. The historic preservation review process mandated by Section 106 is outlined in regulations issued by ACHP (36 CFR part 800 et seq. ). In fulfilling its responsibilities under the NHPA, NOAA identified interested parties in addition to the State Historic Preservation Officer (SHPO), and has completed the identification of historic properties and the assessment of the effects of the undertaking on such properties in scheduled consultations with those identified parties and the SHPO. NOAA received a response from the SHPO, dated May 5, 2017, agreeing that the proposed undertaking will have no adverse effect to one or more historic properties located within the project Area of Potential Effect.

This analysis seeks to fulfill the requirements of Executive Order 12866 and the Regulatory Flexibility Act. Small businesses that could potentially be impacted from the proposed prohibition on damaging a sanctuary resource include commercial fishing, recreational fishing and diving, scenic and sightseeing industries. The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration (SBA) at the proposed rule stage that this rule would not have a significant impact on a substantial number of small entities. Although NOAA has made a few changes to the regulations from the proposed rule to the final rule, none of the changes alter the initial determination that this rule will not have an impact on small businesses included in the original analysis. NOAA also did not receive any comments on the certification or conclusions. Therefore, the determination that this rule will not have a significant economic impact on a substantial number of small entities remains unchanged. As a result, a final regulatory flexibility analysis is not required and has not been prepared.

ONMS has a valid Office of Management and Budget (OMB) control number (0648-0141) for the collection of public information related to the processing of ONMS permits across the National Marine Sanctuary System. NOAA's designation of WSCNMS would likely result in an increase in the number of requests for ONMS general permits, special use permits, certifications, and authorizations because this action proposes to add general permits and special use permits, certifications, appeals, and the authority to authorize other valid federal, state, or local leases, permits, licenses, approvals, or other authorizations. An increase in the number of ONMS permit requests would require a change to the reporting burden certified for OMB control number 0648-0141. An update to this control number for the processing of ONMS permits will be requested as part of the renewal package for 0648-0141.

Nationwide, NOAA issues approximately 500 national marine sanctuary permits each year. WSCNMS is expected to issue an additional 4 to 5 permit requests per year. The public reporting burden for national marine sanctuaries permits is estimated to average 1.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

Comments on this determination were solicited in the proposed rule but no public comments were received. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act, unless that collection of information displays a currently valid OMB control number.

The Sunken Military Craft Act of 2004 (SMCA; Pub. L. 108-375, Title XIV, sections 1401 to 1408; 10 U.S.C. 113 note) preserves and protects from unauthorized disturbance all sunken military craft that are owned by the United States government, as well as foreign sunken military craft that lie within United States waters, as defined in the SMCA, and other vessels owned or operated by a government on military non-commercial service when it sank. Thousands of U.S. sunken military craft lie in waters around the world, many accessible to looters, treasure hunters, and others who may cause damage to them. These craft, and their associated contents, represent a collection of non-renewable and significant historical resources that often serve as war graves, carry unexploded ordnance, and contain oil and other hazardous materials. By protecting sunken military craft, the SMCA helps reduce the potential for irreversible harm to these nationally important historical and cultural resources. Regulations regarding permits for activities directed at sunken military craft under the jurisdiction of the Department of Navy can be found at 32 CFR part 767.

Accordingly, for the reasons discussed in the preamble, the National Oceanic and Atmospheric Administration amends 15 CFR part 922 as follows:

Executive Order 13942 of August 6, 2020, “Addressing the Threat Posed by TikTok, and Taking Additional Steps to Address the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain”, (85 FR 48637) found that the mobile application TikTok posed a threat to the United States and prohibited certain transactions with respect to ByteDance Ltd. or its subsidiaries, and directed the Secretary of Commerce (Secretary) to identify transactions subject to the prohibitions. Similarly, Executive Order 13943 of August 6, 2020, “Addressing the Threat Posed by WeChat, and Taking Additional Steps To Address the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain”, (85 FR 48641) found that the mobile app WeChat posed a threat to the United States and prohibited certain transactions with respect to Tencent Holdings Ltd. or its subsidiaries, and directed the Secretary to identify transactions subject to the prohibitions.

On September 18, 2020, the Department issued an Identification of Prohibited Transactions To Implement Executive Order 13942 and Address the Threat Posed by TikTok and the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain. A version of this Identification (with revised dates of effectiveness) was published in the Federal Register on September 24, 2020 (85 FR 60061). Also on September 18, 2020, the Department issued an Identification of Prohibited Transactions To Implement Executive Order 13943 and Address the Threat Posed by WeChat and the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain. This Identification was not published in the Federal Register , but it has remained available for public inspection on the Department's website. All prohibitions were enjoined by federal courts prior to taking effect.

On June 9, 2021, Executive Order 14034 (Protecting Americans' Sensitive Data from Foreign Adversaries) revoked Executive Orders 13942 and 3943 and required executive departments and agencies to promptly take steps to rescind any orders, rules, regulations, guidelines, or policies, or portions thereof, implementing or enforcing those Executive Orders (86 FR 31423). Accordingly, the Secretary of Commerce has rescinded the Identification of Prohibited Transactions with respect to TikTok and the Identification of Prohibited Transactions with respect to WeChat.

International Emergency Economic Powers Act, 50 U.S.C. 1701, et seq.; National Emergencies Act, 50 U.S.C. 1601 et seq.; Executive Order 14034, 86 FR 31423.

The Standard for the Flammability of Mattresses and Mattress Pads (Standard), 16 CFR part 1632, issued pursuant to the Flammable Fabrics Act (FFA), 15 U.S.C. 1191 et seq., sets forth a test to determine the ignition resistance of a mattress or mattress pad when exposed to a lighted cigarette. Lighted cigarettes are placed at specified locations on the mattress or mattress pad. The Standard establishes pass/fail criteria for the tests. The Standard currently specifies the ignition source for these tests as Standard Reference Material cigarette SRM 1196, available for purchase from the National Institute of Standards and Technology (NIST). See 16 CFR 1632.4(a)(2).

The original specification for the Standard's ignition source included physical characteristics of a conventional, commercially available, non-filtered, king-sized cigarette. Although no specific brand was identified in the standard, a Pall Mall Red cigarette, manufactured by R.J. Reynolds Tobacco Company (RJR), was commonly known to meet the specifications. In early 2008, RJR notified CPSC that the company intended to convert its production of Pall Mall Red cigarettes to be Fire Standard Compliant (FSC).

In 2008, CPSC sought to find an alternate ignition source and contracted with NIST to develop an ignition source with an ignition strength equivalent to the Pall Mall Red cigarette. The ignition strength value is on a scale from 0 to 100 and is analogous to the percentage of full-length burns on a laboratory substrate. Lower values indicate a cigarette is more likely to self-extinguish when not actively being smoked, while higher values indicate a cigarette is more likely to remain lit while unattended. The non-FSC Pall Mall Red ignition strength varied by vintage from a low of 35 to a high of 95, most often falling at the higher end of the range. FSC cigarettes are required to have an ignition strength lower than 25, and in practice, they are often much weaker, to ensure uniform compliance.

In 2010, NIST developed SRM 1196, Standard Cigarette for Ignition Resistance Testing. SRM 1196 was available for purchase starting in September 2010. On November 1, 2010, CPSC proposed the use of SRM 1196 as the standard ignition source. 75 FR 67047. On September 23, 2011, CPSC issued a final rule amending the Standard to specify SRM 1196 as the standard ignition source, which became effective on September 23, 2012. 76 FR 59014.

All of the SRM 1196 cigarettes were produced in one production run in 2010, with a supply estimated to last approximately 10 years. NIST staff made several attempts to procure a new batch of SRM 1196 cigarettes as the supply dwindled; but in late 2018, the supply of SRM 1196 was depleted before NIST was able to complete a new procurement. NIST was unable to find a manufacturer to produce additional SRM 1196 cigarettes. However, NIST successfully procured SRM 1196a as a replacement for SRM 1196.

NIST conducted tests to determine whether the SRM 1196 properties were replicated in the new SRM 1196a. NIST evaluated the suitability of SRM 1196a by examining the cigarette's ignition strength, tobacco column length and mass, use of unbanded paper, and absence of a filter. Tobacco column length is the length of the cigarette that contains tobacco. Banded paper contains bands that slow the cigarette's combustion when not actively being smoked, while unbanded paper does not contain these bands. NIST affirmed that these SRM 1196 properties were replicated in the new SRM 1196a, because the latter has a similar ignition strength, tobacco column length and mass, it uses unbanded paper, and it has no filter. NIST began selling SRM 1196a in February 2020.

CPSC staff evaluated SRM 1196a in a pilot study and then a full-scale study to determine whether it is a comparable, safety-neutral replacement for SRM 1196.

CPSC staff conducted an initial pilot study in late 2019 to evaluate the suitability of SRM 1196a as a substitute for SRM 1196. The goal of the pilot study was to ensure the full-scale study met statistically robust and scientifically meaningful criteria. Staff evaluated the confidence interval and margin of error to use in the full-scale study, based on an examination of the 2010 transition from the original ignition source to SRM 1196, CPSC compliance data, and the number of test replicates required by the Standard. Based on this analysis and testing during the pilot study, staff subject matter experts determined that a 90 percent confidence interval and equivalence margin of 35 percent were appropriate.

CPSC staff then conducted a full-scale study in early 2020, to determine whether there is statistical equivalence between SRM 1196 and SRM 1196a. In the full-scale study, staff evaluated SRM 1196 and SRM 1196a and found statistically equivalent char length pass/fail patterns for all tested mattress substrates. Test results were within a 90 percent confidence interval and equivalence margin of 35 percent. Staff noted that NIST certified the ignition strengths of both SRMs to be comparable, based on a 95 percent confidence interval with a 5 percent margin in laboratory testing. Although the bounds found by CPSC staff are larger than the NIST confidence interval, staff determined that the NIST tests only examined the cigarette characteristics on substrates that have little variability. The CPSC testing included representative mattress materials that are inherently more variable than the benchmark substrates in the NIST cigarette tests. Furthermore, staff analysis of both SRM cigarettes found that the physical dimensions of SRM 1196 and SRM 1196a are nearly identical. Based on the evidence provided by the full-scale study, pilot study, and NIST certification, as well as examination of CPSC compliance data and data from the 2010 transition from the original ignition source to SRM 1196, CPSC staff's review showed that SRM 1196a cigarettes are statistically equivalent to SRM 1196. On these bases, the Commission finds that SRM 1196a is a comparable, safety-neutral replacement for SRM 1196.

The FFA sets forth the process by which the Commission can issue or amend a flammability standard. 15 U.S.C. 1193. In accordance with those provisions, the Commission is amending the Standard to specify SRM 1196a as the ignition source for testing under the Standard. As required by the FFA, the Commission published a proposed rule containing the text of the ignition source revision, alternatives considered, and a preliminary regulatory analysis. 15 U.S.C. 1193(i); 85 FR 68803 (Oct. 30, 2020).

Before issuing a final rule, the Commission must prepare a final regulatory analysis and make findings concerning any relevant voluntary standard, the relationship of costs and benefits of the rule (in this case, the ignition source revision), and the burden imposed by the rule. 15 U.S.C. 1193(j). In addition, the Commission must find that the rule: (1) Is needed to adequately protect the public against the risk of the occurrence of fire leading to death, injury, or significant property damage; (2) is reasonable, technologically practicable, and appropriate; (3) is limited to fabrics, related materials, or products which present unreasonable risks; and (4) is stated in objective terms. Id. 1193(b).

The Commission also must provide an opportunity for interested persons to make an oral presentation concerning the rulemaking before the Commission may issue a final rule. Id. 1193(d). In the preamble to the proposed rule, the Commission requested that anyone who wanted to make an oral presentation concerning this rulemaking contact the Commission's Division of the Secretariat within 45 days of publication of the proposed rule. The Commission did not receive any requests to make an oral presentation.

Currently, the Standard requires that the ignition source for testing mattresses “shall be a Standard Reference Material cigarette (SRM 1196), available for purchase from the National Institute of Standards and Technology. . . .” 16 CFR 1632.4(a)(2). CPSC is amending the Standard to require the use of SRM 1196a instead of SRM 1196 cigarettes.

The Commission received four public comments. One commenter supported amending the standard to update the SRM ignition source, citing the need for consistency in flammability performance and test methods. Three other commenters opposed the amendment. The issues raised in the comments are summarized and addressed below.

Comment: The cost of implementing SRM 1196a would negatively impact mattress manufacturers, due to the higher price charged for SRM 1196a over SRM 1196, and the cost increase associated with SRM 1196a over SRM 1196 should be considered substantial.

Response: The economic analysis of SRM 1196a shows that it will not have a significant economic impact on small domestic firms that supply the U.S. mattress market. The most expensive testing scenario a firm might encounter would fall well below the threshold to be considered significant. Furthermore, because SRM 1196a is a safety-neutral replacement for SRM 1196, firms are not required to retest existing prototypes with SRM 1196a. So, for existing prototypes that firms intend to continue to offer for sale, there is no additional cost associated with this amendment. Additionally, although the price of SRM 1196a is more than the price of SRM 1196, the cost of SRM 1196a is determined by NIST using the actual costs incurred in the production of SRM 1196a and applicable overhead and surcharge rates. The Commission has determined that the cost increase of adopting SRM 1196a is not considered significant to even the smallest domestic suppliers in the United States.

Comment: The additional cost of SRM 1196a would be passed along to consumers, increasing the cost of mattresses nationwide.

Response: The increase in cost associated with adopting SRM 1196a could potentially be passed on to the consumer. Under the Standard's testing requirements, however, the cost of testing is born over the size of the production run for a given prototype. For a regular production run, the cost per mattress product that could be passed on to the consumer associated with adopting SRM 1196a as the ignition source is negligible. Furthermore, because SRM 1196a is a safety-neutral replacement for SRM 1196, firms are not required to retest existing prototypes. So, for existing prototypes that firms intend to continue to offer for sale, there is no additional cost associated with this amendment and no associated cost passed on to the consumer.

Comment: The U.S. market for mattress products faces challenges stemming from supply chain shortages and disruptions related to the COVID-19 pandemic and tariffs on trade.

Response: Preliminary data published by the U.S. Bureau of Labor Statistics (BLS) for the Mattress Manufacturing Industry (NAICS 337910) show that prices charged to producers to manufacture mattresses have increased by 2.2 percent since the start of the pandemic. The Producer Price Index data published by the BLS does not provide details on what causes industry production price changes. Nor does it attribute price increases to supply chain shortages or disruptions; but it does provide a reliable indication that production prices have increased. Although cost increases currently may be impacting industry, the cost associated with adopting SRM 1196a is small. The marginal cost increase associated with amending the Standard will not have a significant impact on suppliers. Delaying the rule, or electing not to adopt SRM 1196a as the standard ignition source, would not result in any significant cost savings.

Comment: The SRM ignition source is not representative of FSC cigarettes consumers can purchase. It is too strong to be a standardized ignition source for testing. The Commission should use FSC cigarettes as the ignition source for testing to the Standard.

Response: The SRM 1196a cigarette is a more appropriate test ignition source than FSC cigarettes for the following reasons:

• The SRM cigarette is a test instrument with calibration and traceability to NIST. Its ignition characteristics are more important than whether it looks like a consumer cigarette.

• Cigarette ignition of mattresses and bedding remains a substantial cause of residential fire deaths and injuries each year. Weakening the standard ignition strength would lower the threshold for smoldering ignition of these products, potentially increasing the incidence of these events. The SRM 1196a cigarette maintains the current level of safety because it is a safety-neutral replacement for SRM 1196.

• FSC cigarettes are intended to self-extinguish when not actively being smoked. The Standard states: “If a cigarette extinguishes before burning its full length on any mattress surface location . . . the test must be repeated with a freshly lit cigarette.” Because FSC cigarettes are designed to reduce the amount of time a cigarette burns while unattended, testing with FSC cigarettes could lead to many test locations with an incomplete initial data point. In addition, it also could lead to substantially more repeated tests. This would require firms to use more cigarettes to complete a test and increase the time required to complete the test.

Comment: The Commission should consider SRM 1082, NIST's FSC Cigarette Ignition Strength Standard material.

Response: SRM 1082 is not a suitable replacement for SRM 1196 because it is an FSC cigarette. SRM 1082 would not provide the same level of safety, given its ignition strength of 15.8, compared to the ignition strength of SRM 1196a of 95.6 (on a scale of 0-100). SRM 1082 is also more expensive than SRM 1196a, with a cost of $405 for one carton, which is 85 percent costlier per cigarette than SRM 1196a ($437 for two cartons). Additionally, because SRM 1082 is an FSC cigarette, it could self-extinguish, requiring substantially more individual cigarettes to complete the testing.

Comment: It is not fair to obligate industry to procure SRM cigarettes from NIST, and NIST has a vested financial interest in revising the Standard.

Response: SRM cigarettes are available for purchase from NIST, and no other source. According to NIST's pricing policy published online, it establishes the prices of its measurement services in accordance with federal statutes. The prices of SRMs are determined by production costs, overhead, and surcharge rates incurred by NIST. Twice each calendar year, SRMs may be re-priced taking into account updates for overhead and surcharge rates, as determined by NIST and the Department of Commerce.

We also received other comments that are out of scope in this rulemaking proceeding. Commenters stated that 16 CFR part 1632 should be revoked because 16 CFR part 1633 is a more robust standard. Another commenter raised an issue regarding flame retardants in health care products. The scope of this rulemaking is limited to revising the ignition source in the Standard. The Commission is not making any other changes to the Standard. Because the comments do not address the replacement of SRM 1196 with SRM 1196a, these comments fall outside the scope of this rulemaking. We note that CPSC separately published an advance notice of proposed rulemaking to consider the revocation or amendment of 16 CFR part 1632, and those issues are appropriately addressed in that proceeding. 70 FR 36357.

Section 4(j) of the FFA requires that the Commission prepare a final regulatory analysis when it issues a regulation under section 4 of the FFA and that the analysis be published with the rule. 15 U.S.C. 1193(j). The following discussion fulfills this requirement.

The size of the U.S. mattress market increased from $17.4 billion in 2018, to $18.1 billion in 2019. Roughly 23.6 million mattress units shipped in 2018. Approximately 29 percent (6.8 million) of units shipped were imported products. Three industry sectors supply mattresses and mattress pads to the U.S. market, categorized under the North American Industry Classification System (NAICS): NAICS Sector 337910—Mattress Manufacturing, NAICS Sector 314120—Curtain and Linen Mills, and NAICS Sector 423210—Furniture and Merchant Wholesalers.

The Mattress Manufacturing Sector (337910) includes establishments primarily engaged in manufacturing innerspring, box spring, and non-innerspring mattresses. The Curtain and Linen Mills Sector (314120) comprises establishments primarily engaged in manufacturing household linens, bedspreads, sheets, tablecloths, towels, and shower curtains, from purchased materials. This sector includes mattress pad and mattress protector manufacturing. The Furniture and Merchant Wholesalers Sector (423210) is primarily engaged in the merchant wholesale distribution of furniture, except hospital beds and medical furniture. Importers of mattresses are typically categorized under NAICS code 423210.

According to the Small Business Administration (SBA), a firm in the Mattress Manufacturing sector (NAICS sector 337910) can be defined as “small” if the firm employs fewer than 1,000 workers. Under this definition, among the 250 firms identified by staff in the sector, 240 are small businesses that supply mattress products. The SBA defines a firm within the Curtain and Linen Mills Sector (NAICS sector 314120) as small if the firm employs fewer than 750 workers. Under this definition, among the 20 firms identified by staff, 19 firms are small and currently supply mattress products to the U.S. mattress market. Finally, a firm in the Furniture and Merchant Wholesale Sector (NAICS sector 423210) is defined as small if the firm employs fewer than 100 workers. All of the 88 firms identified in this sector meet this definition of small. Under SBA-provided definitions, the majority of firms supplying the U.S. market for mattresses and mattress pads are small businesses.

The mattress standard at 16 CFR part 1632 requires premarket, full-scale prototype testing for each new mattress design. Prototype testing also must be performed for each change in materials of an existing design that may affect cigarette ignition resistance.

Under the Standard, four defined test procedures require the use of an SRM ignition source: The mattress test procedure, the mattress pad test procedure, the ticking classification test procedure, and the tape edge substitution test procedure. The number of test cigarettes required by these test procedures range from 18 SRM test cigarettes consumed during the ticking classification test, to 108 SRM test cigarettes consumed during the mattress or mattress pad test procedures. Furthermore, under the Standard only SRM test cigarettes from unopened packages can be selected for a series of tests, and if a cigarette extinguishes before burning its full length on any mattress surface location, the test must be repeated with a freshly lit cigarette. Therefore, mattress and mattress pad test procedures require, in practice, six packs of SRM cigarettes, the ticking classification test procedure requires in practice one pack of SRM cigarettes, and the tape edge substitution test requires, at a minimum, two packs of SRM cigarettes.

SRM 1196a is available for purchase from NIST at a minimum order of 2 cartons. A carton contains 10 packs, and each pack contains 20 cigarettes; therefore, two cartons from NIST will contain 400 SRM cigarettes. Based on information collected by staff from a selection of domestic third-party testing facilities, a third-party testing facility uses an average of 10 to 40 packs of SRM cigarettes (or between 200-800 test cigarettes) per month. These data provide insight into the number of test cigarettes used by third party testing facilities located in the United States, as an order of magnitude. A testing facility that uses 400 test cigarettes per month would need to purchase two cartons of SRM cigarettes from NIST every month.

The SRM 1196a cigarette would have approximately the same ignition strength characteristics as originally intended by the Standard. The use of SRM 1196a cigarettes would not change the flammability performance tests or test method required under the Standard.

Cigarette ignition of mattresses and mattress pads is a substantial cause of residential fire deaths and injuries each year. This rule will allow firms to comply with the Standard, with consistent and reliable results, preventing injury and death due to mattress fires. This rule is “safety-neutral,” so mattresses that passed or failed under the existing Standard would be expected to generate similar results when SRM 1196a is used. The level of protection provided by the Standard would neither increase nor decrease as a result of the change from SRM 1196 to SRM 1196a. Thus, there would be no impact on the level or value of fire safety benefits derived from the Standard.

Because NIST has exhausted its supply of SRM 1196, adopting this rule to require the use of SRM 1196a will allow firms access to an ignition source that would permit them to continue testing mattresses and mattress pads to the Standard. This rule would thus provide significant benefits to firms, since failing to adopt this amendment would mean that the Standard would require firms to test using an ignition source that is no longer available for purchase.

As an interim measure in 2018, when NIST's stock of SRM 1196 cigarettes was depleted, CPSC's Office of Compliance issued guidance stating that testing to the Standard could be completed with commercial king-size, non-filtered FSC cigarettes. CPSC's Office of Compliance amended its Interim Enforcement Policy guidance, effective September 2020, to allow testing with either reserved stock of SRM 1196 or new stock of SRM 1196a. Accordingly, testing with FSC cigarettes to the Standard is no longer permitted.

SRM cigarettes provide a common ignition source for all laboratories, while commercially available FSC cigarettes do not offer that consistency. The ignition strength of FSC cigarettes vary from one brand to another. Because FSC cigarettes are required to have an ignition strength lower than 25 and are often much weaker, FSC cigarettes would have an ignition strength substantially lower than SRM 1196a. As a result, test results would vary between a test conducted with one brand of FSC cigarette and another, making testing, reporting, and enforcement inconsistent and unreliable.

Furthermore, FSC cigarettes are intended to self-extinguish when left unattended. Under the Standard, results from a cigarette that does not burn its full length are not accepted. Any cigarette which extinguishes before burning its full length on any mattress surface location must be retested with a freshly lit cigarette. As a result, use of the FSC cigarette as the ignition source would likely lead to an increase in the average number of cigarettes used for each complete test. FSC cigarettes would likely self-extinguish, requiring multiple freshly lit cigarettes to complete a test, thereby increasing the costs of testing and time burdens associated with testing.

In contrast to the inconsistency and unreliability of FSC cigarettes, SRM 1196a is a statistically equivalent replacement for SRM 1196, and will reduce the need for retesting and lighting fresh FSC cigarettes. Furthermore, SRM 1196a allows for consistency in reporting and testing between laboratories. This rule specifying SRM 1196a as a replacement cigarette will achieve consistency and prevent uncertainty for industry, testing laboratories, and CPSC.

The cost increase associated with this rule is related to the SRM test cigarettes used as the ignition source for testing. A carton of SRM cigarettes contains 10 packs, and each pack contains 20 cigarettes; therefore, two cartons from NIST will contain 400 SRM cigarettes. Prices for SRM 1196a are set by NIST. At the time the Commission published the proposed rule, NIST charged $400 to purchase a “unit” of two cartons of SRM 1196a. Since then, NIST increased the price for two cartons to $437. The current price of SRM 1196a reflects a number of increases in surcharges accrued over the last calendar year, which includes NIST personnel costs and NIST overhead. The price increase from the previous NIST listed price of $400 per unit of two cartons is a price increase of 9.25 percent. At the new per-unit price, the cost of a pack of SRM 1196a cigarettes increased from $20 per pack to $21.85.

Manufacturers and importers of mattresses will be responsible for ensuring that their mattress products are tested using SRM 1196a. If a supplier's mattress product does not comply with the requirements, they will need to either modify the product, or cease their manufacture or importation. Additionally, as required by the CPSIA and its implementing regulations, manufacturers and importers of youth mattresses would be required to certify that their mattresses intended for children comply with the requirements of the Standard. Many domestic manufacturers of youth mattresses are small entities as defined by SBA. The following analysis reviews possible impacts of using SRM 1196a in the Standard.

The annual cost of adopting the SRM 1196a test cigarette will vary among small firms. Different firms offer a variety of mattress products and have different operational procedures for mattress product development and testing. Among other considerations, the number of mattresses produced annually by small firms is not uniform. Furthermore, some firms perform testing procedures in-house, while others elect or are required to have testing performed by a CPSC-approved conformity assessment body. The number of new prototypes that a firm will bring to market, and the size of a production run by a small firm, is up to the firm to decide; but the cost per firm of the amendment would be impacted by these individual decisions.

Commission staff reviewed a variety of likely cost increases that may be faced by small firms in adopting SRM 1196a, in three separate testing scenarios. To determine the likely costs faced by small firms from use of SRM 1196a cigarettes, staff analyzed testing costs related to the Standard in a manner that is consistent with past economic analysis of the industry. The analysis uses commercial data published online for mattress manufacturing, bedding manufacturing, and wholesale mattress product importers acquired from Dun and Bradstreet. Staff also reviewed current mattress products available on the market from a variety of small domestic suppliers and received input from industry on the type and frequency of testing performed under the Standard.

The number of new prototypes that a small firm will bring to market is up to the individual firm to decide, but the cost per firm due to this rule would be impacted by these individual business decisions. A small firm may choose to make new prototypes every year and bring them to market, or it may elect to substitute ticking and modify existing models of mattress products that are selling well or are customer favorites.

The Commission previously published cost estimates for three testing scenarios. 85 FR 68806. To supplement that analysis, the following discusses the effect of the SRM 1196a price increase from $20 per pack to $21.85 per pack since publication of the proposed rule. The most expensive of the three testing scenarios was Scenario 1, which used 46 packs of SRM 1196a to test mattresses and mattress products annually. At $11.50 per pack, a firm's cost of using SRM 1196 would be $529 (46 packs × $11.50 per pack = $529). At $21.85 per pack for SRM 1196a, the same testing scenario would cost a firm $1,005.10 (46 packs × $21.85 per pack = $1,005.10). As a result of adopting SRM 1196a as the replacement SRM, at a price of $21.85 per pack, the firm would incur a cost increase of $476.10 ($1,005.10−$529 = $476.10). This example of a cost impact is for the most expensive testing scenario a firm might reasonably choose. The lowest reported annual revenue for any small domestic firm in the mattress manufacturing sector is $128,000. One percent of annual revenue for the firm is $1,280 ($128,000 × 1 percent). For this small domestic supplier, any impact smaller than $1,280 should be considered insignificant. Therefore, the cost increase of $476.10 of using SRM 1196a at the price of $437, as charged by NIST, would not be significant for even the smallest firm currently supplying the sector.

In summary, this rule is not expected to have a significant impact on expected benefits or costs of the Standard in 16 CFR part 1632. Both the expected benefits and costs of the amendment are small, and the likely effect on testing costs per new prototype mattress or ticking substitution would be minor, especially when the projected cost is allocated over a production run of complying mattresses.

The Commission considered two basic alternatives: (1) Allow for the use of FSC cigarettes as the ignition source; or (2) take no action on the smoldering ignition source issue.

Neither SRM 1196a nor FSC cigarettes (alternative one) would likely have a substantial economic impact. There would, however, be some relative differences in terms of resource costs and potential effects on the level of benefits the Standard affords. Alternative two would impose a significant economic impact, as it would require firms to use an ignition source that is no longer available, effectively making it impossible for firms to comply with the Standard. The advantages and disadvantages of these two basic alternatives are discussed below.

Under the first alternative, manufacturers and testers could conduct tests with any available FSC cigarettes.

A possible advantage of the Commission taking this alternative action is that some of the projected minor increase in resource costs of testing would not be incurred, since FSC cigarettes are less expensive than SRM 1196a. As noted, however, firms would likely have to use many more FSC cigarettes than SRM 1196a cigarettes due to the likelihood that FSC cigarettes would extinguish before testing is complete.

Disadvantages of the Commission taking this action include an increase in test result variability due to differences in cigarettes. Tests would be less reliable and results would vary depending on which cigarette was used. This would create uncertainty and confusion surrounding the reliability of tests for compliance with 16 CFR part 1632. Manufacturers and testing firms would have to conduct tests that are either wasteful (in terms of extra cigarettes required to complete a test due to cigarettes prematurely extinguishing) or have irreproducible and unreliable results.

If the Commission took no action, firms would be required to use an ignition source that is no longer available for purchase. Firms would be unable to comply with the Standard.

In summary, there are no readily available or technically feasible alternatives to SRM 1196a that would have lower estimated costs and still address the need for a consistent ignition source that retains the “safety-neutral” approach of this rule.

Under the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., an agency that engages in rulemaking generally must prepare initial and final regulatory flexibility analyses describing the impact of the rule on small businesses and other small entities. Section 605 of the RFA provides that an agency is not required to prepare a regulatory flexibility analysis if the head of an agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.

This rule retains the current mattress test procedure, but requires that entities performing cigarette ignition tests (including the CPSC, other state agencies, and industry testing organizations) purchase and use SRM 1196a cigarettes at a higher cost than the price at which SRM 1196 cigarettes had been sold. No additional actions will be required of small entities. The costs associated with the rule will essentially be borne by mattress manufacturers and importers that perform (or pay fees for) compliance testing.

The Commission has determined that this rule will have little or no effect on small producers. The design and construction of existing, compliant mattress products will remain unchanged, and the resource cost increase of using SRM 1196a cigarettes will represent a minimal increase in total testing costs. We have addressed comments concerning the impact of this rule on small entities, and we are not aware of any other information that would change the conclusion that the rule will not have a significant impact on a substantial number of small businesses or other small entities.

Based on the information presented here, in the proposed rule, and in the staff briefing package, the Commission concludes that the rule will have little or no effect on small producers. Thus, the Commission certifies that the rule will not have a significant impact on a substantial number of small businesses or other small entities.

Pursuant to the National Environmental Policy Act, and in accordance with Council on Environmental Quality regulations and CPSC procedures for environmental review, the Commission has assessed the possible environmental effects associated with the rule. The Commission's regulations state that amendments to rules providing performance requirements for consumer products normally have little or no potential for affecting the human environment. 16 CFR 1021.5(c)(1). Nothing in this rule alters that expectation. Therefore, because this rule would have no adverse effect on the environment, neither an environmental assessment nor an environmental impact statement is required.

The rule will modify a flammability standard issued under the FFA. With certain exceptions that are not applicable in this instance, “no state or political subdivision of a state may establish or continue in effect a flammability standard or other regulation” applicable to the same fabric or product covered by an FFA standard if the state or local flammability standard or other regulations is “designed to protect against the same risk of the occurrence of fire” unless the state or local flammability standard or regulation “is identical” to the FFA standard. 15 U.S.C. 1203(a). The rule will not alter the preemptive effect of the existing mattress standard. Thus, the rule will preempt nonidentical state or local flammability standards for mattresses or mattress pads designed to protect against the same risk of the occurrence of fire.

Section 4(b) of the FFA (15 U.S.C. 1193(b)) provides that an amendment of a flammability standard shall become effective one year from the date it is promulgated, unless the Commission finds for good cause that an earlier or later effective date is in the public interest, and the Commission publishes the reason for that finding. The Commission believes that an effective date of thirty days will give adequate notice to all interested persons for firms to obtain SRM 1196a cigarettes from NIST. Section 4(b) of the FFA requires that an amendment of a flammability standard shall exempt products “in inventory or with the trade” on the date the amendment becomes effective, unless the Commission limits or withdraws that exemption because those products are so highly flammable that they are dangerous when used by consumers for the purpose for which they are intended. This rule merely changes the ignition source, however, without any change to the test requirements of the Standard, so there is no relevant exemption for products in inventory or with the trade. The purpose of this rule is to allow manufacturers to replace SRM 1196 cigarettes which are no longer available. Accordingly, manufacturers are already purchasing SRM 1196a cigarettes as the SRM 1196 stock is depleted. Therefore, the Commission finds for good cause that the rule will become effective 30 days after publication in the Federal Register .

The Congressional Review Act (CRA; 5 U.S.C. 801-808) states that, before a rule may take effect, the agency issuing the rule must submit the rule, and certain related information, to each House of Congress and the Comptroller General. 5 U.S.C. 801(a)(1). The submission must indicate whether the rule is a “major rule.” The CRA states that the Office of Information and Regulatory Affairs (OIRA) determines whether a rule qualifies as a “major rule.” Pursuant to the CRA, OIRA designated this rule as not a “major rule,” as defined in 5 U.S.C. 804(2).

Sections 4(a), (b), and (j) of the FFA require the Commission to make certain findings when it issues or amends a flammability standard. The Commission must find that the standard or amendment: (1) Is needed to adequately protect the public against the risk of the occurrence of fire leading to death, injury, or significant property damage; (2) is reasonable, technologically practicable, and appropriate; (3) is limited to fabrics, related materials, or products which present unreasonable risks; and (4) is stated in objective terms. 15 U.S.C. 1193(b). In addition, the Commission must find that: (1) If an applicable voluntary standard has been adopted and implemented, that compliance with the voluntary standard is not likely to adequately reduce the risk of injury, or compliance with the voluntary standard is not likely to be substantial; (2) that benefits expected from the regulation bear a reasonable relationship to its costs; and (3) that the regulation imposes the least burdensome alternative that would adequately reduce the risk of injury. These findings are discussed below.

The amendment to the Standard is needed to adequately protect the public against unreasonable risk of the occurrence of fire. The current Standard specifies as the ignition source cigarettes that are no longer being produced. In order for the Standard to continue to be effective (and for labs to test mattresses and mattress pads to determine whether they comply with the Standard), it is necessary to change the ignition source specification. Changing the ignition source to SRM 1196a, rather than FSC cigarettes, will ensure that testing is reliable and that results will not vary from one lab or manufacturer to another. Such variation would be likely if labs or manufacturers were able to use different ignition sources that have similar physical properties but different burning characteristics. The Commission finds that the amendment is needed to adequately protect the public against unreasonable risk of the occurrence of fire leading to death, personal injury or significant property damage.

The amendment to the Standard is reasonable, technologically practicable, and appropriate. The amendment is based on technical research conducted by NIST and CPSC staff, which established that the SRM 1196a cigarette is capable of providing reliable and reproducible results in flammability testing of mattresses and mattress pads. The SRM 1196a ignition source represents an equivalent, safety-neutral ignition source for use in testing to establish compliance with the Standard. The Commission finds that the amendment is reasonable, technologically practicable and appropriate.

The amendment to the Standard is limited to fabrics, related materials, and products that present an unreasonable risk. The amendment will continue to apply to the same products as the existing Standard, so the Commission finds that it is limited to fabrics, related materials, and products that present an unreasonable risk, and it is stated in objective terms.

Voluntary standards. There is no applicable voluntary standard for mattresses. The rule amends an existing federal mandatory standard.

Relationship of benefits to costs. Amending the Standard to specify SRM 1196a cigarettes as the ignition source allows testing to the Standard to continue without interruption, maintains the effectiveness of the Standard, and will not significantly increase testing costs to manufacturers and importers of mattresses and mattress pads. Both expected benefits and costs of the amendment are small. The effect on testing costs will be minor. Thus, the Commission finds that there is a reasonable relationship between benefits and costs of the amendment.

Least burdensome requirement. No other alternative would allow the Standard's level of safety and effectiveness to continue. Thus, the Commission finds that the amendment imposes the least burdensome requirement that would adequately address the risk of injury.

For the reasons discussed above, the Commission finds that amending the mattress flammability standard (16 CFR part 1632) to specify SRM 1196a cigarettes as the ignition source is needed to adequately protect the public against the unreasonable risk of the occurrence of fire leading to death, injury, and significant property damage. The Commission also finds that the amendment to the Standard is reasonable, technologically practicable, and appropriate. The Commission further finds that the amendment is limited to the fabrics, related materials, and products that present such unreasonable risks.

For the reasons given above, the Commission amends 16 CFR part 1632 as follows:

On March 24, 2020, DHS published notice of its decision to temporarily limit the travel of individuals from Canada into the United States at land ports of entry along the United States-Canada border to “essential travel,” as further defined in that document. 1 The document described the developing circumstances regarding the COVID-19 pandemic and stated that, given the outbreak and continued transmission and spread of the virus associated with COVID-19 within the United States and globally, DHS had determined that the risk of continued transmission and spread of the virus associated with COVID-19 between the United States and Canada posed a “specific threat to human life or national interests.” DHS later published a series of notifications continuing such limitations on travel until 11:59 p.m. EDT on June 21, 2021. 2

DHS continues to monitor and respond to the COVID-19 pandemic. As of the week of June 14, 2021, there have been over 172 million confirmed cases globally, with over 3.7 million confirmed deaths. 3 There have been over 33 million confirmed and probable cases within the United States, 4 over 1.3 million confirmed cases in Canada, 5 and over 2.4 million confirmed cases in Mexico. 6

DHS also notes positive developments in recent weeks. CDC reports that, as of June 14, over 310 million vaccine doses have been administered in the United States and almost 55% of adults in the United States are fully vaccinated. 7 On June 7, 2021, CDC moved Canada and Mexico from COVID-19 Level 4 (Very High) to Level 3 (High) in recognition of conditions that, while still requiring significant safeguards, are improving. 8

Given the outbreak and continued transmission and spread of COVID-19 within the United States and globally, the Secretary has determined that the risk of continued transmission and spread of the virus associated with COVID-19 between the United States and Canada poses an ongoing “specific threat to human life or national interests.”

U.S. and Canadian officials have mutually determined that non-essential travel between the United States and Canada currently poses additional risk of transmission and spread of the virus associated with COVID-19 and places the populace of both nations at increased risk of contracting the virus associated with COVID-19. Moreover, given the sustained human-to-human transmission of the virus, coupled with risks posed by new variants, returning to previous levels of travel between the two nations places the personnel staffing land ports of entry between the United States and Canada, as well as the individuals traveling through these ports of entry, at increased risk of exposure to the virus associated with COVID-19. Accordingly, and consistent with the authority granted in 19 U.S.C. 1318(b)(1)(C) and (b)(2), 9 I have determined that land ports of entry along the U.S.-Canada border will continue to suspend normal operations and will only allow processing for entry into the United States of those travelers engaged in “essential travel,” as defined below. Given the definition of “essential travel” below, this temporary alteration in land ports of entry operations should not interrupt legitimate trade between the two nations or disrupt critical supply chains that ensure food, fuel, medicine, and other critical materials reach individuals on both sides of the border.

For purposes of the temporary alteration in certain designated ports of entry operations authorized under 19 U.S.C. 1318(b)(1)(C) and (b)(2), travel through the land ports of entry and ferry terminals along the United States-Canada border shall be limited to “essential travel,” which includes, but is not limited to—

• U.S. citizens and lawful permanent residents returning to the United States;

• Individuals traveling for medical purposes ( e.g., to receive medical treatment in the United States);

• Individuals traveling to attend educational institutions;

• Individuals traveling to work in the United States ( e.g., individuals working in the farming or agriculture industry who must travel between the United States and Canada in furtherance of such work);

• Individuals traveling for emergency response and public health purposes ( e.g., government officials or emergency responders entering the United States to support federal, state, local, tribal, or territorial government efforts to respond to COVID-19 or other emergencies);

• Individuals engaged in lawful cross-border trade ( e.g., truck drivers supporting the movement of cargo between the United States and Canada);

• Individuals engaged in official government travel or diplomatic travel;

• Members of the U.S. Armed Forces, and the spouses and children of members of the U.S. Armed Forces, returning to the United States; and

• Individuals engaged in military-related travel or operations.

The following travel does not fall within the definition of “essential travel” for purposes of this Notification—

• Individuals traveling for tourism purposes ( e.g., sightseeing, recreation, gambling, or attending cultural events).

At this time, this Notification does not apply to air, freight rail, or sea travel between the United States and Canada, but does apply to passenger rail, passenger ferry travel, and pleasure boat travel between the United States and Canada. These restrictions are temporary in nature and shall remain in effect until 11:59 p.m. EDT on July 21, 2021. This Notification may be amended or rescinded prior to that time, based on circumstances associated with the specific threat. Meanwhile, as part of an integrated U.S. government effort and guided by the objective analysis and recommendations of public health and medical experts, DHS is working closely with counterparts in Mexico and Canada to identify conditions under which restrictions may be eased safely and sustainably.

The Commissioner of U.S. Customs and Border Protection (CBP) is hereby directed to prepare and distribute appropriate guidance to CBP personnel on the continued implementation of the temporary measures set forth in this Notification. The CBP Commissioner may determine that other forms of travel, such as travel in furtherance of economic stability or social order, constitute “essential travel” under this Notification. Further, the CBP Commissioner may, on an individualized basis and for humanitarian reasons or for other purposes in the national interest, permit the processing of travelers to the United States not engaged in “essential travel.”

On March 24, 2020, DHS published notice of its decision to temporarily limit the travel of individuals from Mexico into the United States at land ports of entry along the United States-Mexico border to “essential travel,” as further defined in that document. 1 The document described the developing circumstances regarding the COVID-19 pandemic and stated that, given the outbreak and continued transmission and spread of the virus associated with COVID-19 within the United States and globally, DHS had determined that the risk of continued transmission and spread of the virus associated with COVID-19 between the United States and Mexico posed a “specific threat to human life or national interests.” DHS later published a series of notifications continuing such limitations on travel until 11:59 p.m. EDT on June 21, 2021. 2

DHS continues to monitor and respond to the COVID-19 pandemic. As of the week of June 14, 2021, there have been over 172 million confirmed cases globally, with over 3.7 million confirmed deaths. 3 There have been over 33 million confirmed and probable cases within the United States, 4 over 1.3 million confirmed cases in Canada, 5 and over 2.4 million confirmed cases in Mexico. 6

DHS also notes positive developments in recent weeks. CDC reports that, as of June 14, over 310 million vaccine doses have been administered in the United States and almost 55% of adults in the United States are fully vaccinated. 7 On June 7, 2021, CDC moved Canada and Mexico from COVID-19 Level 4 (Very High) to Level 3 (High) in recognition of conditions that, while still requiring significant safeguards, are improving. 8

Given the outbreak and continued transmission and spread of COVID-19 within the United States and globally, the Secretary has determined that the risk of continued transmission and spread of the virus associated with COVID-19 between the United States and Mexico poses an ongoing “specific threat to human life or national interests.”

U.S. and Mexican officials have mutually determined that non-essential travel between the United States and Mexico currently poses additional risk of transmission and spread of the virus associated with COVID-19 and places the populace of both nations at increased risk of contracting the virus associated with COVID-19. Moreover, given the sustained human-to-human transmission of the virus, coupled with risks posed by new variants, returning to previous levels of travel between the two nations places the personnel staffing land ports of entry between the United States and Mexico, as well as the individuals traveling through these ports of entry, at increased risk of exposure to the virus associated with COVID-19. Accordingly, and consistent with the authority granted in 19 U.S.C. 1318(b)(1)(C) and (b)(2), 9 I have determined that land ports of entry along the U.S.-Mexico border will continue to suspend normal operations and will only allow processing for entry into the United States of those travelers engaged in “essential travel,” as defined below. Given the definition of “essential travel” below, this temporary alteration in land ports of entry operations should not interrupt legitimate trade between the two nations or disrupt critical supply chains that ensure food, fuel, medicine, and other critical materials reach individuals on both sides of the border.

For purposes of the temporary alteration in certain designated ports of entry operations authorized under 19 U.S.C. 1318(b)(1)(C) and (b)(2), travel through the land ports of entry and ferry terminals along the United States-Mexico border shall be limited to “essential travel,” which includes, but is not limited to—

• U.S. citizens and lawful permanent residents returning to the United States;

• Individuals traveling for medical purposes ( e.g., to receive medical treatment in the United States);

• Individuals traveling to attend educational institutions;

• Individuals traveling to work in the United States ( e.g., individuals working in the farming or agriculture industry who must travel between the United States and Mexico in furtherance of such work);

• Individuals traveling for emergency response and public health purposes ( e.g., government officials or emergency responders entering the United States to support federal, state, local, tribal, or territorial government efforts to respond to COVID-19 or other emergencies);

• Individuals engaged in lawful cross-border trade ( e.g., truck drivers supporting the movement of cargo between the United States and Mexico);

• Individuals engaged in official government travel or diplomatic travel;

• Members of the U.S. Armed Forces, and the spouses and children of members of the U.S. Armed Forces, returning to the United States; and

• Individuals engaged in military-related travel or operations.

The following travel does not fall within the definition of “essential travel” for purposes of this Notification—

• Individuals traveling for tourism purposes ( e.g., sightseeing, recreation, gambling, or attending cultural events).

At this time, this Notification does not apply to air, freight rail, or sea travel between the United States and Mexico, but does apply to passenger rail, passenger ferry travel, and pleasure boat travel between the United States and Mexico. These restrictions are temporary in nature and shall remain in effect until 11:59 p.m. EDT on July 21, 2021. This Notification may be amended or rescinded prior to that time, based on circumstances associated with the specific threat. Meanwhile, as part of an integrated U.S. government effort and guided by the objective analysis and recommendations of public health and medical experts, DHS is working closely with counterparts in Mexico and Canada to identify conditions under which restrictions may be eased safely and sustainably.

The Commissioner of U.S. Customs and Border Protection (CBP) is hereby directed to prepare and distribute appropriate guidance to CBP personnel on the continued implementation of the temporary measures set forth in this Notification. The CBP Commissioner may determine that other forms of travel, such as travel in furtherance of economic stability or social order, constitute “essential travel” under this Notification. Further, the CBP Commissioner may, on an individualized basis and for humanitarian reasons or for other purposes in the national interest, permit the processing of travelers to the United States not engaged in “essential travel.”

On July 10, 2021 (86 FR 30779), HUD published its Restoring Affirmatively Furthering Fair Housing Definitions and Certifications interim final rule. Following publication, the Federal Register alerted HUD to an error in the amendatory instruction for revisions to 24 CFR 92.508. Specifically, the amendatory instruction directed that paragraph (a)(7)(i)(C) be revised, however, the revision being made by the interim final rule is to paragraph (a)(7)(i)(B). This document corrects the amendatory instructions for 24 CFR 92.508 to reflect the correct paragraph being revised.

In FR Doc. 2021-12114 appearing on page 30779 in the Federal Register on July 10, 2021, the following correction is made:

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA)(5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because we must establish the special local regulation by July 10, 2021, and lack sufficient time to request public comments and respond to those comments before the special local regulation must be established.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be contrary to the public interest because immediate action is needed to respond to the potential safety hazards associated with the New Martinsville Vintage Regatta taking place on the Ohio River between mile marker 127.5 and mile marker 128.5

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The Captain of the Port Ohio Valley (COTP) has determined that potential hazards associated with New Martinsville Vintage Regatta starting July 10, 2021, will be a safety concern for anyone on the Ohio River from mile marker 127.5 to mile marker 128.5. This rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the special local regulation for the duration of the regatta.

This rule establishes a special local regulation from 9 a.m. through 6 p.m. daily on July 10, 2021, and July 11, 2021. The special local regulation will cover all navigable waters between mile markers 127.5 and 128.5 on the Ohio River. The duration of the regulated area is intended to protect personnel, vessels, and the marine environment in these navigable waters for the duration of the regatta. No vessel or person will be permitted to enter the regulated area without obtaining permission from the designated representative.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of 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. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size and location of the special local regulation. This rule involes a special local regulation lasting less than a week and covering a limited area of one mile. In addition, vessel traffic will be able to reach out to the safety boat to coordinate safe passage through the special local regulation which will impact a mile mile stretch on the Ohio River. The Coast Guard will publish a Local Notice to Mariners (LNMs), and issue a Broadcast Notice to Mariners (BNMs) via VHF-FM marine channel 16 about the regulated area.

The Regulatory Flexibility Act of 1980, 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 rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the regulated area may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

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 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 call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a 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 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 rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does 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.

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 rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined 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 rule involves a special local regulations lasting from 9 a.m. through 6 p.m. on July 10, 2021 and 9 a.m. through 6 p.m. July 11, 2021 that will limit access of the Ohio River from mile marker 127.5 to mile marker 128.5. It is categorically excluded from further review under paragraph L[61] of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Memorandum for the Record supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email 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.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 100 as follows:

Purpose of Program: The Rehabilitation Short-Term Training program is designed to provide short-term training and technical instruction in areas of special significance to the vocational, medical, social, and psychological rehabilitation programs, supported employment program, independent living services programs, and Client Assistance Program, including special seminars, institutes, workshops, and other short-term courses. Short-term training projects may be of regional or national scope.

Program Authority: 29 U.S.C. 772(a)(1).

Applicable Program Regulations: 34 CFR parts 385 and 390.

We published a notice of proposed priority (NPP) for this competition in the Federal Register on February 19, 2021 (86 FR 10213). The NPP contained background information and our reasons for proposing the priority.

Editorial and technical revisions are explained in the discussion of comments that follow.

Public Comment: In response to our invitation in the NPP, 23 parties submitted comments on the proposed priority.

We group major issues according to subject. Generally, we do not address technical and other minor changes or suggested changes the law does not authorize us to make. In addition, we do not address general comments that raise concerns not directly related to the proposed priority.

Analysis of Comments and Changes: An analysis of the comments and of any changes in the priority since publication of the NPP follows.

Comment: Several commenters addressed the priority's requirement that, in providing training and technical assistance, the grantee considers the challenges that State VR agencies face in implementing WIOA's expanded VR services provisions. These commenters expressed the concern that the priority's emphasis on VR agency challenges would have the effect of “shielding” the agency from its statutory responsibility to provide quality and timely VR services in accordance with the Rehabilitation Act. These commenters indicated that CAPs also face similar challenges and argue that any consideration of WIOA implementation challenges should encompass both perspectives.

Conversely, some commenters cited several VR agency challenges and limitations—financial and non-financial—beyond those referenced in the NPP and about which, these commenters believe, CAPs may not be sufficiently aware. These commenters cited, as examples, issues related to the Rehabilitation Act-Individuals with Disabilities Education Act coordination in the delivery of pre-employment transition services; the Rehabilitation Act's maintenance of effort requirements; and parameters set by the States' written policies governing the nature and scope of VR services and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements (2 CFR part 200), among others. The commenters recommended greater emphasis on improving communication between the CAPs and the State VR agencies to promote mutual understanding about their distinct roles, approaches, and perspectives; more training about the impact of Federal and State statutes, regulations, and policies on the delivery of VR services in the States; and closer coordination between the CAPs and the State VR agencies on both individual cases and statewide initiatives to improve competitive integrated employment outcomes for VR clients and applicants. Additionally, one commenter recommended that the comprehensive needs assessment questionnaires, surveys, or focus group include broader input from VR agencies and the State Rehabilitation Councils (SRCs).

Discussion: The Department agrees that the priority's references to VR agency challenges should not be interpreted as a dispensation from the VR program requirements in the Rehabilitation Act, as amended by WIOA. The Department also agrees that VR clients and applicants would be well served by increased coordination, communication, and cross-training between CAPs and VR agencies. The priority includes several provisions that promote such coordination, communication, and training. Required training topics include the obstacles faced by individuals represented by the CAPs and the challenges faced by VR agencies; the roles of SRCs, workforce development partners, and other key VR stakeholders; leadership, relationship-building, and outreach skills for CAP professionals; strategic assessments of VR program challenges, needs, and opportunities based on the CAPs; and strategic engagement with State VR agencies, SRCs, and other stakeholders in response to such assessments. In addition, the NPP requires that CAP training and technical assistance be based on a comprehensive needs assessment that considers the needs of CAP professionals and individuals with disabilities in the context of VR program challenges, needs, and opportunities.

We are revising the priority to further emphasize CAP coordination and communication with the stated purpose of improving VR service delivery and, thus, competitive integrated employment outcomes for VR clients and applicants.

Changes: The Department added language encouraging greater communication, coordination, cross-training, and feedback between the CAP and the State VR agencies, SRCs, workforce partners, and other programs and services available under the Rehabilitation Act in the priority's introductory paragraphs; in required topic areas (a)(1)(iv) and (vi) and (a)(3)(i) and (iii); and in the comprehensive needs assessment section. Also, we added a reference to the CAP's participation in the SRC under the CAP duties and responsibilities required topic area.

Comment: One commenter suggested that policy analysis is an additional area that needs to be addressed in the CAP Training priority. The commenter points out that, under section 101(a)(16)(A) and (B) of the Rehabilitation Act, the designated State agency is required to actively consult with the CAP prior to the adoption of any policies or procedures governing the provision of VR services under the State plan, or amendments thereof, and to consider the views of the CAP director in matters of general policy arising in the administration of the plan.

Discussion: The Department agrees that CAP professionals must develop the expertise necessary to advise State designated agencies on proposed policies and procedures governing the provision of VR services, consistent with section 101(a)(16)(A) and (B)(iv) of the Rehabilitation Act. The NPP supports the development of such expertise by requiring CAP training on the service provision requirements in the Rehabilitation Act and its regulations, policy guidance, and legal decisions, including those related to section 113 on pre-employment transition services and section 511 regarding limitations on use of subminimum wage. We are revising the priority to further foster and facilitate meaningful CAP input on policies or procedures governing the provision of VR services before they are adopted by the State designated agency, consistent with the Rehabilitation Act. The final priority's new provisions on coordination and communication discussed above should also foster favorable conditions for the CAPs to provide input on proposed VR service provision policies and procedures.

Changes: The Department added a reference to section 101(a)(16) under the final priority's required topic area on CAP duties and responsibilities.

Comment: One commenter stated that the priority should encourage CAPs and State VR agencies to resolve disputes at the lowest level of intervention possible to minimize the need for litigation and maximize the amount of Federal funds available for the provision of VR services that individuals need to obtain their employment goals under the Rehabilitation Act.

Discussion: The Department agrees that the priority should encourage CAPs to resolve disputes at the lowest level possible. Accordingly, alternate dispute resolution is one of the required training topic areas under this priority. Also, the notice inviting applications published elsewhere in this issue of the Federal Register includes two pertinent Government Performance and Results Act (GPRA) performance measures: Number and percentage of individual cases resolved through alternative dispute resolution and number of non-litigation systemic activities not involving individual representation that resulted in the change of one or more policies or practices of an agency. Moreover, we expect that the priority's provisions regarding coordination and communication between CAPs, State VR agencies, and other programs within the scope of CAP will help create an environment favorable to non-litigation dispute resolution activities and outcomes.

Changes: None.

Comment: One commenter raised the question of whether the CAP Training priority's purview extends beyond the VR services outlined in Title I of the Rehabilitation Act, as amended by WIOA. The commenter notes that section 112(a) extends the CAP program's role to all the projects, programs, and services provided under the Rehabilitation Act, including independent living.

Discussion: The Department agrees that, under section 112(a) of the Rehabilitation Act, CAPs are responsible for informing, assisting, advising, and advocating for projects, programs, and services under the Rehabilitation Act beyond VR, including the independent living programs. In response, the priority has been revised to ensure consistency with Section 112(a) of the Rehabilitation Act.

Changes: The Department incorporated throughout the priority references to other projects, programs, and services provided by the Rehabilitation Act, in addition to the priority's original references to the VR program.

Comment: One commenter expressed support for the priority's provisions regarding CAP Training coordination with the Rehabilitation Services Administration (RSA) VR technical assistance centers. Also, the commenter recommended further integration with the technical assistance centers through the CAP Training grantee's participation in the Intensive Technical Assistance (ITA) agreements established between the technical assistance centers and participating State VR agencies. The commenter also recommended that the CAP Training grantee join the Technical Assistance Center Collaborative that convenes monthly to coordinate delivery of the centers' technical assistance to the VR agencies.

Discussion: The Department agrees with the importance of coordination between the CAP Training program and the RSA VR technical assistance centers. Accordingly, the priority requires the coordination and leveraging of resources between the CAP Training grantee and the technical assistance centers. Towards that end, we will encourage the CAP Training grantee to attend the Technical Assistance Center Collaborative meetings. However, it is not feasible or appropriate for the CAP Training grantee to participate directly in the ITA agreements. CAP Training activities do not constitute ITA, as defined in the technical assistance centers' final priority. Under the priority, CAP training is available primarily to individual CAP professionals nationwide, whereas technical assistance to CAPs in individual States are available on a short-term, issue-specific basis only. The CAP Training grantee will be able to learn about the ITA agreements through its participation in the Technical Assistance Center Collaborative. Participation in the collaborative may also offer opportunities for short-term collaborative opportunities between CAP Training and the technical assistance centers in individual States.

Changes: None.

Comment: Several commenters noted that the priority's increased focus on strategic planning and resource management would require increased funding relative to that under the prior priority.

Discussion: The funding level established in the notice inviting applications published elsewhere in this issue of the Federal Register for the FFY 2021 competition reflects the Department's recognition of the funding needs associated with the increased focus on strategic planning and resource management capacity-building and other aspects of this priority.

Changes: None.

Comment: Several commenters questioned whether the grantee would have the necessary access to Unified or Combined State Plans, State monitoring reports, Annual Client Assistance Program Reports (RSA-227), and input from VR clients.

Discussion: The approved Unified and Combined State plans can be found at https://wioaplans.ed.gov/. The State monitoring reports, RSA-227, State VR annual reports, and other pertinent information resources are currently available on the RSA's upgraded information management system, at rsa.ed.gov. The Department expects that these information resources will be used for two broad purposes under this priority: A comprehensive needs assessment that the grantee will conduct at the national level and the strategic planning activities that individual CAPs will conduct at the State level. RSA will provide the CAP Training grantee with technical assistance to access State Plans, RSA-227s, State monitoring reports, and other pertinent resources for its comprehensive needs assessment. In turn, the CAP Training grantee is expected to help individual CAPs to access and analyze these resources and to gather and assess input from VR clients and other key stakeholders as part of their strategic planning activities.

Changes: None.

FINAL PRIORITY:

Rehabilitation Short-Term Training—Client Assistance Program (CAP Training).

This CAP Training priority is designed to provide CAP professionals the necessary knowledge, competencies, and skills to inform, assist, and advocate for clients and client-applicants regarding expanded education, training, and competitive integrated employment opportunities and other services and benefits available under the Rehabilitation Act of 1973, as amended by WIOA.

Under this priority, the grantee must provide comprehensive and in-depth training and technical assistance activities that provide updated information about CAP duties and responsibilities under the Rehabilitation Act; expanded VR service provisions in the Rehabilitation Act, including section 113 on pre-employment transition services and section 511 regarding limitations on use of subminimum wage; and on other education, training, and employment opportunities under WIOA, including career pathways, apprenticeships, and customized employment. The training and technical assistance must enhance CAP professionals' individual and systems advocacy competencies and their leadership, relationship-building, and outreach skills. In addition, the training and technical assistance must strengthen the institutional effectiveness of the CAPs in the individual States through strategic planning and resource management capacity-building activities. In providing the training and technical assistance, the grantee must consider the challenges and opportunities experienced by the VR program and other programs authorized under the Rehabilitation Act, as amended by WIOA, and encourage greater communication and coordination between the CAPs and those programs.

Under this priority, the Secretary funds only applications that meet the project requirements outlined below. Applicants must describe major implementation activities, timelines, and milestones for each of the following project requirements:

(a) Training and technical assistance to increase CAP professionals' knowledge, skills, and competencies in the four broad subject areas and related topics:

(1) The Rehabilitation Act, as amended by WIOA, including—

(i) CAP duties and responsibilities under section 112(a) of the Rehabilitation Act and other pertinent provisions including section 101(a)(16) regarding CAP consultation on draft policies and procedures governing the provision of VR services and section 105(b) regarding CAP membership on the SRC;

(ii) VR service provision requirements in the Rehabilitation Act and its regulations, policy guidance, and legal decisions, including those regarding section 113 on pre-employment transition services and section 511 regarding limitations on use of subminimum wage;

(iii) Requirements related to other projects, programs, and services under the Rehabilitation Act, as amended by WIOA, including the independent living programs authorized in Title VII;

(iv) Expanded training, education, and employment opportunities under WIOA, including but not limited to the provision of pre-employment transition services, apprenticeships, customized employment, career pathways, and the focus on postsecondary credential attainment, including advanced degrees;

(v) Challenges and opportunities in implementing the expanded VR service provisions and other benefits available under the Rehabilitation Act, as amended by WIOA, including consideration of Federal and State statutes, regulations, and policies that impact the delivery of VR services in the States, such as the transition services provisions of the Individuals with Disabilities Education Act;

(vi) Obstacles that individuals with disabilities—including individuals with the most significant disabilities, students and youth with disabilities, members of traditionally unserved or underserved groups, and individuals in economically disadvantaged communities—experience in accessing VR services and other services and benefits under the Rehabilitation Act; and

(vii) The complementary roles of CAPs, State VR agencies, SRCs, community rehabilitation programs, WIOA core partners, and key stakeholders of the VR program and other services and programs authorized by the Rehabilitation Act, as amended by WIOA.

(2) Discrete skills related to CAP duties and responsibilities, including—

(i) Individual advocacy;

(ii) Systems advocacy;

(iii) Alternate dispute resolution; and

(iv) Leadership, relationship-building, and outreach.

(3) Strategic planning, including—

(i) Assessments of the State's program priorities, challenges, needs, and opportunities in implementing the expanded VR program provisions and other benefits and services under the Rehabilitation Act, as amended by WIOA. Strategic assessments may include targeted reviews of the Unified or Combined State Plans, monitoring reports, Annual Client Assistance Program Report (RSA-227), other State Plans and reports, and input from agency leadership and staff, SRC members, clients, applicants, and other key stakeholders;

(ii) Development of the individual CAPs' strategic goals and action plans (including their particular training or technical assistance needs), based on identified program priorities, challenges, needs, and opportunities; and

(iii) Strategic outreach and engagement with State VR agencies, SRCs, and other stakeholders associated with the programs and services authorized under the Rehabilitation Act to increase collaboration in support of improved service delivery and outcomes in the State.

(4) Resource management, including—

(i) Budgeting and financial oversight practices in support of strategic goals and objectives, consistent with Generally Accepted Accounting Practices; and

(ii) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, at 2 CFR part 200, pertinent to CAP and VR program operations.

(b) Comprehensive plan for the provision of training and technical assistance on the required subject areas and topics, based on a comprehensive assessment of CAP professionals' needs. The training and technical assistance plan must describe the following:

(1) Subject areas and topics, specifically, how they will be prioritized and made available in the initial year and subsequent years of the project;

(2) Training activities, consisting of both established training modules and ad hoc training responsive to emerging circumstances or trends;

(3) Technical assistance, consisting of individualized assistance on applying principles and practices from training on the required subject areas and topics, as well as consultation on options for applying existing law, regulations, and RSA-issued guidance to specific factual circumstances that arise in the course of CAP professionals' individual or systems advocacy efforts;

(4) Training and technical assistance curricula, materials, and tools, which may incorporate the resources developed by current and former RSA VR technical assistance centers and demonstration projects, available at the National Clearinghouse of Rehabilitation Training Materials;

(5) Information delivery methods, including in-person and virtual activities, communities of practice, social media, and searchable databases; and

(6) State-of-the-art communication tools and platforms, including an interactive project website, distance learning and convening technologies, and searchable databases.

The comprehensive needs assessment may comprise selective reviews, on a national basis, of RSA-227s, Unified or Combined State Plans, RSA State monitoring reports, other State Plans and reports, and input from CAP professionals and key stakeholders, including VR agency and SRC representatives.

(c) Quality control processes to ensure that training and technical assistance activities and materials are updated to reflect the statutory and regulatory changes in the Rehabilitation Act, as amended by WIOA, the RSA policy guidance updates, and future reauthorizations of the Rehabilitation Act.

(d) Coordination with and leveraging the resources of RSA's vocational rehabilitation technical assistance centers and other Federal or non-Federal programs, including the National Technical Assistance Center on Transition and the recently funded RSA technical assistance centers on Quality Employment and Quality Management in the development and delivery of CAP Training project activities, curriculum, materials, and tools.

(e) Coordination with the entity providing training and technical assistance to the Protection and Advocacy of Individual Rights program, consistent with section 509 of the Rehabilitation Act.

(f) Comprehensive evaluation plan based on performance measures established in the notice inviting applications, consistent with the Government Performance and Results Act.

CAP Training performance will be assessed based on the following considerations:

(a) Increased capacity to provide individual and systems advocacy, alternative dispute resolution, and outreach to unserved or underserved populations, as reported by the CAP professionals.

(b) Trends in pertinent CAP services, including individual and systems advocacy.

(c) Relationship between the observed CAP services trends and the training and technical assistance provided under this priority.

The performance evaluation will be based on a variety of quantitative and qualitative data sources, including, but not limited to:

(a) RSA-227;

(b) Pre- and post-training assessments;

(c) Questionnaires, surveys, and focus groups;

(d) Success stories; and

(e) Peer reviews.

The evaluation plan must include a logic model that outlines the proposed project activities, outputs, outcomes, baselines, and targets. The plan also must describe how the evaluation results will be used to promote continuous program improvement throughout the grant's period of performance.

Types of Priorities:

When inviting applications for a competition using one or more priorities, we designate the type of each priority as absolute, competitive preference, or invitational through a notice in the Federal Register . The effect of each type of priority follows:

Absolute priority: Under an absolute priority, we consider only applications that meet the priority (34 CFR 75.105(c)(3)).

Competitive preference priority: Under a competitive preference priority, we give competitive preference to an application by (1) awarding additional points, depending on the extent to which the application meets the priority (34 CFR 75.105(c)(2)(i)); or (2) selecting an application that meets the priority over an application of comparable merit that does not meet the priority (34 CFR 75.105(c)(2)(ii)).

Invitational priority: Under an invitational priority, we are particularly interested in applications that meet the priority. However, we do not give an application that meets the priority a preference over other applications (34 CFR 75.105(c)(1)).

This document does not preclude us from proposing additional priorities, requirements, definitions, or selection criteria, subject to meeting applicable rulemaking requirements.

This is a summary of the Auction 110 Procedures Public Notice, released on June 9, 2021. The complete text of the Auction 110 Procedures Public Notice, including attachments and any related document, are available on the Commission's website at www.fcc.gov/auction/110 or by using the search function for AU Docket No. 21-62, DA 21-655, on the Commission's Electronic Comment Filing System (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).

1. By the Auction 110 Procedures Public Notice, the Office of Economics and Analytics (OEA), jointly with the Wireless Telecommunications Bureau (WTB), establishes the procedures to be used for Auction 110, the auction of new flexible-use licenses in the 3.45-3.55 GHz band (the 3.45 GHz Service). Auction 110 is the Commission's third scheduled auction of mid-band spectrum, which is intended to further the deployment of fifth-generation (5G) wireless, the Internet of Things (IoT), and other advanced spectrum-based services across the country. The Auction 110 Procedures Public Notice continues to implement section 905 of the Consolidated Appropriations Act, 2021, which required the Commission to start an auction to grant new initial licenses subject to flexible use in the 3450-3550 MHz (3.45 GHz) band by December 31, 2021.

2. The bidding for new licenses in Auction 110 is scheduled to commence on October 5, 2021. The Auction 110 Procedures Public Notice provides details regarding the procedures, terms, conditions, dates, and deadlines governing participation in Auction 110 bidding, as well as an overview of the post-auction application and payment processes.

3. In the 3.45 GHz Second Report and Order, 86 FR 17920, April 7, 2021, the Commission made available 100 megahertz of spectrum in the 3.45-3.55 GHz band for licensed use within the contiguous United States. In that Order, the Commission allocated the 3.45-3.55 GHz band for new non-federal fixed and mobile (except aeronautical mobile) operations in the contiguous United States. Among other things, the Commission authorized both fixed and mobile operations in the 3.45-3.55 GHz band using geographic area licensing, established licensing and operating rules for the new 3.45 GHz Service, and decided to use its competitive bidding rules to assign 3.45 GHz Service licenses.

4. On March 18, 2021, in accordance with section 309(j)(3) of the Communications Act of 1934, as amended (Communications Act), the Commission released a public notice seeking comment on certain competitive bidding procedures and various other procedures to be used in Auction 110. The Commission received comments from eight parties in response to the Auction 110 Comment Public Notice, 86 FR 18000, April 07, 2021, and eight reply comments. In the Auction 110 Procedures Public Notice, OEA and WTB resolve all open issues raised in the Auction 110 Comment Public Notice and address the comments received.

5. Other Commission rules and decisions provide the underlying authority for the procedures OEA and WTB adopt today for Auction 110. Among other things, prospective applicants should familiarize themselves with the Commission's general competitive bidding rules, including recent amendments and clarifications thereto, as well as Commission decisions regarding competitive bidding procedures, application requirements, and obligations of Commission licensees. Prospective applicants also should familiarize themselves with the Commission's rules regarding the 3.45 GHz Service, as well as the licensing and operating rules that are applicable to all part 27 services. In addition, applicants must be thoroughly familiar with the procedures, terms, and conditions contained in the Auction 110 Procedures Public Notice and any future public notices that may be released in this proceeding.

6. The terms contained in the Commission's rules, relevant orders, and public notices are not negotiable. The Commission may amend or supplement the information contained in its public notices at any time and will issue public notices to convey any new or supplemental generally applicable information to applicants. Pursuant to the Commission's rules, OEA and WTB also retain the authority to implement further procedures during the course of this auction. It is the responsibility of all applicants to remain current with all Commission rules and with all public notices pertaining to Auction 110.

7. Auction 110 will offer 4,060 new flexible-use licenses for spectrum in the 3.45-3.55 GHz band throughout the contiguous United States. The 100 megahertz of spectrum in this band will be licensed on an unpaired basis and divided into ten 10-megahertz blocks in partial economic area (PEA)-based geographic areas located in the contiguous 48 states and the District of Columbia (PEAs 1-41, 43-211, 213-263, 265-297, 299-359, and 361-411). These 10-megahertz blocks are designated as A through J.

8. All 3.45 GHz Service licenses will be issued for 15-year, renewable license terms, and certain licenses are subject to cooperative sharing requirements, as described in the 3.45 GHz Second Report and Order and below, as well as any other conditions that may be established in related proceedings. Interested parties will be able to find additional information about the cooperative sharing requirements, including information about the encumbrances in specific PEAs, on the National Telecommunications and Information Administration's (NTIA) 3450-3550 MHz web page at https://www.ntia.doc.gov/category/3450-3550-mhz. Interested parties can also find additional guidance and information on federal/non-federal coordination procedures in the public notice issued jointly by NTIA and the Commission. OEA and WTB understand that the Department of Defense (DoD) will hold one or more workshops to provide further information on transition and coordination plans, as well as guidance on anticipated received power levels from the DoD's high-powered operations, methods and means for sharing proprietary and classified information ( e.g., through “Trusted Agents”), and descriptions of potential national emergency scenarios.

9. Licensees may hold up to four 10-megahertz blocks (out of a total of ten) in the 3.45-3.55 GHz band within any PEA at any given time for the first four years after the close of the auction. A licensee in the 3.45-3.55 GHz band may provide any services permitted under terrestrial fixed or mobile, except aeronautical mobile, allocations (as set forth in the non-Federal Government column of the Table of Frequency Allocations in section 2.106 of the Commission's rules, as modified by the 3.45 GHz Second Report and Order ), so long as it complies with the relevant licensing, operating, and technical rules.

10. The auction of licenses in the 3.45-3.55 GHz band will be referred to as “Auction 110.” Bidding in Auction 110 will begin on Tuesday, October 5, 2021. Pre-bidding dates and deadlines are listed below. The initial schedule for bidding rounds in Auction 110 will be announced by public notice at least one week before bidding begins.

11. Unless otherwise announced, bidding on all licenses will be conducted on each business day until bidding has stopped on all licenses.

12. The following dates and deadlines apply to Auction 110:

13. Those wishing to participate in Auction 110 must:

• Submit a short-form application (FCC Form 175) electronically prior to 6 p.m. ET on July 21, 2021, following the electronic filing procedures set forth in the FCC Form 175 Instructions. OEA will prepare and make publicly available detailed instructions for submitting an FCC Form 175 for Auction 110 (FCC Form 175 Instructions) in the Education section of the Auction 110 website at www.fcc.gov/auction/110.

• Submit a sufficient upfront payment and an FCC Remittance Advice Form (FCC Form 159) by 6 p.m. ET on September 2, 2021, following the procedures and instructions set forth in the FCC Form 159 Instructions.

• Comply with all provisions outlined in the Auction 110 Procedures Public Notice and applicable Commission rules.

14. An application to participate in Auction 110, referred to as a short-form application or FCC Form 175, provides information that the Commission uses to determine whether the applicant has the legal, technical, and financial qualifications to participate in a Commission auction for spectrum licenses. The short-form application is the first part of the Commission's two-phased auction application process. In the first phase, a party seeking to participate in Auction 110 must file a short-form application in which it certifies, under penalty of perjury, that it is qualified to participate. Eligibility to participate in Auction 110 is based on an applicant's short-form application and certifications and on the applicant's submission of a sufficient upfront payment for the auction. After bidding closes, in the second phase of the process, each winning bidder must file a more comprehensive post-auction, long-form application (FCC Form 601) for the licenses it wins in the auction, and it must have a complete and accurate ownership disclosure information report (FCC Form 602) on file with the Commission. OEA and WTB remind applicants that being deemed qualified to bid in Auction 110 does not constitute a determination that a party is qualified to hold a Commission license or is eligible for a designated entity bidding credit.

15. A party seeking to participate in Auction 110 must file an FCC Form 175 electronically via the Auction Application System prior to 6 p.m. ET on July 21, 2021, following the procedures prescribed in the FCC Form 175 Instructions. If an applicant claims eligibility for a bidding credit, then the information provided in its FCC Form 175 as of the filing date will be used to determine whether the applicant may request the claimed bidding credit. Below OEA and WTB describe more fully the information disclosures and certifications required in the short-form application. An applicant that files an FCC Form 175 for Auction 110 will be subject to the Commission's rule prohibiting certain communications. An applicant is subject to the prohibition beginning at the deadline for filing short-form applications—6 p.m. ET on July 21, 2021. The prohibition will end for applicants on the post-auction down payment deadline for Auction 110.

16. An applicant bears full responsibility for submitting an accurate, complete, and timely short-form application. Pursuant to the Commission's competitive bidding rules, each applicant must make a series of certifications under penalty of perjury on its FCC Form 175 related to the information provided in its application and its participation in the auction, and it must confirm that it is legally, technically, financially, and otherwise qualified to hold a license. Additionally, each participant in Auction 110 must certify that it has read the Auction 110 Procedures Public Notice and has familiarized itself both with the auction procedures and with the requirements for obtaining a license and operating facilities in the 3.45-3.55 GHz band). If an Auction 110 applicant fails to make the required certifications in its FCC Form 175 by the filing deadline, then its application will be deemed unacceptable for filing and cannot be corrected after the filing deadline.

17. An applicant should note that submitting an FCC Form 175 (and any amendments thereto) constitutes a representation by the certifying official that he or she is an authorized representative of the applicant with authority to bind the applicant, that he or she has read the form's instructions and certifications, and that the contents of the application, its certifications, and any attachments are true and correct. Submitting a false certification to the Commission may result in penalties, including monetary forfeitures, license forfeitures, ineligibility to participate in future auctions, and/or criminal prosecution.

18. Applicants are cautioned that, because the required information submitted in FCC Form 175 bears on each applicant's qualifications, requests for confidential treatment will not be routinely granted. The Commission generally has held that it may publicly release confidential business information where the party has put that information at issue in a Commission proceeding or where the Commission has identified a compelling public interest in disclosing the information. In this regard, the Commission specifically has held that information submitted in support of receiving bidding credits in auction proceedings should be made available to the public.

19. An applicant must designate between one and three individuals as authorized bidders in its FCC Form 175. The Commission's rules prohibit an individual from serving as an authorized bidder for more than one auction applicant.

20. No individual or entity may file more than one short-form application or have a controlling interest in more than one short-form application. If a party submits multiple short-form applications for an auction, then only one application may form the basis for that party to become qualified to bid in that auction.

21. Similarly, and consistent with the Commission's general prohibition on joint bidding agreements, a party generally is permitted to participate in a Commission auction only through a single bidding entity. Accordingly, the filing of applications in Auction 110 by multiple entities controlled by the same individual or set of individuals generally will not be permitted. This restriction applies across all applications, without regard to the geographic areas selected. The Commission adopted a limited exception to the general prohibition on the filing of multiple applications by commonly controlled entities for qualified rural wireless partnerships and individual members of such partnerships. 47 CFR 1.2105(a)(3). Under this limited exception, each qualifying rural wireless partnership and its individual members will be permitted to participate separately in an auction. As noted by the Commission in adopting the prohibition on applications by commonly controlled entities, this rule, in conjunction with the prohibition against joint bidding agreements, protects the competitiveness of the Commission's auctions.

22. After the initial short-form application filing deadline, Commission staff will review all timely submitted applications for Auction 110 to determine whether each application complies with the application requirements and whether the applicant has provided all required information concerning its qualifications for bidding. After this review is completed, a public notice will be released announcing the status of applications and identifying the applications that are complete and those that are incomplete because of minor defects that may be corrected. That public notice also will establish an application resubmission filing window, during which an applicant may make permissible minor modifications to its application to address identified deficiencies. The public notice will include the deadline for resubmitting modified applications. To become a qualified bidder, an applicant must have a complete application ( i.e., have timely filed an application that is deemed complete after the deadline for correcting any identified deficiencies), and must make a timely and sufficient upfront payment. Qualified bidders will be identified by public notice at least 10 days prior to the mock auction.

23. The Auction 110 Procedures Public Notice outlines below additional details regarding certain information required to be submitted in the FCC Form 175. An applicant should consult the Commission's rules to ensure that, in addition to the materials described below, all required information is included in its short-form application. To the extent the information in the Auction 110 Procedures Public Notice does not address a potential applicant's specific operating structure, or if the applicant needs additional information or guidance concerning the described disclosure requirements, the applicant should review the educational materials for Auction 110 (see the Education section of the Auction 110 website at www.fcc.gov/auction/110 ) and/or use the contact information provided in the Auction 110 Procedures Public Notice to consult with Commission staff to better understand the information it must submit in its short-form application.

24. An applicant must select all of the license areas on which it may want to bid from the list of available PEAs on its FCC Form 175. An applicant must carefully review and verify its PEA selections before the FCC Form 175 filing deadline because those selections cannot be changed after the auction application filing deadline. An applicant is not required to place bids on any or all of the license areas selected, but the FCC Auction Bidding System (bidding system) will not accept bids for blocks located in PEAs that the applicant did not select in its FCC Form 175. The auction application system, however, will provide an applicant the option to select all 406 available PEAs at one time using an “all PEAs” feature.

25. An applicant must provide in its FCC Form 175 a brief description of, and identify each party to, any partnerships, joint ventures, consortia or agreements, arrangements, or understandings of any kind relating to the licenses being auctioned, including any agreements that address or communicate directly or indirectly bids (including specific prices), bidding strategies (including the specific licenses on which to bid or not to bid), or the post-auction market structure, to which the applicant, or any party that controls or is controlled by the applicant, is a party. In connection with the agreement disclosure requirement, the applicant must certify under penalty of perjury in its FCC Form 175 that it has described, and identified each party to, any such agreements, arrangements, or understandings to which it (or any party that controls it or that controls) is a party. As discussed below, an applicant may continue negotiating, discussing, or communicating with respect to a new agreement after the FCC Form 175 filing deadline, provided that the communications involved do not relate both to the licenses being auctioned and to bids or bidding strategies or post-auction market structure. If, after the FCC Form 175 filing deadline, an auction applicant enters into any agreement relating to the licenses being auctioned, then it is subject to these same disclosure obligations. Each applicant must maintain the accuracy and completeness of the information in its pending auction application.

26. For purposes of making the required agreement disclosures on the FCC Form 175, if parties agree in principle on all material terms prior to the application filing deadline, then each party to the agreement that is submitting an auction application must provide a brief description of, and identify the other party or parties to, the agreement on its respective FCC Form 175, even if the agreement has not been reduced to writing. Parties that have not agreed in principle by the FCC Form 175 filing deadline should not describe, or include the names of parties to, the discussions on their applications.

27. The Commission's rules generally prohibit joint bidding and other arrangements involving auction applicants (including any party that controls or is controlled by such applicants). For purposes of the prohibition, a joint bidding arrangement includes any arrangement relating to the licenses being auctioned that addresses or communicates, directly or indirectly, bidding at the auction, bidding strategies, including arrangements regarding price or the specific licenses on which to bid, and any such arrangement relating to the post-auction market structure.

28. This prohibition applies to joint bidding arrangements involving two or more nationwide providers, as well as joint bidding arrangements involving a nationwide provider and one or more non-nationwide providers, where at least one party to the arrangement is an applicant for the auction. In the Updating Part 1 Report and Order, 80 FR 56763, Sep. 18, 2015, the Commission stated that entities that qualify as nationwide providers generally would be identified in procedures public notices released before each auction. To that end, and consistent with the Commission's decisions in recent spectrum auctions, the Commission considers AT&T, T-Mobile, and Verizon to be “nationwide providers” for the purpose of implementing the competitive bidding rules in Auction 110.

29. Under certain circumstances, a non-nationwide provider may enter into an agreement to form a consortium or a joint venture (as applicable) that results in a single party applying to participate in an auction. Specifically, a designated entity (DE) can participate in one consortium or joint venture in an auction, and non-nationwide providers that are not designated entities may participate in an auction through only one joint venture. While two or more non-nationwide providers may participate in an auction through a joint venture, a nationwide and a non-nationwide provider may not do so. A non-nationwide provider may enter into only one agreement to form a consortium or joint venture (as applicable), and such consortium or joint venture shall be the exclusive bidding vehicle for its members in the auction. The general prohibition on joint bidding arrangements excludes certain agreements, including those that are solely operational in nature, as defined in section 1.2105(a)(2)(ix)(A)-(C) of the Commission's rules.

30. To implement the prohibition on joint bidding arrangements, the Commission's rules require each applicant to certify in its short-form application that it has disclosed any arrangements or understandings of any kind relating to the licenses being auctioned to which it (or any party that controls or is controlled by it) is a party. The applicant must also certify that it (or any party that controls or is controlled by it) has not entered and will not enter into any arrangement or understanding of any kind relating directly or indirectly to bidding at auction with, among others, any other applicant or a nationwide provider.

31. Although the Commission's rules do not prohibit auction applicants from communicating about matters that are within the scope of an excepted agreement that has been disclosed in an FCC Form 175, the Commission reminds applicants that certain discussions or exchanges could nonetheless touch upon impermissible subject matters, and that compliance with the Commission's rules will not insulate a party from enforcement of the antitrust laws.

32. Applicants should bear in mind that a winning bidder will be required to disclose in its FCC Form 601 post-auction application the specific terms, conditions, and parties involved in any agreement relating to the licenses being auctioned into which it had entered prior to the time bidding was completed. This applies to any bidding consortium, joint venture, partnership, or other agreement, arrangement, or understanding of any kind entered into relating to the competitive bidding process, including any agreements relating to the licenses being auctioned that address or communicate directly or indirectly bids (including specific prices), bidding strategies (including the specific licenses on which to bid or not to bid), or the post-auction market structure, to which the applicant, or any party that controls or is controlled by the applicant, is a party.

33. Each applicant must comply with the applicable part 1 ownership disclosure requirements and provide information required by sections 1.2105 and 1.2112, and, where applicable, section 1.2110, of the Commission's rules. Specifically, in completing FCC Form 175, an applicant must fully disclose information regarding the real party- or parties-in-interest in the applicant or application and the ownership structure of the applicant, including both direct and indirect ownership interests of 10% or more, as prescribed in sections 1.2105 and 1.2112 and, where applicable, section 1.2110 of the Commission's rules. Each applicant is responsible for ensuring that information submitted in its short-form application is complete and accurate.

34. In certain circumstances, an applicant may have previously filed an FCC Form 602 ownership disclosure information report or filed an auction application for a previous auction in which ownership information was disclosed. The most current ownership information contained in any FCC Form 602 or previous auction application on file with the Commission that used the same FCC Registration Number (FRN) the applicant is using to submit its FCC Form 175 will automatically be pre-filled into certain ownership sections on the applicant's FCC Form 175, if such information is in an electronic format compatible with FCC Form 175. Applicants are encouraged to submit an FCC Form 602 ownership report or update any ownership information on file with the Commission in an FCC Form 602 ownership report prior to starting a short-form application for Auction 110 to ensure that their most recent ownership information is pre-filled into their short-form application. Each applicant must carefully review any ownership information automatically entered into its FCC Form 175, including any ownership attachments, to confirm that all information supplied on FCC Form 175 is complete and accurate as of the application filing deadline. Any information that needs to be corrected or updated must be changed directly in FCC Form 175.

35. Section 310 of the Communications Act requires the Commission to review foreign investment in radio station licenses and imposes specific restrictions on who may hold certain types of radio licenses. Section 310 applies to applications for initial radio licenses, applications for assignments and transfers of control of radio licenses, and spectrum leasing arrangements under the Commission's secondary market rules. In completing FCC Form 175, an applicant is required to disclose information concerning foreign ownership of the applicant. If an applicant has foreign ownership interests in excess of the applicable limit or benchmark set forth in section 310(b), then it may seek to participate in Auction 110 as long as it has filed a petition for declaratory ruling with the Commission prior to the FCC Form 175 filing deadline. An applicant must certify in its FCC Form 175 that, as of the deadline for filing its application to participate in the auction, the applicant either is in compliance with the foreign ownership provisions of section 310 or has filed a petition for declaratory ruling requesting Commission approval to exceed the applicable foreign ownership limit or benchmark in section 310(b) that is pending before, or has been granted by, the Commission. Additional information concerning foreign ownership disclosure requirements is provided in the FCC Form 175 Instructions.

36. Consistent with past practice in many prior spectrum license auctions, OEA and WTB adopt the Commission's proposal to limit information available in Auction 110 in order to prevent the identification of bidders placing particular bids until after the bidding has closed. More specifically, OEA will not make public until after bidding has closed: (1) The PEAs that an applicant selects for bidding in its short-form application, (2) the amount of any upfront payment made by or on behalf of an applicant for Auction 110, (3) any applicant's bidding eligibility, and (4) any other bidding-related information that might reveal the identity of the bidder placing a bid.

37. The limited information procedures used in past auctions have helped safeguard against potential anticompetitive behavior such as retaliatory bidding and collusion. No commenters objected to this proposal, and OEA and WTB find nothing in the record to suggest departure from the Commission's now-established practice of implementing these procedures in wireless spectrum auctions. OEA and WTB find that the competitive benefits associated with limiting information disclosure support adoption of such procedures and outweigh the potential benefits of full disclosure.

38. Once the bidding begins in Auction 110, under the limited information procedures (sometimes also referred to as anonymous bidding), information to be made public after each round of bidding will include, for licenses in each geographic area, the supply, the aggregate demand, the price at the end of the last completed round, and the price for the next round. The identities of bidders placing specific bids and the net bid amounts (reflecting bidding credits) will not be disclosed until after the close of bidding.

39. Throughout the auction, bidders will have access to additional information related to their own bidding and bidding eligibility through the Commission's bidding system. For example, bidders will be able to view their own level of eligibility, both before and during the auction.

40. After the close of bidding, bidders' PEA selections, upfront payment amounts, bidding eligibility, bids, and other bidding-related actions will be made publicly available.

41. OEA and WTB warn applicants that direct or indirect communication to other applicants or the public disclosure of non-public information ( e.g., reductions in eligibility, identities of bidders) could violate the Commission's rule prohibiting certain communications. Therefore, to the extent an applicant believes that such a disclosure is required by law or regulation, including regulations issued by the U.S. Securities and Exchange Commission (SEC), OEA and WTB strongly urge that the applicant consult with the Commission staff in the Auctions Division before making such disclosure.

42. The rules prohibiting certain communications set forth in section 1.2105(c) apply to each applicant that files a short-form application (FCC Form 175) in Auction 110. Section 1.2105(c)(1) of the Commission's rules provides that, subject to specified exceptions, “[a]fter the short-form application filing deadline, all applicants are prohibited from cooperating or collaborating with respect to, communicating with or disclosing, to each other or any nationwide provider [of communications services] that is not an applicant, or, if the applicant is a nationwide provider, any non-nationwide provider that is not an applicant, in any manner the substance of their own, or each other's, or any other applicants' bids or bidding strategies (including post-auction market structure), or discussing or negotiating settlement agreements, until after the down payment deadline. . . .”

43. An “applicant” for purposes of this rule includes all “controlling interests” in the entity submitting the FCC Form 175 auction application, as well as all holders of interests amounting to 10% or more of the entity (including institutional investors and asset management companies), and all officers and directors of that entity. Under section 1.2105(c), a party that submits an application becomes an “applicant” under the rule at the application deadline, and that status does not change based on later developments. Thus, an auction applicant that does not correct deficiencies in its application, fails to submit a timely and sufficient upfront payment, or does not otherwise become qualified, remains an “applicant” for purposes of the rule and remains subject to the prohibition on certain communications until the Auction 110 down payment deadline.

44. As the Commission proposed in the Auction 110 Comment Public Notice, OEA and WTB consider AT&T, T-Mobile, and Verizon to be “nationwide providers” for the purposes of the prohibited communications rule for Auction 110.

45. The prohibition in section 1.2105(c) on certain communications begins at an auction's short-form application filing deadline and ends at the auction's down payment deadline after the auction closes, which will be announced in a future public notice.

46. Section 1.2105(c) of the Commission's rules prohibits certain communications between applicants for an auction, regardless of whether the applicants seek permits or licenses in the same geographic area or market. The rule also applies to communications by applicants with non-applicant nationwide providers of communications services and by nationwide applicants with non-applicant non-nationwide providers. The rule further prohibits “joint bidding arrangements,” including arrangements relating to the permits or licenses being auctioned that address or communicate, directly or indirectly, bidding at the auction, bidding strategies, including arrangements regarding price or the specific permits or licenses on which to bid, and any such arrangements relating to the post-auction market structure. The rule allows for limited exceptions for communications within the scope of any arrangement consistent with the exclusion from the Commission's rule prohibiting joint bidding, provided such arrangement is disclosed on the applicant's auction application. Applicants may communicate pursuant to any pre-existing agreements, arrangements, or understandings relating to the licenses being auctioned that are solely operational or that provide for the transfer or assignment of licenses, provided that such agreements, arrangements, or understandings are disclosed on their applications and do not both relate to the licenses at auction and address or communicate bids (including amounts), bidding strategies, or the particular permits or licenses on which to bid or the post-auction market structure.

47. In addition to express statements of bids and bidding strategies, the prohibition against communicating in any manner includes public disclosures as well as private communications and indirect or implicit communications. Consequently, an applicant must take care to determine whether its auction-related communications may reach another applicant. OEA and WTB remind applicants that they must determine whether their communications with other parties are permissible under the rule once the prohibition begins at the deadline for submitting applications, even before the public notice identifying applicants is released.

48. Parties subject to section 1.2105(c) should take special care in circumstances where their officers, directors, and employees may receive information directly or indirectly relating to any applicant's bids or bidding strategies. Such information may be deemed to have been received by the applicant under certain circumstances. For example, Commission staff have found that, where an individual serves as an officer and director for two or more applicants, the bids and bidding strategies of one applicant are presumed to be conveyed to the other applicant through the shared officer, which creates an apparent violation of the rule.

49. Subject to the limited exceptions for communications within the scope of any arrangement consistent with the exclusion from the Commission's rule prohibiting joint bidding, section 1.2105(c)(1) prohibits applicants from communicating with specified other parties only with respect to “their own, or each other's, or any other applicant's bids or bidding strategies . . . .” The Prohibited Communications Guidance Public Notice, 80 FR 63215, Oct. 19, 2015, released in advance of the broadcast incentive auction (Auction 1000) reviewed the scope of the prohibition generally, as well as in that specific auction's forward auction of spectrum licenses and reverse auction to relinquish broadcast licenses. As the Commission explained therein, a communication conveying “bids or bidding strategies (including post-auction market structure)” must also relate to the “licenses being auctioned” in order to be covered by the prohibition. Thus, the prohibition is limited in scope and does not apply to all communications between or among the specified parties. The Commission consistently has made clear that application of the rule prohibiting communications has never required total suspension of essential ongoing business. Entities subject to the prohibition may negotiate agreements during the prohibition period, provided that the communications involved do not relate to both: (1) The licenses being auctioned and (2) bids or bidding strategies or post-auction market structure.

50. Accordingly, business discussions and negotiations that are unrelated to bidding in Auction 110 and that do not convey information about the bids or bidding strategies, including the post-auction market structure, of an applicant are not prohibited by the rule. Moreover, not all auction-related information is covered by the prohibition. For example, communicating merely whether a party has or has not applied to participate in Auction 110 will not violate the rule. In contrast, communicating, among other things, how a party will participate, including specific geographic areas selected, specific bid amounts, and/or whether or not the party is placing bids, would convey bids or bidding strategies and would be prohibited.

51. While section 1.2105(c) does not prohibit business discussions and negotiations among auction applicants that are unrelated to the auction, each applicant must remain vigilant not to communicate, directly or indirectly, information that affects, or could affect, bids or bidding strategies. Certain discussions might touch upon subject matters that could convey price or geographic information related to bidding strategies. Such subject areas include, but are not limited to, management, sales, local marketing agreements, and other transactional agreements.

52. OEA and WTB caution applicants that bids or bidding strategies may be communicated outside of situations that involve one party subject to the prohibition communicating privately and directly with another such party. For example, the Commission has warned that prohibited communications concerning bids and bidding strategies may include communications regarding capital calls or requests for additional funds in support of bids or bidding strategies to the extent such communications convey information concerning the bids and bidding strategies directly or indirectly. Moreover, the Commission found a violation of the rule against prohibited communications when an applicant used the Commission's bidding system to disclose its bidding strategy in a manner that explicitly invited other auction participants to cooperate and collaborate in specific markets, and it has placed auction participants on notice that the use of its bidding system to disclose market information to competitors will not be tolerated and will subject bidders to sanctions.

53. Likewise, when completing a short-form application, each applicant should avoid any statements or disclosures that may violate section 1.2105(c), particularly in light of the limited information procedures in effect for Auction 110. Specifically, an applicant should avoid including any information in its short-form application that might convey information regarding its PEA selections, such as referring to certain markets in describing agreements, including any information in application attachments that will be publicly available that may otherwise disclose the applicant's PEA selections, or using applicant names that refer to licenses being offered.

54. Applicants also should be mindful that communicating non-public application or bidding information publicly or privately to another applicant may violate section 1.2105(c) even though that information subsequently may be made public during later periods of the application or bidding processes.

55. Section 1.2105(c) does not prohibit an applicant from communicating bids or bidding strategies to a third party, such as a consultant or consulting firm, counsel, or lender. The applicant should take appropriate steps, however, to ensure that any third party it employs for advice pertaining to its bids or bidding strategies does not become a conduit for prohibited communications to other specified parties, as that would violate the rule. For example, an applicant might require a third party, such as a lender, to sign a non-disclosure agreement before the applicant communicates any information regarding bids or bidding strategy to the third party. Within third-party firms, separate individual employees, such as attorneys or auction consultants, may advise individual applicants on bids or bidding strategies, as long as such firms implement firewalls and other compliance procedures that prevent such individuals from communicating the bids or bidding strategies of one applicant to other individuals representing separate applicants. Although firewalls and/or other procedures should be used, their existence is not an absolute defense to liability if a violation of the rule has occurred.

56. As the Commission has noted in other spectrum auctions, in the case of an individual, the objective precautionary measure of a firewall is not available. As a result, an individual that is privy to bids or bidding information of more than one applicant presents a greater risk of becoming a conduit for a prohibited communication. OEA and WTB will take the same approach to interpreting the prohibited communications rule in Auction 110. OEA and WTB emphasize that whether a prohibited communication has taken place in a given case will depend on all the facts pertaining to the case, including who possessed what information, what information was conveyed to whom, and the course of bidding in the auction.

57. OEA and WTB remind potential applicants that they may discuss the short-form application or bids for specific licenses or license areas with the counsel, consultant, or expert of their choice before the short-form application deadline. Furthermore, the same third-party individual could continue to give advice after the short-form deadline regarding the application, provided that no information pertaining to bids or bidding strategies, including PEAs selected on the short-form application, is conveyed to that individual.

58. Applicants also should use caution in their dealings with other parties, such as members of the press, financial analysts, or others who might become conduits for the communication of prohibited bidding information. For example, even though communicating that it has applied to participate in the auction will not violate the rule, an applicant's statement to the press that it intends to stop bidding in an auction could give rise to a finding of a section 1.2105 violation. Similarly, an applicant's public statement of intent not to place bids during bidding in Auction 110 could also violate the rule.

59. By electronically submitting its FCC Form 175 auction application, each applicant for Auction 110 certifies its compliance with section 1.2105(c) of the rules. The mere filing of a certifying statement as part of an application, however, will not outweigh specific evidence that a prohibited communication has occurred, nor will it preclude the initiation of an investigation when warranted. Any applicant found to have violated these communication prohibitions may be subject to sanctions.

60. Section 1.2105(c)(4) requires that any applicant that makes or receives a communication that appears to violate section 1.2105(c) must report such communication in writing to the Commission immediately, and in no case later than five business days after the communication occurs. Each applicant's obligation to report any such communication continues beyond the five-day period after the communication is made, even if the report is not made within the five-day period.

61. A party reporting any information or communication pursuant to sections 1.65, 1.2105(a)(2), or 1.2105(c)(4) must take care to ensure that any report of a prohibited communication does not itself give rise to a violation of section 1.2105(c). For example, a party's report of a prohibited communication could violate the rule by communicating prohibited information to other parties specified under the rule through the use of Commission filing procedures that allow such materials to be made available for public inspection.

62. Parties must file only a single report concerning a prohibited communication and must file that report with the Commission personnel expressly charged with administering the Commission's auctions. This process differs from filing procedures used in connection with other Commission rules and processes, which may call for submission of filings to the Commission's Office of the Secretary or ECFS. Filing through the Office of Secretary or ECFS could allow the report to become publicly available and might result in the communication of prohibited information to other auction applicants. This rule is designed to minimize the risk of inadvertent dissemination of information in such reports. Any reports required by section 1.2105(c) must be filed consistent with the instructions set forth in the Auction 110 Procedures Public Notice. For Auction 110, such reports must be filed with the Chief of the Auctions Division, Office of Economics and Analytics, by the most expeditious means available. Any such report should be submitted by email to the Auctions Division Chief and sent to auction110@fcc.gov. If you choose instead to submit a report in hard copy, contact Auctions Division staff at auction110@fcc.gov or (202) 418-0660 for guidance.

63. Given the potential competitive sensitivity of public disclosure of information in such a report, a party seeking to report such a prohibited communication should consider submitting its report with a request that the report or portions of the submission be withheld from public inspection by following the procedures specified in section 0.459 of the Commission's rules. OEA and WTB encourage such parties to coordinate with the Auctions Division staff about the procedures for submitting such reports.

64. Each applicant that is a winning bidder will be required to provide as part of its long-form application any agreement or arrangement it has entered into and a summary of the specific terms, conditions, and parties involved in any agreement it has entered into. This applies to any bidding consortia, joint venture, partnership, or agreement, understanding, or other arrangement entered into relating to the competitive bidding process, including any agreement relating to the post-auction market structure. Failure to comply with the Commission's rules can result in enforcement action.

65. A summary listing of documents issued by the Commission, OEA, and WTB addressing the application of section 1.2105(c) is available on the Commission's auction web page at www.fcc.gov/summary-listing-documents-addressing-application-rule-prohibiting-certain-communications.

66. Regardless of compliance with the Commission's rules, applicants remain subject to the antitrust laws, which are designed to prevent anticompetitive behavior in the marketplace. Compliance with the disclosure requirements of section 1.2105(c)(4) will not insulate a party from enforcement of the antitrust laws. For instance, a violation of the antitrust laws could arise out of actions taking place well before any party submits a short-form application. The Commission has cited a number of examples of potentially anticompetitive actions that would be prohibited under antitrust laws: For example, actual or potential competitors may not agree to divide territories in order to minimize competition, regardless of whether they split a market in which they both do business, or whether they merely reserve one market for one and another market for the other.

67. To the extent that Commission staff become aware of specific allegations that suggest that violations of the federal antitrust laws may have occurred, they may refer such allegations to the United States Department of Justice for investigation. If an applicant is found to have violated the antitrust laws or the Commission's rules in connection with its participation in the competitive bidding process, then it may be subject to a forfeiture and may be prohibited from participating further in Auction 110 and in future auctions, among other sanctions.

68. A bidding credit represents an amount by which a bidder's overall payment across all the licenses won will be discounted, subject to the caps discussed below. As set forth in section 1.2110 of the Commission's rules, and as described below, these rule revisions include, but are not limited to: (1) Adopting a two-pronged standard for evaluating eligibility for small business benefits, (2) establishing a new attribution rule for certain disclosable interest holders of applicants claiming designated entity benefits, (3) updating the gross revenue amounts defining eligibility for small business benefits, (4) creating a separate bidding credit for eligible rural service providers, and (5) establishing caps on the total amount of designated entity benefits any eligible winning bidder may receive.

69. In Auction 110, designated entity bidding credits will be available to applicants demonstrating eligibility for a small business or a rural service provider bidding credit and subsequently winning license(s). These bidding credits will not be cumulative—an applicant is permitted to claim either a small business bidding credit or a rural service provider bidding credit, but not both. Each applicant must also certify that it is eligible for the claimed bidding credit in its FCC Form 175. In addition to the information provided below, each applicant should review carefully the Commission's decisions regarding the designated entity provisions as well as the part 1 rules.

70. In particular, the Commission reminds applicants applying for designated entity bidding credits that they should take due account of the requirements of the Commission's rules and implementing orders regarding de jure and de facto control of such applicants. These rules include a prohibition, which applies to all applicants (whether they seek bidding credits or not), against changes in ownership of the applicant that would constitute an assignment or transfer of control. This may, in some circumstances, include changes in officers or directors. Applicants should not expect to receive any opportunities to revise their ownership structure after the filing of their short- and long-form applications, including making revisions to their agreements or other arrangements with interest holders, lenders, or others in order to address potential concerns relating to compliance with the designated entity bidding credit requirements. This policy will help to ensure compliance with the Commission's rules applicable to the award of bidding credits prior to the conduct of the auction, which will involve competing bids from those that do and do not seek bidding credits, and thus preserves the integrity of the auction process. OEA and WTB also believe that this will meet the Commission's objectives in awarding licenses through the competitive bidding process.

71. For Auction 110, bidding credits will be available to eligible small businesses and consortia thereof, subject to the caps discussed below. Under the service rules applicable to the 3.45 GHz Service licenses to be offered in Auction 110, the level of bidding credit available is determined as follows:

• A bidder that qualifies as a “small business”— i.e., one with attributed average annual gross revenues that do not exceed $55 million for the preceding five years—is eligible to receive a 15% discount on its overall payment.

• A bidder that qualifies as a “very small business”— i.e., one with attributed average annual gross revenues that do not exceed $20 million for the preceding five years—is eligible to receive a 25% discount on its overall payment.

72. In adopting this two-tiered approach in the 3.45 GHz Second Report and Order, the Commission observed that this approach would provide consistency and predictability for small businesses.

73. Small business bidding credits are not cumulative; an eligible applicant may receive either the 15% or the 25% bidding credit on its overall payment, but not both. The Commission's unjust enrichment provisions also apply to a winning bidder that uses a bidding credit and subsequently seeks to assign or transfer control of its license within a certain period to an entity not qualifying for at least the same level of small business bidding credit.

74. Each applicant claiming a small business bidding credit must disclose the gross revenues for the preceding five years for each of the following: (1) The applicant, (2) its affiliates, (3) its controlling interests, and (4) the affiliates of its controlling interests. The applicant must also submit an attachment that lists all parties with which the applicant has entered into any spectrum use agreements or arrangements for any licenses that may be won by the applicant in Auction 110. In addition, to the extent that an applicant has an agreement with any disclosable interest holder for the use of more than 25% of the spectrum capacity of any license that may be won in Auction 110, the applicant must disclose the identity and the attributable gross revenues of any such disclosable interest holder. This attribution rule will be applied on a license-by-license basis. As a result, an applicant may be eligible for a bidding credit on some, but not all, of the licenses for which it is bidding in Auction 110. If an applicant is applying as a consortium of small businesses, then the disclosures described in this paragraph must be provided for each consortium member.

75. An eligible applicant may request a 15% discount on its overall payment using a rural service provider bidding credit, subject to the cap discussed below. To be eligible for a rural service provider bidding credit, an applicant must: (1) Be a service provider that is in the business of providing commercial communications services and, together with its controlling interests, affiliates, and the affiliates of its controlling interests, has fewer than 250,000 combined wireless, wireline, broadband, and cable subscribers; and (2) serve predominantly rural areas. Rural areas are defined as counties with a population density of 100 or fewer persons per square mile. An applicant seeking a rural service provider bidding credit must provide the number of subscribers served as of the short-form application deadline. An applicant may count any subscriber as a single subscriber even if that subscriber receives more than one service.

76. Each applicant seeking a rural service provider bidding credit must disclose the number of its subscribers, along with the number of subscribers of its affiliates, controlling interests, and the affiliates of its controlling interests. The applicant must also submit an attachment that lists all parties with which the applicant has entered into any spectrum use agreements or arrangements for any licenses that may be won by the applicant in Auction 110. In addition, to the extent that an applicant has an agreement with any disclosable interest holder for the use of more than 25% of the spectrum capacity of any license that may be won in Auction 110, the identity and the attributable subscribers of any such disclosable interest holder must be disclosed. Like applicants seeking eligibility for small business bidding credits, eligible rural service providers may also form a consortium. If an applicant is applying as a consortium of rural service providers, then the disclosures described in this paragraph, including the certification, must be provided for each consortium member.

77. Eligible applicants claiming either a small business or rural service provider bidding credit will be subject to specified caps on the total amount of bidding credit discounts that they may receive. OEA and WTB adopt the bidding credit caps for Auction 110 at the amounts proposed by the Commission in the Auction 110 Comment Public Notice. Specifically, OEA and WTB adopt a $25 million cap on the total amount of bidding credit discounts that may be awarded to an eligible small business, and a $10 million cap on the total amount of bidding credit discounts that may be awarded to an eligible rural service provider. Additionally, to create parity among eligible small businesses and rural service providers competing against each other in smaller markets, no winning designated entity bidder may receive more than $10 million in bidding credit discounts in total for licenses won in PEAs with populations of 500,000 or less.

78. Pursuant to section 1.2110 of the Commission's rules, an applicant's eligibility for designated entity benefits is determined by attributing the gross revenues (for those seeking small business benefits) or subscribers (for those seeking rural service provider benefits) of the applicant, its affiliates, its controlling interests, and the affiliates of its controlling interests. Controlling interests of an applicant include individuals and entities with either de facto or de jure control of the applicant. Typically, ownership of greater than 50% of an entity's voting stock evidences de jure control. De facto control is determined on a case-by-case basis based on the totality of the circumstances. The following are some common indicia of de facto control:

• The entity constitutes or appoints more than 50% of the board of directors or management committee;

• the entity has authority to appoint, promote, demote, and fire senior executives that control the day-to-day activities of the licensee; and

• the entity plays an integral role in management decisions.

79. Additionally, for attribution purposes, officers and directors of an applicant seeking a bidding credit are considered to have a controlling interest in the applicant. Applicants should refer to section 1.2110(c)(2) of the Commission's rules and the FCC Form 175 Instructions to understand how certain interests are calculated in determining control for purposes of attributing gross revenues.

80. Affiliates of an applicant or controlling interest include an individual or entity that: (1) Directly or indirectly controls or has the power to control the applicant, (2) is directly or indirectly controlled by the applicant, (3) is directly or indirectly controlled by a third party that also controls or has the power to control the applicant, or (4) has an identity of interest with the applicant. The Commission's definition of an affiliate of the applicant encompasses both controlling interests of the applicant and affiliates of controlling interests of the applicant. For more information on the application requirements regarding controlling interests and affiliates, applicants should refer to sections 1.2110(c)(2) and (c)(5) respectively, as well as the FCC Form 175 Instructions.

81. An applicant seeking a small business bidding credit must demonstrate its eligibility for the bidding credit by: (1) Meeting the applicable small business size standard, based on the controlling interest and affiliation rules discussed in the Auction 110 Procedures Public Notice; and (2) retaining control, on a license-by-license basis, over the spectrum associated with the licenses for which it seeks small business benefits. For purposes of the first prong of the standard, applicants should note that control and affiliation may arise through, among other things, ownership interests, voting interests, management and other operating agreements, or the terms of any other types of agreements—including spectrum lease agreements—that independently or together create a controlling, or potentially controlling, interest in the applicant's or licensee's business as a whole. In addition, once an applicant demonstrates eligibility as a small business under the first prong, it must also be eligible for benefits on a license-by-license basis under the second prong. As part of making the FCC Form 175 certification that it is qualified as a designated entity under section 1.2110, an applicant is certifying that it does not have any spectrum use or other agreements that would confer either de jure or de facto control of any license it seeks to acquire with bidding credits.

82. Applicants should note that, under this standard for evaluating eligibility for small business bidding credits, if an applicant executes a spectrum use agreement that does not comply with the Commission's relevant standard of de facto control, then it will be subject to unjust enrichment obligations for the benefits associated with that particular license, as well as the penalties associated with any violation of section 310(d) of the Communications Act and related regulations, which require Commission approval of transfers of control. If that spectrum use agreement (either alone or in combination with the designated entity controlling interest and attribution rules described above) goes so far as to confer control of the applicant's overall business, then the gross revenues of the additional interest holders will be attributed to the applicant, which could render the applicant ineligible for all current and future small business benefits on all licenses.

83. Under section 1.2110(c)(2)(ii)(J) of the Commission's rules, the gross revenues (or the subscribers, in the case of a rural service provider) of an applicant's disclosable interest holder are attributable to the applicant, on a license-by-license basis, if the disclosable interest holder has an agreement with the applicant to use, in any manner, more than 25% of the spectrum capacity of any license won by the applicant and acquired with a bidding credit during the five-year unjust enrichment period for the applicable license. For purposes of this requirement, a disclosable interest holder of an applicant seeking designated entity benefits is defined as any individual or entity holding a 10% or greater interest of any kind in the applicant, including but not limited to, a 10% or greater interest in any class of stock, warrants, options, or debt securities in the applicant or licensee. Any applicant seeking a bidding credit for licenses won in Auction 110 will be subject to this attribution rule and must make the requisite disclosures.

84. Certain disclosable interest holders may be excluded from this attribution rule. Specifically, an applicant claiming the rural service provider bidding credit may have spectrum license use agreements with a disclosable interest holder, without having to attribute the disclosable interest holder's subscribers, so long as the disclosable interest holder is independently eligible for a rural service provider credit and the use agreement is otherwise permissible under the Commission's existing rules. If applicable, the applicant must attach to its FCC Form 175 any additional information as may be required to indicate any license (or license area) that may be subject to this attribution rule or to demonstrate its eligibility for the exception from this attribution rule. Consistent with the Commission's limited information procedures, the Commission intends to withhold from public disclosure all information contained in any such attachments until after the close of Auction 110.

85. Applicants claiming designated entity benefits may be eligible for certain exceptions from the Commission's attribution rules. For example, in calculating an applicant's gross revenues under the controlling interest standard, the Commission will not attribute to the applicant the personal net worth, including personal income, of its officers and directors. However, to the extent that the officers and directors of the applicant are controlling interest holders of other entities, the gross revenues of those entities will be attributed to the applicant. Moreover, if an officer or director operates a separate business, then the gross revenues derived from that business would be attributed to the applicant.

86. The Commission has also exempted from attribution to the applicant the gross revenues of the affiliates of a rural telephone cooperative's officers and directors, if certain conditions specified in section 1.2110(b)(4)(iii) of the Commission's rules are met. An applicant claiming this exemption must provide, in an attachment, an affirmative statement that the applicant, affiliate and/or controlling interest is an eligible rural telephone cooperative within the meaning of section 1.2110(b)(4)(iii), and the applicant must supply any additional information as may be required to demonstrate eligibility for the exemption from the attribution rule.

87. An applicant claiming a rural service provider bidding credit may be eligible for an exception from the Commission's attribution rules as an existing rural partnership. To qualify for this exception, an applicant must be a rural partnership providing service as of July 16, 2015, and each member of the rural partnership must individually have fewer than 250,000 combined wireless, wireline, broadband, and cable subscribers. Because each member of the rural partnership must individually qualify for the bidding credit, by definition, a partnership that includes a nationwide provider as a member will not be eligible for the benefit.

88. Finally, a consortium of small businesses or rural service providers may seek an exception from the Commission's attribution rules. Under the Commission's rules, a consortium of small businesses or rural service providers is a conglomerate organization composed of two or more entities, each of which individually satisfies the definition of small business or rural service provider. A consortium must provide additional information for each member demonstrating each member's eligibility for the claimed bidding credit in order to show that the applicant satisfies the eligibility criteria for the bidding credit. The gross revenue or subscriber information of each consortium member will not be aggregated for purposes of determining the consortium's eligibility for the claimed bidding credit. This information must be provided, however, to ensure that each consortium member qualifies for the bidding credit sought by the consortium.

89. Pursuant to the rules governing competitive bidding, each applicant must make certifications regarding whether it is a current or former defaulter or delinquent. A current defaulter or delinquent is not eligible to participate in Auction 110, but a former defaulter or delinquent may participate so long as it is otherwise qualified and makes an upfront payment that is 50% more than would otherwise be necessary. Accordingly, each applicant must certify under penalty of perjury on its FCC Form 175 that it, its affiliates, its controlling interests, and the affiliates of its controlling interests are not in default on any payment for a Commission construction permit or license (including down payments) and that it is not delinquent on any non-tax debt owed to any Federal agency. Additionally, an applicant must certify under penalty of perjury whether it (along with its controlling interests) has ever been in default on any payment for a Commission construction permit or license (including down payments) or has ever been delinquent on any non-tax debt owed to any Federal agency, subject to the exclusions described below. For purposes of making these certifications, the term “controlling interest” is defined in section 1.2105(a)(4)(i) of the Commission rules.

90. Under the Commission's rule regarding applications by former defaulters, an applicant is considered a “former defaulter” or a “former delinquent” when, as of the FCC Form 175 deadline, the applicant or any of its controlling interests has defaulted on any Commission construction permit or license or has been delinquent on any non-tax debt owed to any Federal agency, but has since remedied all such defaults and cured all of the outstanding non-tax delinquencies. For purposes of the certification under section 1.2105(a)(2)(xii), the applicant may exclude from consideration any cured default on a Commission construction permit or license or cured delinquency on a non-tax debt owed to a Federal agency for which any of the following criteria are met: (1) The notice of the final payment deadline or delinquency was received more than seven years before the FCC Form 175 filing deadline, (2) the default or delinquency amounted to less than $100,000, (3) the default or delinquency was paid within two quarters ( i.e., six months) after receiving the notice of the final payment deadline or delinquency, or (4) the default or delinquency was the subject of a legal or arbitration proceeding and was cured upon resolution of the proceeding. With respect to the first exclusion, notice to a debtor may include notice of a final payment deadline or notice of delinquency and may be express or implied depending on the origin of any Federal non-tax debt giving rise to a default or delinquency. Additionally, for the third exclusion, the date of receipt of the notice of a final default deadline or delinquency by the intended party or debtor will be used for purposes of verifying receipt of notice.

91. In addition to the Auction 110 Procedures Public Notice, applicants are encouraged to review previous guidance on default and delinquency disclosure requirements in the context of the auction short-form application process. Parties are also encouraged to consult with Auctions Division staff if they have any questions about default and delinquency disclosure requirements.

92. The Commission considers outstanding debts owed to the United States Government, in any amount, to be a serious matter. The Commission has previously adopted rules, including a provision referred to as the “red light rule,” that implement its obligations under the Debt Collection Improvement Act of 1996, which governs the collection of debts owed to the United States. Under the red light rule, applications and other requests for benefits filed by parties that have outstanding debts owed to the Commission will not be processed. When adopting that rule, the Commission explicitly declared, however, that its competitive bidding rules are not affected by the red-light rule. As a consequence, the Commission's adoption of the red light rule does not alter the applicability of any of its competitive bidding rules, including the provisions and certifications of sections 1.2105 and 1.2106, with regard to current and former defaults or delinquencies.

93. OEA and WTB remind each applicant, however, that any indication in the Commission's Red Light Display System, which provides information regarding debts currently owed to the Commission, may not be determinative of an auction applicant's ability to comply with the default and delinquency disclosure requirements of section 1.2105. Thus, while the red light rule ultimately may prevent the processing of long-form applications by auction winners, an auction applicant's lack of current “red light” status is not necessarily determinative of its eligibility to participate in an auction (or whether it may be subject to an increased upfront payment obligation). Moreover, a prospective applicant in Auction 110 should note that any long-form applications filed after the close of bidding will be reviewed for compliance with the Commission's red light rule, and such review may result in the dismissal of a winning bidder's long-form application. OEA and WTB encourage each applicant to carefully review all records and other available Federal agency databases and information sources to determine whether the applicant, or any of its affiliates, or any of its controlling interests, or any of the affiliates of its controlling interests, owes or was ever delinquent in the payment of non-tax debt owed to any Federal agency.

94. Applicants owned by members of minority groups and/or women, as defined in section 1.2110(c)(3), and rural telephone companies, as defined in section 1.2110(c)(4), may identify themselves regarding this status in filling out their FCC Form 175 applications. This applicant status information is collected for statistical purposes only and assists the Commission in monitoring the participation of various groups in its auctions.

95. After the initial FCC Form 175 filing deadline, an Auction 110 applicant will be permitted to make only minor changes to its application consistent with the Commission's rules. Examples of minor changes include the deletion or addition of authorized bidders (to a maximum of three) and the revision of addresses and telephone numbers of the applicant, its responsible party, and its contact person. Major modification to an FCC Form 175 ( e.g., change of PEA selection, certain changes in ownership that would constitute an assignment or transfer of control of the applicant, change in the required certifications, change in applicant's legal classification that results in a change in control, or change in claimed eligibility for a higher percentage of bidding credit) will not be permitted after the initial FCC Form 175 filing deadline. If an amendment reporting changes is a “major amendment,” as described in section 1.2105(b)(2), the major amendment will not be accepted and may result in the dismissal of the application.

96. Pursuant to section 1.65 of the Commission's rules, each applicant has a continuing obligation to maintain the accuracy and completeness of information furnished in a pending application, including a pending application to participate in Auction 110. Consistent with the requirements for spectrum auctions, an applicant for Auction 110 must furnish additional or corrected information to the Commission within five business days after a significant occurrence, or amend its FCC Form 175 no more than five business days after the applicant becomes aware of the need for the amendment. An applicant is obligated to amend its pending application even if a reported change may result in the dismissal of the application because it is subsequently determined to be a major modification.

97. As noted above, a party seeking to participate in Auction 110 must file an FCC Form 175 electronically via the FCC's Auction Application System. During the initial filing window, an applicant will be able to make any necessary modifications to its FCC Form 175 in the Auction Application System. An applicant that has certified and submitted its FCC Form 175 before the close of the initial filing window may continue to make modifications as often as necessary until the close of that window; however, the applicant must re-certify and re-submit its FCC Form 175 before the close of the initial filing window to confirm and effect its latest application changes. After each submission, a confirmation page will be displayed stating the submission time and submission date.

98. An applicant will also be allowed to modify its FCC Form 175 in the Auction Application System, except for certain fields, during the resubmission filing window and after the release of the public notice announcing the qualified bidders for an auction. During these times, if an applicant needs to make permissible minor changes to its FCC Form 175 or must make changes in order to maintain the accuracy and completeness of its application pursuant to sections 1.65 and 1.2105(b)(4), then it must make the change(s) in the Auction Application System and re-certify and re-submit its application to confirm and effect the change(s).

99. An applicant's ability to modify its FCC Form 175 in the Auction Application System will be limited between the closing of the initial filing window and the opening of the application resubmission filing window, and between the closing of the resubmission filing window and the release of the public notice announcing the qualified bidders for an auction. During these periods, an applicant will be able to view its submitted application, but will be permitted to modify only the applicant's address, responsible party address, and contact information ( e.g., name, address, telephone number, etc.) in the Auction Application System. An applicant will not be able to modify any other pages of the FCC Form 175 in the Auction Application System during these periods. If, during these periods, an applicant needs to make other permissible minor changes to its FCC Form 175, or changes to maintain the accuracy and completeness of its application pursuant to sections 1.65 and 1.2105(b)(4), then the applicant must submit a letter briefly summarizing the changes to its FCC Form 175 via email to auction110@fcc.gov. The email summarizing the changes must include a subject line referring to Auction 110 and the name of the applicant, for example, “Re: Changes to Auction 110 Auction Application of XYZ Corp.” Any attachments to the email must be formatted as Adobe® Acrobat® (PDF) or Microsoft® Word documents. An applicant that submits its changes in this manner must subsequently modify, certify, and submit its FCC Form 175 application(s) electronically in the Auction Application System once it is again open and available to applicants.

100. Applicants should also note that even at times when the Auction Application System is open and available to applicants, the system will not allow an applicant to make certain other permissible changes itself ( e.g., correcting a misstatement of the applicant's legal classification, name, or certifying official). If an applicant needs to make a permissible minor change of this nature, then it must submit a written request by email to the Auctions Division Chief, via auction110@fcc.gov requesting that the Commission manually make the change on the applicant's behalf. Once Commission staff has informed the applicant that the change has been made in the Auction Application System, the applicant must then re-certify and re-submit its FCC Form 175 in the Auction Application System to confirm and effect the change(s).

101. As with filing the FCC Form 175, any amendment(s) to the application and related statements of fact must be certified by an authorized representative of the applicant with authority to bind the applicant. Applicants should note that submission of any such amendment or related statement of fact constitutes a representation by the person certifying that he or she is an authorized representative with such authority and that the contents of the amendment or statement of fact are true and correct.

102. Applicants must not submit application-specific material through the Commission's Electronic Comment Filing System. Further, as discussed above, parties submitting information related to their applications should use caution to ensure that their submissions do not contain confidential information or communicate information that would violate section 1.2105(c) or the limited information procedures adopted for Auction 110. An applicant seeking to submit, outside of the Auction Application System, information that might reflect non-public information, such as an applicant's PEA selection(s), upfront payment amount, or bidding eligibility, should consider including in its email a request that the filing or portions of the filing be withheld from public inspection until the end of the prohibition on certain communications pursuant to section 1.2105(c).

103. Questions about FCC Form 175 amendments should be directed to the Auctions Division at (202) 418-0660.

104. OEA and WTB remind each potential bidder that it is solely responsible for investigating and evaluating all technical and marketplace factors that may have a bearing on the value of the licenses that it is seeking in Auction 110 and that it is required to certify, under penalty of perjury, that it has read the Auction 110 Procedures Public Notice and has familiarized itself with the auction procedures and the service rules for the 3.45-3.55 GHz band. The Commission makes no representations or warranties about the use of this spectrum or these licenses for particular services. Each applicant should be aware that a Commission auction represents an opportunity to become a Commission licensee, subject to certain conditions and regulations. This includes the established authority of the Commission to alter the terms of existing licenses by rulemaking, which is equally applicable to licenses awarded by auction. A Commission auction does not constitute an endorsement by the Commission of any particular service, technology, or product, nor does a Commission license constitute a guarantee of business success.

105. An applicant should perform its due diligence research and analysis before proceeding, as it would with any new business venture. In particular, OEA and WTB encourage each potential bidder to perform technical analyses and/or refresh its previous analyses to assure itself that, should it become a winning bidder for any Auction 110 license, it will be able to build and operate facilities that will fully comply with all applicable technical and legal requirements. OEA and WTB urge each applicant to inspect any prospective sites for communications facilities located in, or near, the geographic area for which it plans to bid, confirm the availability of such sites, and to familiarize itself with the Commission's rules regarding the National Environmental Policy Act (NEPA), the National Historic Preservation Act (NHPA), and other environmental statutes.

106. OEA and WTB also encourage each applicant in Auction 110 to continue to conduct its own research throughout the auction in order to determine the existence of pending or future administrative or judicial proceedings that might affect its decision on continued participation in the auction. Lockheed Martin Corporation has filed a request for waiver of certain Commission rules that is currently pending before the Commission. Additionally, three Petitions for Reconsideration of the 3.45 GHz Second Report and Order are currently pending before the Commission. If the Commission acts on any of these pending matters prior to the auction, we will provide updated information for potential bidders as necessary. Each applicant is responsible for assessing the likelihood of the various possible outcomes and for considering the potential impact on licenses available in an auction. The due diligence considerations mentioned in the Auction 110 Procedures Public Notice do not constitute an exhaustive list of steps that should be undertaken prior to participating in Auction 110. As always, the burden is on the potential bidder to determine how much research to undertake, depending upon the specific facts and circumstances related to its interests. For example, applicants should pay particular attention to the framework adopted in the 3.45 GHz Second Report and Order that requires new flexible-use licensees to reimburse secondary, non-federal radiolocation operators for the relocation costs associated with their transitions into the 2.9-3.0 GHz band and cooperative sharing requirements for certain licenses.

107. Applicants in Auction 110 should carefully consider the impact of the aggregation limit in the 3.45 GHz Service, discussed further in Section III.B.4, below. In particular, applicants should consider whether any of their own attributable interest holders have permissible overlapping interests in another applicant that could further limit the number of licenses that each applicant may hold in a given PEA. For example, a single individual or entity may be permitted to hold a non-controlling interest of 10% or more in multiple applicants, but the combined holdings of those applicants in any PEA may not exceed the four-license aggregation limit.

108. Applicants are solely responsible for identifying associated risks and for investigating and evaluating the degree to which such matters may affect their ability to bid on, otherwise acquire, or make use of the licenses available in Auction 110. Each potential bidder is responsible for undertaking research to ensure that any licenses won in the auction will be suitable for its business plans and needs. Each potential bidder must undertake its own assessment of the relevance and importance of information gathered as part of its due diligence efforts.

109. The Commission makes no representations or guarantees regarding the accuracy or completeness of information in its databases or any third-party databases, including, for example, court docketing systems. To the extent the Commission's databases may not include all information deemed necessary or desirable by an applicant, it must obtain or verify such information from independent sources or assume the risk of any incompleteness or inaccuracy in said databases. Furthermore, the Commission makes no representations or guarantees regarding the accuracy or completeness of information that has been provided by incumbent licensees and incorporated into its databases.

110. Potential applicants in Auction 110 should consider carefully the process for transitioning incumbent Federal and non-Federal radiolocation and amateur operations out of the 3.45-3.55 GHz band and to the cooperative sharing requirements within the band when developing business plans, assessing market conditions, and evaluating the availability of equipment for 3.45 GHz Service operations. Each applicant should follow closely releases from the Commission concerning these issues and consider carefully the technical and economic implications for commercial use of the 3.45-3.55 GHz band.

111. The 3.45-3.55 GHz band will operate using a cooperative sharing framework under which existing federal users are prohibited from causing harmful interference to non-federal operations, except in limited circumstances and in locations where current incumbent federal systems will remain indefinitely in the band. Under the following circumstances, non-federal systems are not entitled to protection against harmful interference from federal operations (and limited restrictions may be placed on non-federal operations); (1) in “Cooperative Planning Areas” identified by the DoD in which it anticipates that federal operations will continue after the assignment of flexible use licenses in the band; and (2) in “Periodic Use Areas” that overlap with certain Cooperative Planning Areas, in which the DoD will need episodic access to all or a portion of the band in specific, limited geographic areas. Cooperative Planning Areas and Periodic Use Areas are coordination areas, rather than exclusion areas, meaning that commercial operations within their boundaries are not precluded. Under this framework, incumbent federal operations and new flexible use operations must coordinate with each other to facilitate shared use of the band in these specified areas and during specified time periods as described in the 3.45 GHz Second Report and Order.

112. We note that one of the pending petitions for reconsideration, filed by the Aerospace Industries Association, seeks adoption of a coordination framework for certain existing federal contractor facilities and that Lockheed Martin Corporation has filed a request for waiver of certain Commission rules across the lower 75 megahertz of the 3.45-3.55 GHz Band related to its Experimental Radio Service licenses and operations between midnight and 8:00 a.m. ET. Potential bidders should be aware that if relief substantially similar to that sought by Lockheed were granted, it would affect coordination requirements and spectrum use in blocks A through H in PEAs 41, 44, and 227 for the duration of time of any such grant.

113. In addition to the federal users operating in the 3.45-3.55 GHz band, the 3.3-3.55 GHz band is currently used by secondary non-federal radiolocation licensees that will be relocated to the 2.9-3.0 GHz band no later than 180 days after the flexible-use licenses won in Auction 110 are granted. In order to facilitate the expeditious clearing of the 3.3-3.55 GHz band, in the 3.45 GHz Second Report and Order, the Commission adopted a requirement that licensees in the new 3.45 GHz Service reimburse the current 3.3-3.55 licensees for their reasonable costs related to the relocation of their operations to the 2.9-3.0 GHz band. Auction 110 winning bidders will be required to pay these reimbursement costs in addition to their winning bid amounts. For additional information about cost-sharing and reimbursement procedures related to the licenses offered in Auction 110, potential bidders should review carefully the 3.45 GHz Second Report and Order.

114. The spectrum in the 3.45-3.55 GHz band is covered by a Congressional mandate that requires auction proceeds to be used to fund the estimated relocation or sharing costs of incumbent federal entities. In 2004, the Commercial Spectrum Enhancement Act (CSEA) established a Spectrum Relocation Fund (SRF) to reimburse eligible federal agencies operating on certain frequencies that have been reallocated from federal to non-federal use for the cost of relocating their operations. The CSEA, as amended by the Spectrum Act, requires that the total cash proceeds from any auction of eligible frequencies must equal at least 110% of the estimated relocation or sharing costs provided to the Commission by NTIA, and it prohibits the Commission from concluding any auction of eligible frequencies that falls short of this amount. The Commission's rules therefore require that the establishment of a reserve price in order to meet the CSEA's requirement that Auction 110's total cash proceeds amount to at least 110% of the NTIA's estimate of the relevant relocation or sharing costs.

115. NTIA provides the Commission with an estimate of eligible federal entities' relocation or sharing costs and the timelines for such relocation or sharing pursuant to the requirements of the CSEA. On January 14, 2021, NTIA provided to the Commission an estimate of $13,432,140,300 for the relocation or sharing costs of the incumbent Federal entities currently operating in the 3.45-3.55 GHz band. Accordingly, for Auction 110, OEA and WTB establish a single aggregate reserve price to ensure that total cash proceeds from the auction equal at least $14,775,354,330, or 110% of NTIA's estimate.

116. OEA and WTB adopt procedures that have been used in past Commission auctions to determine whether the reserve price is met in Auction 110. Although total cash proceeds from Auction 110 will not be known precisely before the conclusion of the auction, these procedures will provide a careful, conservative estimate of whether total cash proceeds meet the reserve price after each bidding round in the clock phase.

117. As in many services, the Commission has established for this auction bidding credits for small business and rural service providers. Winning bidders claiming such credits may pay less than the amount of their winning bids for any licenses won. In the CSEA/Part 1 Declaratory Ruling, the Commission determined that “total cash proceeds” for purposes of meeting the CSEA's requirement means winning bids net of any applicable bidding credit discounts at the end of bidding. Thus, whether the CSEA's total cash proceeds requirement has been met depends on whether winning bids, net of any applicable bidding credit discounts, equal, in aggregate, at least 110% of estimated relocation costs.

118. As in prior Commission auctions, OEA will assess whether the reserve price is met—whether the auction will generate sufficient total cash proceeds—based on bids in the clock phase of the auction and not the assignment phase. Total cash proceeds from assignment phase payments are expected to be small relative to those from the clock phase and therefore less likely to contribute significantly to meeting the reserve price. Given that assignment phase payments will be determined using a second-price rule, an individual bidder will have little ability to boost net winning bids in the assignment phase in order to meet the reserve price. OEA and WTB do not wish to require bidders or Commission staff to invest the additional time in the assignment phase if ultimately no licenses will be assigned.

119. Whether winning bidders in the clock phase claim any bidding credits that may reduce total cash proceeds to less than gross winning bids only can be determined with certainty at the close of the clock phase of bidding. However, OEA will estimate whether the reserve is met during the clock phase by assuming conservatively that for a category in a PEA with excess demand, blocks will be won by the bidders with the highest bidding credit percentages, to the extent that such bidders still demand blocks in that category in that PEA. In order to make bidders aware of whether the reserve is likely to be met while they are still bidding in the clock phase, OEA and will indicate on the Public Reporting System (PRS) whether estimated total cash proceeds based on the bids in the most recently completed round would satisfy the reserve. If the reserve has not yet been met, OEA will make available only to bidders information on the shortfall between the reserve and the estimated total cash proceeds, rounded up to the nearest million.

These procedures are designed to avoid a potential situation where the reserve price is assumed to be met, but, when bidding credits are considered, final net winning bids later prove insufficient. For a category in a PEA without excess demand, the requirement will be evaluated based on a true calculation of net revenue after bid processing, rather than on the estimate, since information on how to apply bidding credits precisely will be available in that case.

120. These procedures are designed to avoid a potential situation where the reserve price is assumed to be met, but, when bidding credits are considered, final net winning bids later prove insufficient. For a category in a PEA without excess demand, the requirement will be evaluated based on a true calculation of net revenue after bid processing, rather than on the estimate, since information on how to apply bidding credits precisely will be available in that case.

121. Potential bidders seeking licenses for geographic areas adjacent to the Canadian and Mexican borders should be aware that the use of the 3.45 GHz Service frequencies they acquire in Auction 110 are subject to current and future agreements with the governments of Canada and Mexico.

122. The Commission routinely works with the United States Department of State and Canadian and Mexican government officials to ensure the efficient use of the spectrum as well as interference-free operations in the border areas near Canada and Mexico. Until such time as any adjusted agreements, as needed, between the United States, Mexico, and/or Canada can be agreed to, operations in the 3.45-3.55 GHz band must not cause harmful interference across the border, consistent with the terms of the agreements currently in force.

123. Licensees must comply with the Commission's rules for environmental review under the NEPA, the NHPA, and other environmental statutes. Licensees and other applicants that propose to build certain types of communications facilities for licensed service must follow Commission procedures implementing obligations under NEPA and NHPA prior to constructing the facilities. Under NEPA, a licensee or applicant must assess if certain environmentally sensitive conditions specified in the Commission's rules are relevant to the proposed facilities, and prepare an environmental assessment when applicable. If an environmental assessment is required, then facilities may not be constructed until environmental processing is completed. Under NHPA, a licensee or applicant must follow the procedures in section 1.1320 of the Commission's rules, the Nationwide Programmatic Agreement for Collocation of Wireless Antennas and the Nationwide Programmatic Agreement Regarding the Section 106 National Historic Preservation Act Review Process. Compliance with section 106 of the NHPA requires tribal consultation, and if construction of the communications facilities would have adverse effects on historic or tribally significant properties, an environmental assessment must be prepared.

124. In the 3.45 GHz Second Report and Order, the Commission adopted a spectrum aggregation limit for flexible-use licenses in the 3.45 GHz Service that allows any entity to hold a maximum of 40 megahertz ( i.e., four blocks out of ten) in any PEA at any point in time for four years post-auction. For purposes of spectrum attribution to a particular entity, all controlling interests and non-controlling interests of 10% or more, including institutional investors and asset management companies, are attributable. In addition, interests of less than 10% are attributable if the interest confers de facto control, including but not limited to partnership and other ownership interests and any stock interest in a licensee.

125. Consistent with this limit on the number of blocks that a single entity can hold in any single PEA, the bidding system will limit to four the number of blocks that a bidder can demand in any given PEA at any point in the auction. Therefore, in each bidding round, a bidder will have the opportunity to bid for a total of up to four blocks of spectrum per PEA. This spectrum aggregation limit will apply across both categories in PEAs that contain Cat1 and Cat2 blocks. As a result, no single entity will be permitted to bid on, for example, two Cat1 blocks and three Cat2 blocks within a single PEA. An aggregation limit of four blocks furthers the Commission's interest in promoting greater diversity in participation in the 3.45 GHz Service by ensuring that, if licenses for all blocks in a PEA are awarded, there will be at least three winning bidders in the PEA.

126. The bidding system will not, however, prevent an entity from bidding on more licenses than it may otherwise be permitted to hold under the relevant attribution rules. Applicants should therefore encouraged to conduct the necessary due diligence prior to the short-form application deadline to determine whether any of its attributable interest holders have attributable interests in other potential auction participants, which may limit each applicant's ability to hold up to four licenses in a single PEA. Bidders are reminded, however, that section 1.2105(c) of the competitive bidding rules, 47 CFR 1.2105(c), prohibits certain communications between auction participants beginning at the short-form application deadline and continuing until the deadline for winning bidders to make down payments.

127. Before the opening of the short-form filing window for Auction 110, detailed educational information will be provided in various formats to would-be participants on the Auction 110 web page. Specifically, OEA will provide various materials on the pre-bidding processes in advance of the opening of the short-form application window, beginning with the release of step-by-step instructions for completing the FCC Form 175, which OEA will make available in the Education section of the Auction 110 website at www.fcc.gov/auction/110. In addition, OEA will provide an online application procedures tutorial for the auction, covering information on pre-bidding preparation, completing short-form applications, and the application review process.

128. In advance of the start of the mock auction, OEA will provide educational materials on the bidding procedures for Auction 110, beginning with the release of a user guide for the bidding system and bidding system file formats, followed by an online bidding procedures tutorial. OEA and WTB recognize the importance of these materials to applicants' and bidders' comprehension of the bidding procedures adopted herein. Accordingly, the educational materials shall be released as soon as reasonably possible to provide potential applicants and bidders with time to understand them and ask questions before bidding begins.

129. OEA and WTB believe that parties interested in participating in Auction 110 will find the interactive, online tutorials an efficient and effective way to further their understanding of the application and bidding processes. The online tutorials will allow viewers to navigate the presentation outline, review written notes, and listen to audio of the notes. Additional features of this web-based tool include links to auction-specific Commission releases, email links for contacting Commission staff, and screen shots of the online application and bidding systems. The online tutorials will be accessible in the Education section of the Auction 110 website at www.fcc.gov/auction/110. Once posted, the tutorials will remain continuously accessible.

130. In order to be eligible to bid in Auction 110, an applicant must first follow the procedures to submit a short-form application (FCC Form 175) electronically via the Auction Application System, following the instructions set forth in the FCC Form 175 Instructions. The short-form application will become available with the opening of the initial filing window and must be submitted prior to 6 p.m. ET on July 21, 2021. Late applications will not be accepted. No application fee is required for short-form applications.

131. Applications may be filed at any time beginning at noon ET on July 8, 2021, until the filing window closes at 6 p.m. ET on July 21, 2021. Applicants are strongly encouraged to file early and are responsible for allowing adequate time for filing their applications. There are no limits or restrictions on the number of times an application can be updated or amended until the initial filing deadline on July 21, 2021.

132. An applicant must always click on the CERTIFY & SUBMIT button on the “Certify & Submit” screen to successfully submit its FCC Form 175 and any modifications; otherwise the application or changes to the application will not be received or reviewed by Commission staff. Additional information about accessing, completing, and viewing the FCC Form 175 is provided in the FCC Form 175 Instructions. Applicants requiring technical assistance should contact FCC Auctions Technical Support at (877) 480-3201, option nine; (202) 414-1250; or (202) 414-1255 (text telephone (TTY)); hours of service are Monday through Friday, from 8 a.m. to 6 p.m. ET. In order to provide better service to the public, all calls to Technical Support are recorded.

133. After the deadline for filing auction applications, the Commission will process all timely submitted applications to determine whether each applicant has complied with the application requirements and provided all information concerning its qualifications for bidding. OEA will issue a public notice with applicants' initial application status, identifying: (1) Those that are complete; and (2) those that are incomplete or deficient because of defects that may be corrected. The public notice will include the deadline for resubmitting corrected applications and an electronic copy of the public notice will be sent by email to the contact address listed in the FCC Form 175 for each applicant. In addition, each applicant with an incomplete application will be sent information on the nature of the deficiencies in its application, along with the name and contact information of a Commission staff member who can answer questions specific to the application.

134. After the initial application filing deadline on July 21, 2021, applicants can make only minor modifications to their applications. Major modifications ( e.g., change of PEA selection, certain changes in ownership that would constitute an assignment or transfer of control of the applicant, change in the required certifications, change in applicant's legal classification that results in a change in control, or change in claimed eligibility for a higher percentage of bidding credit) will not be permitted. After the deadline for resubmitting corrected applications, an applicant will have no further opportunity to cure any deficiencies in its application or provide any additional information that may affect Commission staff's ultimate determination of whether and to what extent the applicant is qualified to participate in Auction 110.

135. Commission staff will communicate only with an applicant's contact person or certifying official, as designated on the applicant's FCC Form 175, unless the applicant's certifying official or contact person notifies Commission staff in writing that another representative is authorized to speak on the applicant's behalf. Authorizations may be sent by email to auction110@fcc.gov.

136. After Commission staff reviews resubmitted applications and upfront payments, OEA will release a public notice identifying applicants that have become qualified bidders for the auction. A Qualified Bidders Public Notice will be issued before bidding in the auction begins. Qualified bidders are those applicants with submitted FCC Form 175 applications that are deemed timely filed and complete and that have made a sufficient upfront payment.

137. In order to be eligible to bid in Auction 110, a sufficient upfront payment and a complete and accurate FCC Remittance Advice Form (FCC Form 159, Revised 2/03) must be submitted before 6 p.m. ET on September 2, 2021. After completing its short-form application, an applicant will have access to an electronic pre-filled version of the FCC Form 159. An accurate and complete FCC Form 159 must accompany each payment. Proper completion of this form is critical to ensuring correct crediting of upfront payments. Payers using the pre-filled FCC Form 159 are responsible for ensuring that all the information on the form, including payment amounts, is accurate. Instructions for completing FCC Form 159 for Auction 110 are provided below.

138. Upfront payments for Auction 110 must be wired to, and will be deposited in, the U.S. Treasury.

139. Wire transfer payments for Auction 110 must be received before 6 p.m. ET on September 22, 2021. An applicant must initiate the wire transfer through its bank, authorizing the bank to wire funds from the applicants account to the proper account in the U.S. Treasury. No other payment method is acceptable. The Commission will not accept checks, credit cards, or automated clearing house (ACH) payments. To avoid untimely payments, applicants should discuss arrangements (including bank closing schedules and other specific bank wire transfer requirements, such as an in-person written request before a specified time of day) with their bankers several days before they plan to make the wire transfer, and must allow sufficient time for the transfer to be initiated and completed before the deadline. The following information will be needed:

ABA Routing Number: 021030004.

Receiving Bank: TREAS NYC, 33 Liberty Street, New York, NY 10045.

Beneficiary: FCC, 45 L Street NE, 3rd Floor, Washington, DC 20554.

Account Number: 827000001001.

Originating Bank Information (OBI Field): (Skip one space between each information item).

“AUCTIONPAY”

Applicant FCC Registration Number (FRN): (Use the same FRN as used on the applicant's FCC Form 159, block 21).

Payment Type Code: (Same as FCC Form 159, block 24A: “U110”).

140. At least one hour before placing the order for the wire transfer (but on the same business day), applicants must print and fax a completed FCC Form 159 (Revised 2/03) to the FCC at (202) 418-2843. Alternatively, the completed form can be scanned and sent as an attachment to an email to RROGWireFaxes@fcc.gov. On the fax cover sheet or in the email subject header, write “Wire Transfer—Auction Payment for Auction 110”. To meet the upfront payment deadline, an applicant's payment must be credited to the Commission's account for Auction 110 before the deadline.

141. Each applicant is responsible for ensuring timely submission of its upfront payment and for timely filing of an accurate and complete FCC Form 159. An applicant should coordinate with its financial institution well ahead of the due date regarding its wire transfer and allow sufficient time for the transfer to be initiated and completed prior to the deadline. Among other things, OEA and WTB caution each applicant to plan ahead regarding any potential delays in its or its financial institution's ability to complete wire transfers due to the COVID-19 pandemic. The Commission repeatedly has cautioned auction participants about the importance of planning ahead to prepare for unforeseen last-minute difficulties in making payments by wire transfer. Each applicant also is responsible for obtaining confirmation from its financial institution that its wire transfer to the U.S. Treasury was successful and from Commission staff that its upfront payment was timely received and that it was deposited into the proper account. As a regulatory requirement, the U.S. Treasury screens all payments from all financial institutions before deposits are made available to specified accounts. If wires are suspended, the U.S. Treasury may direct questions regarding any transfer to the financial institution initiating the wire. Each applicant must take care to assure that any questions directed to its financial institution(s) are addressed promptly. To receive confirmation from Commission staff, contact Scott Radcliffe of the Office of Managing Director's Revenue & Receivables Operations Group/Auctions at (202) 418-7518 or Theresa Meeks at (202) 418-2945.

142. Please note the following information regarding upfront payments:

• All payments must be made in U.S. dollars.

• All payments must be made by wire transfer.

• Upfront payments for Auction 110 go to an account number different from the accounts used in previous FCC auctions.

143. Failure to deliver a sufficient upfront payment as instructed by the upfront payment deadline will result in dismissal of the short-form application and disqualification from participation in the auction.

144. The following information supplements the standard instructions for FCC Form 159 (Revised 2/03) and is provided to help ensure correct completion of FCC Form 159 for upfront payments for Auction 110. Applicants need to complete FCC Form 159 carefully, because:

• Mistakes may affect bidding eligibility; and

• Lack of consistency between information provided in FCC Form 159 (Revised 2/03), FCC Form 175, long-form application (FCC Form 601), and correspondence about an application may cause processing delays.

145. Therefore, appropriate cross-references between the FCC Form 159 Remittance Advice and the short-form application (FCC Form 175) are described below.

146. The Commission has delegated authority to OEA and WTB to determine appropriate upfront payments for each license being auctioned, taking into account such factors as the efficiency of the auction process and the potential value of similar licenses. An upfront payment is a refundable deposit made by each applicant seeking to participate in bidding to establish its eligibility to bid on licenses. Upfront payments that are related to the inventory of licenses being auctioned protect against frivolous or insincere bidding and provide the Commission with a source of funds from which to collect payments owed at the close of bidding.

147. Applicants that are former defaulters must pay upfront payments 50% greater than non-former defaulters. For purposes of classification as a former defaulter or a former delinquent, defaults and delinquencies of the applicant itself and its controlling interests are included. For this purpose, the term “controlling interest” is defined in 47 CFR 1.2105(a)(4)(i).

148. An applicant must make an upfront payment sufficient to obtain bidding eligibility on the generic blocks on which it will bid. OEA and WTB adopt the Commission's proposal to set upfront payments based on MHz-pops, and that the amount of the upfront payment submitted by an applicant will determine its initial bidding eligibility, the maximum number of bidding units on which a bidder may place bids in any single round. In order to bid for a block, qualified bidders must have a current eligibility level that meets or exceeds the number of bidding units assigned to that generic block in a PEA. At a minimum, therefore, an applicant's total upfront payment must be enough to establish eligibility to bid on at least one block in one of the PEAs selected on its FCC Form 175 for Auction 110, or else the applicant will not become qualified to participate in the auction. The total upfront payment does not affect the total dollar amount the bidder may bid.

149. In the Auction 110 Comment Public Notice, the Commission proposed to require applicants to submit upfront payments based on $0.03 per MHz-pop for PEAs 1-50 and $0.01 per MHz-pop for all other PEAs, subject to a minimum of $500. In response to concerns raised by commenters that calculating upfront payments and bidding units with a significant structural break between the top 50 markets and markets just outside of the top 50 has the potential to create distortions in bidding behavior, OEA and WTB will forgo the discrete break in calculation amounts for large and small markets for upfront payment and bidding unit amounts.

150. Accordingly, OEA and WTB adopt upfront payments for a generic block in a PEA based on $0.01 per MHz-pop for all PEAs. The results of these calculations will be rounded using the Commission's standard rounding procedures for auctions: Results above $10,000 are rounded to the nearest $1,000; results below $10,000 but above $1,000 are rounded to the nearest $100; and results below $1,000 are rounded to the nearest $10. The upfront payment amount per block in each PEA is set forth in the “Attachment A” file on the Auction 110 website at www.fcc.gov/auction/110.

151. OEA and WTB also adopt the Commission's proposal to assign each generic block in a PEA a specific number of bidding units, equal to one bidding unit per $100 of the upfront payment. The number of bidding units per block in each PEA is set forth in the “Attachment A” file that lists the upfront payment amounts. The number of bidding units for one block in a given PEA is fixed, since it is based on the MHz-pops in the block, and it does not change during the auction as prices change. Thus, in calculating its upfront payment amount, an applicant must determine the maximum number of bidding units on which it may wish to bid in any single round and submit an upfront payment amount for the auction covering that number of bidding units. In some cases, a qualified bidder's maximum eligibility may be less than the amount of its upfront payment because the qualified bidder has either previously been in default on a Commission construction permit or license or delinquent on non-tax debt owed to a Federal agency, or has submitted an upfront payment that exceeds the total amount of bidding units associated with the license areas it selected on its FCC Form 175. In order to make this calculation, an applicant should add together the bidding units for the number of blocks in PEAs on which it seeks to be active in any given round. Applicants should check their calculations carefully, as there is no provision for increasing a bidder's eligibility after the upfront payment deadline.

152. If an applicant is a former defaulter, it must calculate its upfront payment for the maximum amount of generic blocks in each PEA on which it plans to bid by multiplying the number of bidding units on which it wishes to be active by 1.5. In order to calculate the number of bidding units to assign to former defaulters, the Commission will calculate the number of bidding units a non-former defaulter would get for the upfront payment received, divide that number by 1.5, and round the result up to the nearest bidding unit. If a former defaulter fails to submit a sufficient upfront payment to establish eligibility to bid on at least one generic block in a PEA, the applicant will not be eligible to participate in Auction 110. The applicant, however, will retain its status as an applicant in Auction 110 and will remain subject to 47 CFR 1.2105(c).

153. All qualified bidders for Auction 110 are automatically registered for the auction. Registration materials will be distributed prior to the auction by overnight delivery. The mailing will be sent only to the contact person at the contact address listed in the FCC Form 175 and will include the SecurID® tokens that will be required to place bids.

154. Qualified bidders that do not receive this registration mailing will not be able to submit bids. Therefore, any qualified bidder for Auction 110 that has not received this mailing by noon on September 8, 2021, should call the Auctions Hotline at (717) 338-2868. Receipt of this registration mailing is critical to participating in the auction, and each applicant is responsible for ensuring it has received all the registration materials.

155. In the event that a SecurID ® token is lost or damaged, only a person who has been designated as an authorized bidder, the contact person, or the certifying official on the applicant's short-form application may request a replacement. To request a replacement, call the Auction Bidder Line at the telephone number provided in the registration materials or the Auction Hotline at (717) 338-2868.

156. Bidders will be able to participate in Auction 110 over the internet using the FCC Auction Bidding System (bidding system). During the assignment phase only, bidders will have the option of placing bids by telephone through a dedicated auction bidder line. Please note that telephonic bid assistants are required to use a script when entering bids placed by telephone. Telephonic bidders are therefore reminded to allow sufficient time to bid by placing their calls well in advance of the close of a round. The length of a call to place a telephonic bid may vary; please allow a minimum of 10 minutes. The toll-free telephone number for the auction bidder line will be provided to qualified bidders prior to the start of bidding in the auction.

157. Only qualified bidders are permitted to bid. Each authorized bidder must have his or her own SecurID ® token, which the Commission will provide at no charge. Each applicant will be issued three SecurID ® tokens. A bidder cannot bid without his or her SecurID ® token. In order to access the bidding function of the bidding system, bidders must be logged in during the bidding round using the passcode generated by the SecurID ® token and a personal identification number (PIN) created by the bidder. Bidders are strongly encouraged to print a bid summary for each round after they have completed all their activity for that round. For security purposes, the SecurID ® tokens and a telephone number for bidding questions are only mailed to the contact person at the contact address listed on the FCC Form 175. Each SecurID ® token is tailored to a specific auction. SecurID ® tokens issued for other auctions or obtained from a source other than the FCC will not work for Auction 110. Please note that the SecurID ® tokens can be recycled, and the Commission requests that bidders return the tokens to the FCC. Pre-addressed envelopes will be provided to return the tokens once the auction has ended.

158. The Commission makes no warranties whatsoever, and shall not be deemed to have made any warranties, with respect to the bidding system, including any implied warranties of merchantability or fitness for a particular purpose. In no event shall the Commission, or any of its officers, employees, or agents, be liable for any damages whatsoever (including, but not limited to, loss of business profits, business interruption, loss of use, revenue, or business information, or any other direct, indirect, or consequential damages) arising out of or relating to the existence, furnishing, functioning, or use of the bidding system. Moreover, no obligation or liability will arise out of the Commission's technical, programming, or other advice or service provided in connection with the bidding system.

159. To the extent an issue arises with the bidding system itself, the Commission will take all appropriate measures to resolve such issues quickly and equitably. Should an issue arise that is outside the bidding system or attributable to a bidder, including, but not limited to, a bidder's hardware, software, or internet access problem that prevents the bidder from submitting a bid prior to the end of a round, the Commission shall have no obligation to resolve or remediate such an issue on behalf of the bidder. Similarly, if an issue arises due to bidder error using the bidding system, the Commission shall have no obligation to resolve or remediate such an issue on behalf of the bidder. Accordingly, after the close of a bidding round, the results of bid processing will not be altered absent evidence of any failure in the bidding system.

160. All qualified bidders will be eligible to participate in a mock auction for the clock phase. Only those bidders that are qualified to participate in Auction 110 will be eligible to participate in the mock auction. The mock auction, which will begin on September 30, 2021, will enable qualified bidders to become familiar with the bidding system and to practice submitting bids prior to the auction. OEA and WTB recommend that all qualified bidders, including all their authorized bidders, participate to assure that they can log in to the bidding system and gain experience with the bidding procedures. Participating in the mock auction may reduce the likelihood of a bidder making a mistake during the auction. Details regarding the mock auction will be announced in the Qualified Bidders Public Notice for Auction 110.

161. After the clock phase of the auction concludes, a separate mock auction for the assignment phase will be held for those qualified bidders that won generic blocks in the clock phase.

162. At any time before or during the bidding process, OEA, in conjunction with WTB, may delay, suspend, or cancel bidding in Auction 110 in the event of a natural disaster, technical obstacle, network interruption, administrative or weather necessity, evidence of an auction security breach or unlawful bidding activity, or for any other reason that affects the fair and efficient conduct of competitive bidding. This approach has proven effective in resolving exigent circumstances in previous auctions and OEA and WTB find no reason to depart from it here. OEA will notify participants of any such delay, suspension, or cancellation by public notice and/or through the bidding system's announcement function. If the bidding is delayed or suspended, then OEA may, in its sole discretion, elect to resume the auction starting from the beginning of the current round or from some previous round, or cancel the auction in its entirety. OEA and WTB emphasize that they will exercise this authority at their discretion.

163. As is the case with many business investment opportunities, some unscrupulous entrepreneurs may attempt to use Auction 110 to deceive and defraud unsuspecting investors. Common warning signals of fraud include the following:

• The first contact is a “cold call” from a telemarketer or is made in response to an inquiry prompted by a radio or television infomercial.

• The offering materials used to invest in the venture appear to be targeted at IRA funds, for example, by including all documents and papers needed for the transfer of funds maintained in IRA accounts.

• The amount of investment is less than $25,000.

• The sales representative makes verbal representations that: (a) The Internal Revenue Service, Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), FCC, or other government agency has approved the investment; (b) the investment is not subject to state or federal securities laws; or (c) the investment will yield unrealistically high short-term profits. In addition, the offering materials often include copies of actual FCC releases, or quotes from FCC personnel, giving the appearance of FCC knowledge or approval of the solicitation.

164. Information about deceptive telemarketing investment schemes is available from the FCC, as well as the FTC and SEC. Additional sources of information for potential bidders and investors may be obtained from the following sources:

• The FCC's Consumer Call Center at (888) 225-5322 or by visiting www.fcc.gov/general/frauds-scams-and-alerts-guides.

• the FTC at (877) FTC-HELP ((877) 382-4357) or by visiting www.consumer.ftc.gov/articles/0238-investment-risks.

• the SEC at (202) 942-7040 or by visiting www.sec.gov/investor.

165. Complaints about specific deceptive telemarketing investment schemes should be directed to the FTC, the SEC, or the National Fraud Information Center at (202) 835-0618.

166. OEA and WTB will conduct Auction 110 using an ascending clock auction design with two phases. The first phase of the auction—the clock phase—will consist of successive clock bidding rounds in which bidders indicate their demands for a number of generic license blocks in specific categories and PEAs. In the second phase—the assignment phase—winning clock phase bidders will have the opportunity to bid for their preferred combinations of frequency-specific license assignments, consistent with their clock phase winnings, in a series of sealed-bid rounds conducted by PEA or, in some cases, PEA group.

167. In conjunction with WTB, OEA will release shortly updated technical guides that provide the mathematical details of the adopted auction design and algorithms for the clock and assignment phases of Auction 110. The information in the updated technical guides, which are available in the Education section of the Auction 110 website ( www.fcc.gov/auction/110 ), supplements the decisions in the Auction 110 Procedures Public Notice. The Auction 110 Clock Phase Technical Guide details the adopted procedures for the clock phase of Auction 110. The Auction 110 Assignment Phase Technical Guide details the adopted procedures for the assignment phase.

168. Under the bidding procedures that OEA and WTB adopt, during the clock phase of Auction 110, bidders will indicate their demands for generic license blocks in a bidding category in specific geographic areas—in this case, PEAs. There may be one or two bidding categories in a given PEA. The clock auction format will proceed in a series of rounds, with bidding being conducted simultaneously for all spectrum blocks in all PEAs available in the auction. During each bidding round, the bidding system will announce a per-block clock price for each category in each PEA. Qualified bidders will submit, for each category and PEA for which they wish to bid, the number of blocks they seek at the clock price associated with the current round. Bidding rounds will be open for predetermined periods of time. Bidders will be subject to activity and eligibility rules that govern the pace at which they participate in the auction.

169. As proposed, for each product—a category in a PEA—the clock price for a generic license block will increase from round to round if bidders indicate total demand for blocks in that product that exceeds the number of blocks available. The bidding rounds will continue until, for all products, the total number of blocks that bidders demand does not exceed the supply of available blocks.

170. If the aggregate reserve price to satisfy the CSEA requirement has been met at the time that the clock phase bidding stops, those bidders indicating demand for a product at the final clock phase price will be deemed winning bidders, and the auction will proceed to the assignment phase. If the reserve price has not been met at the time bidding stops in the clock phase, the auction will end, and no licenses will be assigned.

171. Following the clock phase, if the reserve price has been met, the assignment phase will offer clock phase winners the opportunity to bid an additional amount for licenses with specific frequencies. All winning bidders, regardless of whether they bid in the assignment phase, will be assigned licenses for contiguous blocks within a category in a PEA. In addition, if in a PEA there are one or more bidders with clock phase winnings in both categories, one of the bidders will be assigned frequency blocks that are contiguous across the two categories.

172. As established in the 3.45 GHz Second Report and Order, the 3.45-3.55 GHz band will be licensed in uniform 10-megahertz sub-blocks in each of the 406 PEAs in the contiguous United States. In most PEAs, new licensees generally will have unrestricted use of all ten frequency blocks. In other areas, specifically in PEAs that wholly or in part cover Cooperative Planning Areas or Periodic Use Areas, licensees must coordinate with incumbent federal operations in the band, as established in the 3.45 GHz Second Report and Order. In some of the PEAs where coordination is required, all ten blocks will be subject to the same restrictions. In others, the restrictions may vary depending upon the frequency block—specifically, in some PEAs subject to coordination with federal incumbents, the A through D blocks may be subject to different restrictions than the E through J blocks. As set forth in the 3.45 GHz Second Report and Order, the lower 40 megahertz of the band—between 3450-3490 MHz corresponding to the A through D blocks—are affected differently than the upper 60 megahertz in certain PEAs in the band. In the event Lockheed is granted relief substantially similar to that sought in its waiver request, the A through H blocks will be subject to different conditions than the I and J blocks in the three affected PEAs. See Lockheed Waiver Request.

173. Categories. The Commission adopts the proposal to establish categories for bidding such that all the blocks within a category in a PEA are similar in terms of any requirements or restrictions. For the reasons proposed by the Commission, OEA and WTB adopt bidding categories as follows: In the PEAs where all ten blocks are the same— i.e., all ten generally are unrestricted or all ten are subject to the same restrictions—the ten generic blocks will be considered Category 1, or “Cat1,” blocks. In the PEAs subject to coordination with federal incumbents where the restrictions differ according to the frequency, the four blocks A through D will be considered Category 1, or “Cat1,” while the six blocks E through J will be considered Category 2, or “Cat2,” for bidding. In PEAs with two categories, we designate certain blocks as Cat1 and other blocks as Cat2 simply to denote that for these licenses the coordination requirements in a PEA differ between the two categories. For all licenses, we caution potential bidders to investigate carefully the restrictions that may apply to a given PEA. In particular, we note that DoD has created a workbook that specifically describes the coordination requirements for each Cooperative Planning Area and Periodic Use Area. In 334 PEAs, there will be ten generic blocks of a single Cat1 product, and in 72 PEAs, there will be two products. OEA and WTB also note that in the three PEAs that encompass the areas subject to Lockheed's pending waiver request, the eight blocks A through H would be considered Cat1 while the two blocks I and J would be considered Cat2 for bidding should relief substantially similar to that sought by Lockheed be granted.

174. This approach to determining bidding categories differs somewhat from the approach the Commission has taken in prior clock auctions, in that the coordination requirements on blocks in a given category in a given PEA may differ from the requirements on the same category of blocks in a different PEA. For example, the Cat1 blocks in one PEA may be unrestricted while the Cat1 blocks in another PEA may require some degree of coordination. Similarly, the restrictions on Cat2 blocks will likely vary from PEA to PEA. In previous auctions, blocks in a given bidding category generally have been subject to the same use requirements in all PEAs, but because the restrictions in this auction differ so widely from PEA to PEA, that approach is not feasible. Importantly, however, for Auction 110, within any given PEA, the blocks within a category can be considered generic, and bidding in the clock phase will determine a single price that will apply to each generic block in a category in a PEA.

175. This approach for bidding on generic blocks in two categories is based on the close similarity of the blocks within each bidding category within a PEA. To the extent a bidder has a preference for licenses for specific frequencies, the bidder may bid for its preferred blocks in the assignment phase. However, a bidder for a generic block in a category will not be assured that it will be assigned, or not be assigned, any particular frequency block.

176. Limit on number of blocks per bidder. In the 3.45 GHz Second Report and Order, the Commission adopted a spectrum aggregation limit for flexible-use licenses in the 3.45 GHz band of a maximum of 40 megahertz ( i.e., four blocks out of ten) in any PEA at any point in time for four years post-auction. Consistent with this limit on the number of blocks that a single entity can hold in any single PEA, the bidding system will limit to four the number of blocks that a bidder can demand in any given PEA at any point in the auction. Therefore, in each bidding round, a bidder will have the opportunity to bid for a total of up to four blocks of spectrum per PEA. This spectrum aggregation limit will apply across both categories in PEAs that contain Cat1 and Cat2 blocks. As a result, no single entity will be permitted to bid on, for example, two Cat1 blocks and three Cat2 blocks within a single PEA. More specifically, the bidding system will not permit bids to be submitted that, if fully applied, would result in the bidder demanding more than four blocks in the PEA. Further, the system will not fully apply submitted bids if doing so would result in the bidder demanding more than four blocks in the PEA. For example, a requested increase in one category may not be applied if a requested reduction in the other category cannot be applied because of insufficient aggregate demand.

177. An aggregation limit of four blocks will further the Commission's interest in promoting greater diversity in participation in the 3.45 GHz band by ensuring that, if licenses for all blocks in a PEA are awarded, there will be at least three winning bidders in the PEA.

178. As proposed, Auction 110 will consist of sequential bidding rounds, each followed by the release of round results. OEA and WTB will conduct bidding simultaneously for all spectrum blocks in both bidding categories for all PEAs available in the auction. In the first bidding round of Auction 110, a bidder will indicate, for each product, the number of generic license blocks it demands at the minimum opening bid price.

179. The initial bidding schedule will be announced in a public notice to be released at least one week before the start of bidding. OEA will retain the discretion to adjust the bidding schedule in order to foster an auction pace that reasonably balances speed with the bidders' need to study round results and adjust their bidding strategies. Such adjustments may include changes in the amount of time for bidding rounds, the amount of time between rounds, or the number of rounds per day, and will depend upon bidding activity and other factors.

180. Auction 110 will be conducted over the internet. A bidder will be able to submit its bids using the bidding system's upload function, which allows bid files in a comma-separated values (CSV) text format to be uploaded. The bidding system will not allow bids to be submitted unless the bidder selected the PEAs on its FCC Form 175, the bidder has sufficient bidding eligibility, and the bids, if applied, are consistent with the aggregation limit of 40 megahertz in a PEA.

181. During each round of the bidding, a bidder will also be able to remove bids placed in the current bidding round. If a bidder modifies its bids for blocks in a PEA in a round, the system will take the last bid submission as that bidder's bid for the round. No bids may be withdrawn after the close of a round. Unlike an auction conducted using the Commission's simultaneous multiple-round auction format, there are no provisionally winning bids in a clock auction. As a result, the concept of bid withdrawals as used in simultaneous multiple-round auctions does not apply to a clock auction.

182. OEA and WTB adopt a simultaneous stopping rule for Auction 110, under which all blocks in all PEAs will remain available for bidding until the bidding stops in every PEA. Specifically, bidding will close for all blocks after the first round in which there is no excess demand in any product. Excess demand is calculated as the difference between the number of blocks of aggregate demand and supply. Under this approach, it is not possible to determine in advance how long Auction 110 will last.

183. OEA and WTB adopt the proposal to make public after each clock phase bidding round, for each category in each PEA: The supply, the aggregate demand, the posted price of the last completed round, and the clock price for the next round. The posted price of the previous round is, generally, the start-of-round price if supply exceeds demand; the clock price of the previous round if demand exceeds supply; or the price at which a reduction caused demand to equal supply. The identities of bidders demanding blocks in a specific category or PEA will not be disclosed until after Auction 110 concludes ( i.e., after the close of bidding).

184. OEA will also make public after each clock phase bidding round whether the reserve price has been met, that is, whether the estimated total cash proceeds based on the bids in the most recently completed round would satisfy the CSEA requirement. If the reserve has not yet been met, each bidder will be informed about the shortfall between the reserve and the estimated total cash proceeds, rounded up to the nearest million. This shortfall information will not be publicly available during the auction.

185. Each bidder will have access to additional information related to its own bidding and bid eligibility. Specifically, after the bids of a round have been processed, the bidding system will inform each bidder of the number of blocks it holds after the round (its processed demand) for every product and its eligibility for the next round.

186. Limiting the availability of bidding information during the auction balances the Commission's interest in providing bidders with sufficient information about the status of their own bids and the general level of bidding in all areas and license categories to allow them to bid confidently and effectively, while restricting the availability of information that may facilitate identification of bidders placing particular bids, which could potentially lead to undesirable strategic bidding.

187. Activity requirement. To ensure that the auction closes within a reasonable period of time, an activity rule requires bidders to bid actively throughout the auction, rather than wait until late in the auction before participating. For this clock auction, a bidder's activity in a round for purposes of the activity rule will be the sum of the bidding units associated with the bidder's demands as applied by the auction system during bid processing. Bidders are required to be active on a specific percentage (the activity requirement percentage ) of their current bidding eligibility during each round of the auction. Failure to maintain the requisite activity level will result in a reduction in the bidder's eligibility, possibly curtailing or eliminating the bidder's ability to place bids in subsequent rounds of the auction.

188. OEA and WTB adopt the proposal to require that bidders maintain a fixed, high level of activity in each round of Auction 110 in order to maintain bidding eligibility. Specifically, bidders must be active on between 90% and 100% of their bidding eligibility in all clock rounds, with the specific percentage within this range to be set for each round. Thus, the activity rule will be satisfied when a bidder has bidding activity on blocks with bidding units that total 90% to 100% of its current eligibility in the round. OEA will set the activity requirement percentage initially at 95%. If the activity rule is met, then the bidder's eligibility will not change for the next round. If the activity rule is not met in a round, the bidder's eligibility will be reduced. Bidding activity will be based on the bids that are applied by the FCC auction bidding system. That is, if a bidder requests a reduction in the quantity of blocks it demands in a product, but the bidding system cannot apply the request because demand would fall below the available supply, then the bidder's activity will reflect its unreduced demand. Under the ascending clock auction format, the FCC auction bidding system will not allow a bidder to reduce the quantity of blocks it demands in an individual product if the reduction would result in aggregate demand falling below (or further below) the available supply of blocks in the product.

189. OEA will retain the discretion to change the activity requirement percentage during the auction. The bidding system would announce any such change in advance of the round in which it would take effect, giving bidders adequate notice to adjust their bidding strategies.

190. Contingent bidding limit. Because a bidder's eligibility for the next round is calculated based on the bidder's demands as applied by the auction system during bid processing, a bidder's eligibility may be reduced even if the bidder submitted bids with activity that exceeds the required activity for the round. This may occur, for example, if the bidder bids to reduce its demand in PEA X by two blocks (with 10 bidding units each) and bids to increase its demand by one block (with 20 bidding units) in PEA Y. If the bidder's demand can only be reduced by one block in PEA X (because there is only one block of excess demand), the increase in PEA Y cannot be applied, and absent other bidding activity the bidder's eligibility would be reduced. To help a bidder avoid potentially having its eligibility reduced as a result of submitted bids that could not be applied during bid processing, as proposed, OEA and WTB adopt procedures to allow a bidder to submit bids with associated bidding activity greater than its current bidding eligibility. For example, depending upon the bidder's overall bidding eligibility and the contingent bidding percentage, a bidder could submit an “additional” bid or bids that would be considered (in price point order with its other bids) and applied as available eligibility permits during the bid processing. However, OEA and WTB emphasize that even under these additional procedures, the bidder's activity as applied by the auction system during bid processing will not exceed the bidder's current bidding eligibility. That is, if a bidder submits bids with associated bidding units exceeding 100% of its current bidding eligibility, its processed activity cannot exceed its eligibility.

191. Under these procedures, after Round 1 a bidder may submit bids with bidding units totaling up to a contingent bidding limit equal to the bidder's current bidding eligibility for the round times a percentage (the contingent bidding percentage ) equal to or greater than 100%. The Commission has previously referred to the contingent bidding limit as the activity upper limit, and similarly, to the contingent bidding percentage as the activity limit percentage. OEA and WTB modify those terms to remind bidders that bids submitted using the contingent bidding limit will be applied only under certain circumstances. For Round 1, the contingent bidding limit would be 100% of the bidder's initial bidding eligibility. OEA and WTB adopt an initial contingent bidding percentage of 120% to apply beginning in Round 2. This limit will be subject to change in subsequent rounds within a range of 100% to 140%. In any bidding round, the auction bidding system will advise the bidder of its current bidding eligibility, its required bidding activity, and its contingent bidding limit. The Auction 110 Clock Phase Technical Guide provides examples of use of the contingent bidding limit, and bidders are encouraged to review them.

192. As with the activity requirement percentage, OEA will retain the discretion to change the contingent bidding percentage during the auction and will announce any such changes in advance of the round in which they would take effect.

193. Missing bids. Under the clock auction format, bidders are required to indicate their demands in every round, even if their demands at the new round's prices are unchanged from the previous round. Missing bids—bids that are not reconfirmed—are treated by the auction bidding system as requests to reduce to a quantity of zero blocks for the product. If these requests are applied, or applied partially, then a bidder's bidding activity, and its bidding eligibility for the next round, may be reduced. in which they would take effect.

194. For Auction 110, OEA and WTB will not provide for activity rule waivers to preserve a bidder's eligibility. OEA and WTB note that the procedures to permit a bidder to submit bids with bidding activity greater than its eligibility, within the precise limits set forth above, will address some of the circumstances under which a bidder risks losing bidding eligibility and otherwise could wish to use a bidding activity waiver, while minimizing any potential adverse impacts on bidder incentives to bid sincerely and on the price setting mechanism of the clock auction. This approach not to allow waivers is consistent with the ascending clock auction procedures used in other FCC clock auctions. The clock auction relies on precisely identifying the point at which demand decreases to equal supply to determine winning bidders and final prices. Allowing waivers would create uncertainty with respect to the exact level of bidder demand and would interfere with the basic clock price-setting and winner determination mechanism. Moreover, uncertainty about the level of demand would affect the way bidders' requests to reduce demand are processed by the bidding system, as addressed below.

195. As is typical for each auction, the Commission sought comment on the use of a minimum opening bid amount and/or reserve price, as mandated by section 309(j) of the Communications Act. OEA and WTB will establish minimum opening bid amounts for Auction 110. The bidding system will not accept bids lower than the minimum opening bids for each product. Based on the Commission's experience in past auctions, setting minimum opening bid amounts judiciously is an effective tool for accelerating the competitive bidding process.

196. For Auction 110, the Commission proposed to calculate minimum opening bid amounts based on bandwidth and license area population using a tiered approach under which the calculation would vary by market population. The Commission proposed minimum opening bid amounts for a block in a PEA based on $0.06 per MHz-pop for PEAs 1-50 and $0.02 per MHz-pop for all other PEAs, subject to a minimum of $1000.

197. Based on comments in the record, however, OEA and WTB adopt revised, lower minimum opening bid amounts for Auction 110. Specifically, OEA and WTB adopt minimum opening bid amounts for a block in a PEA based on $0.03 per MHz-pop for PEAs 1-50, $0.006 per MHz-pop for PEAs 51-100, and $0.003 per MHz-pop for all other PEAs, subject to a minimum of $1000. These minimum opening bid amounts are set forth in the “Attachment A” file on the Auction 110 website at www.fcc.gov/auction/110.

198. OEA and WTB adopt the proposed procedures regarding clock price increments for Auction 110. Accordingly, after bidding in the first round and before each subsequent round, the bidding system will announce the start-of-round price (also referred to as the posted price of the previous round) and the clock price for the upcoming round—that is, the lowest price and the highest price at which bidders can specify the number of blocks they demand during the round. As long as aggregate demand for blocks in the product exceeds the supply of blocks, the start-of-round price will be equal to the clock price from the prior round. If demand equaled supply at a price in a previous round, then the start-of-round price for the next round will be equal to the price at which demand equaled supply. If demand was less than supply in the previous round, then the start-of-round price for the next round will not increase.

199. OEA will set the clock price for blocks in a specific product for a round by adding a percentage increment to the start-of-round price. For example, if the start-of-round price for a block of a given product is $10,000, and the percentage increment is 20%, then the clock price for the round will be $12,000. The result of the clock price calculation will be rounded as follows: results above $10,000 will be rounded up to the nearest $1,000, and results below $10,000 will be rounded up to the nearest $100. OEA will set the initial increment percentage at 10%, and may adjust the increment within a range of 5% to 20% inclusive, as rounds continue. The total dollar amount of the increment (the difference between the clock price and the start-of-round price) will be capped at a certain amount. OEA will set this cap on the increment initially at $50 million and may adjust the cap as rounds continue. The proposed 5% to 20% increment range and cap will allow OEA to set a percentage that manages the auction pace and takes into account bidders' needs to evaluate their bidding strategies while moving the auction along quickly.

200. As proposed, OEA and WTB will permit a bidder to make intra-round bids by indicating a point between the start-of-round price and the clock price at which its demand for blocks changes. In placing an intra-round bid, a bidder will indicate a specific price and a (different) quantity of blocks it demands if, after bids for the round are processed, the price for blocks should increase beyond that intra-round amount.

201. An intra-round bid gives the bidder the flexibility to indicate that it wants to change its demand at a price lower than the clock price. However, intra-round bids will be optional; a bidder may choose to express its demands only at the clock prices. Permitting intra-round bids allows the auction system to use relatively large increments, thereby speeding the auction, without running the risk that a jump in the clock price will overshoot the market clearing price—the point at which demand for blocks equals the available supply.

202. Under the ascending clock auction format the Commission proposed for Auction 110, and which OEA and WTB adopt, a bidder will indicate in each round the number of blocks in each product that it demands at a given price, subject to the in-band limit of four discussed above.

203. A bidder that is willing to maintain the same demand for a product (relative to its demands from the previous round as processed by the bidding system) at the new clock price would bid for that quantity at the clock price, indicating that it is willing to pay up to that price, if need be, for the specified quantity. Bids to maintain demand will always be applied by the auction bidding system. A bidder that wishes to change the quantity it demands would bid at the clock price or at an intra-round price, depending upon the point at which its demands change.

204. For example, if a bidder has processed demand for two blocks entering a round in which the start-of-round price is $2,000 and the clock price is $2,500, but it is only willing to buy one block if the price should increase above $2,100, the bidder can submit an intra-round bid indicating a bid quantity of one at a price of $2,100. Or, if the bidder is not willing to pay more than the start-of-round price of $2,000 for any blocks, it can submit an intra-round bid requesting a quantity of zero at the start-of-round price of $2,000.

205. To facilitate bidding for multiple blocks in a PEA, bidders will be permitted to make two types of bids: Simple bids and switch bids. A “simple” bid indicates a desired quantity of blocks in a product at a price (either the clock price or an intra-round price). A “switch” bid allows the bidder to request to move its demand for a quantity of blocks from Cat1 to Cat2, or vice versa, within the same PEA at a price for the “from” category (either the clock price or an intra-round price). “Switch” bids are allowed only in PEAs with two categories.

206. OEA and WTB will not incorporate any form of package bidding procedures into the clock phase of Auction 110. Package bidding would add complexity to the bidding process, and OEA and WTB do not see significant benefit from such procedures, given the clock auction and assignment phase format OEA and WTB adopt. A bidder may bid on multiple blocks in a PEA (up to the limit of four) and in multiple PEAs. As set forth below, the assignment phase will assign contiguous blocks to winners of multiple blocks in a category in a PEA and give bidders an opportunity to express their preferences for specific frequency blocks, thereby facilitating aggregations of licenses. Also as set forth below, if there are one or more bidders that win blocks in both categories, the assignment phase bidding system will assign blocks that are contiguous across the categories to one such bidder.

207. OEA and WTB adopt bid processing procedures that the auction bidding system will use, after each bidding round, to process bids to change demand to determine the processed demand of each bidder for each product and a posted price for each product that will serve as the start-of-round price for the next round.

208. Under the ascending clock auction format, the FCC auction bidding system will not allow a bidder to reduce the quantity of blocks it demands in a product if the reduction would result in aggregate demand falling below (or further below) the available supply of blocks in the product. Therefore, if a bidder submits a simple bid to reduce the number of blocks for which it has processed demand as of the previous round, the bidding system will treat the bid as a request to reduce demand that will be applied only if the “no excess supply” rule would be satisfied. Similarly, if a bidder submits a switch bid to move its demand for a quantity of blocks from Cat1 to Cat2 within the same PEA, the FCC auction bidding system will treat the bid as a request that will be applied only if the “no excess supply” rule would be satisfied for Cat1 in the PEA.

209. The bidding system will not allow a bidder to increase the quantity of blocks it demands in a product if the total number of bidding units associated with the bidder's demand exceeds the bidder's bidding eligibility for the round. Therefore, if a bidder submits a simple bid to increase the number of blocks for which it has processed demand as of the previous round, the bidding system will treat the bid as a request to increase demand that will be applied only if it would not cause the bidder's activity to exceed its eligibility. The eligibility rule for bids to increase demand does not apply to switch bids because the bidder's processed activity does not change when a switch bid is applied.

210. In addition, in light of the in-band aggregation limit of 40 megahertz in a PEA established by the 3.45 GHz Second Report and Order, the bidding system will not permit a bidder to increase the number of blocks it demands in a PEA if its total demand in the PEA would exceed four blocks.

211. Under the bid processing procedures OEA and WTB adopt, as in all previous FCC spectrum auctions using the clock auction format, a bid (simple bid or switch bid) that involves a reduction from the bidder's previous demands can be applied partially—that is, reduced by fewer blocks than requested in the bid—if excess demand is insufficient to support the entire reduction. Accordingly, the bidding system will apply a bidder's request to reduce demand as much as possible consistent with the no excess supply rule. A switch bid may be applied partially, but the increase in demand in the “to” category will always match in quantity the reduction in the “from” category. A simple bid to increase a bidder's demand may be applied partially if the total number of bidding units associated with the bidder's demand exceeds the bidder's bidding eligibility for the round, or if fully applying the bid would violate the aggregation limit. Therefore, the bidding system will accommodate a bidder's request to increase demand as much as possible consistent with the aggregation limit and as long as the bidder's activity does not exceed its eligibility.

212. As proposed, OEA and WTB adopt procedures to determine the order in which the bidding system will process bids after a round ends. Bids to maintain demand are considered first and always applied. The bidding system will then process bids to change demand in order of price point, where the price point represents the percentage of the bidding interval for the round. For example, if the start-of-round price is $5,000 and the clock price is $6,000, a price of $5,100 will correspond to the 10% price point, since it is 10% of the bidding interval between $5,000 and $6,000. The bidding system will first consider intra-round bids in ascending order of price point and then bids at the clock price. The system will consider bids at the lowest price point across all PEAs, then look at bids at the next price point in all areas, and so on. If there are multiple bids at a single price point, the system will process those bids in order of a bid-specific pseudo-random number. As it considers each submitted bid during bid processing, the bidding system will determine the extent to which there is excess demand in each PEA at that point in the processing in order to determine whether a bidder's request to reduce demand can be applied. Likewise, the auction bidding system will evaluate the activity associated with the bidder's most recently determined demands at that point in the processing to determine whether a request to increase demand can be applied.

213. Because in any given round some bidders may request to increase demands for licenses while others may request reductions, the price point at which a bid is considered by the bidding system can affect whether it is applied. Bids not applied because of insufficient aggregate demand or insufficient eligibility will be held in a queue and considered, again in order, if there should be excess demand or sufficient eligibility later in the processing after other bids are processed.

214. Therefore, once a round closes, the bidding system will process bids to change demand by first considering the bid submitted at the lowest price point and determining the maximum extent to which that bid can be applied given bidders' demands as determined at that point in the bid processing. If the bid can be applied (either in full or partially), the number of blocks the bidder holds at that point in the processing will be adjusted, and aggregate demand will be recalculated accordingly. If the bid cannot be applied in full, the unfulfilled bid, or portion thereof, will be held in a queue to be considered later during bid processing for that round. The bidding system will then consider the bid submitted at the next highest price point, applying it in full, in part, or not at all, given the most recently determined demands of bidders. Any unfulfilled requests will again be held in the queue, and aggregate demand will again be recalculated. Every time a bid or part of a bid is applied, the unfulfilled bids held in the queue will be reconsidered, in the order of the original price points of the bids (and by pseudo-random number, in the case of tied price points). The auction bidding system will not carry over unfulfilled bid requests to the next round, however. The bidding system will advise bidders of the status of their bids when round results are released.

215. OEA and WTB further adopt bid processing procedures that will determine, based on aggregate demand, the posted price for each product for the round, which will serve as the start-of-round price for the next round. The uniform price for all of the blocks in a product will increase from round to round as long as there is excess demand for blocks in the product but will not increase if aggregate demand does not exceed the available supply of blocks.

216. Under these procedures, if at the end of a round the aggregate demand for blocks in the product exceeds the supply of blocks, the posted price will equal the clock price for the round. If a reduction in demand was applied during the round and caused demand in the product to equal supply, the posted price will be the price at which the reduction was applied. If aggregate demand is less than or equal to supply and no bid to reduce demand was applied for the product, then the posted price will equal the start-of-round price for the round. The range of acceptable bid amounts for the next round will be set by adding the percentage increment to the posted price.

217. When a bid to reduce demand can be applied only partially, the uniform price for the product will stop increasing at that point, since the partial application of the bid will result in demand falling to equal supply. Hence, a bidder that makes a bid to reduce demand that cannot be fully applied will not face a price for the remaining demand that is higher than its bid price.

218. After the bids of the round have been processed, if the stopping rule has not been met, the FCC auction bidding system will announce clock prices to indicate a range of acceptable bids for the next round. Each bidder will be informed of its processed demand and the extent of excess demand for blocks in each product.

219. Under the clock auction format for Auction 110, if the reserve price to meet the CSEA requirement is met in the clock phase, bidders with processed demand for a product at the time the stopping rule is met will become the winning bidders of licenses corresponding to that number of blocks and will be assigned specific frequencies in the assignment phase. The final clock phase price for a generic block in a product will be the posted price for the final round. This and other Auction 110 bid processing details are addressed in the Auction 110 Clock Phase Technical Guide.

220. Following the conclusion of the clock phase, if the reserve price to satisfy the CSEA requirement has been met, the assignment phase will follow. As proposed, in the assignment phase, in a series of bidding rounds, each clock phase winning bidder will have the opportunity to indicate its preferences for specific frequency licenses corresponding to the generic blocks it won in each category in the clock phase. As proposed, a bidder will be assigned contiguous frequencies for blocks it wins within each category and PEA regardless of whether it chooses to bid in the assignment phase. As set forth below, OEA and WTB adopt an additional assignment procedure to address commenter concerns that the procedures, as proposed, did not take contiguity across categories into account.

221. As proposed, OEA will sequence assignment rounds to make it easier for bidders to incorporate frequency assignments from previously assigned areas into their bid preferences for other areas, recognizing that bidders winning multiple blocks of licenses generally will prefer contiguous blocks across adjacent PEAs. To that end, OEA will conduct rounds for the largest markets first to enable bidders to establish a “footprint” from which to work.

222. Specifically, OEA will conduct a separate assignment round for each of the top 20 PEAs and to conduct these assignment rounds sequentially, beginning with the largest PEA. Once the top 20 PEAs have been assigned, OEA will conduct, for each Regional Economic Area Grouping (REAG), a series of assignment rounds for the remaining PEAs within that region.

223. Further, the bidding system will group into a single market for assignment any non-top 20 PEAs within a REAG in which the same winning bidders will be assigned the same number of blocks in each category, and all are subject to the small markets bidding cap or all are not subject to the cap. Grouping in this way may also help maximize contiguity across PEAs.

224. OEA will sequence the assignment rounds within a REAG in descending order of population for a PEA group or individual PEA. The bidding for the different REAGs will be conducted in parallel in order to reduce the total amount of time required to complete the assignment phase.

225. Under the bidding procedures OEA and WTB adopt, in each assignment round a bidder will be asked to assign a price to one or more possible frequency assignments for which it wishes to express a preference, consistent with its winnings for generic blocks in the clock phase. The price will represent a maximum payment that the bidder is willing to pay, in addition to the price established in the clock phase for the generic blocks, for the frequency-specific license or licenses in its bid. In PEAs where there are two categories and a bidder won generic blocks in both categories, a bidder will submit its preferences for blocks won in Cat1 and Cat2 separately, rather than submitting bids for preferences that include blocks in both categories. That is, if a bidder won one block in Cat1 and two blocks in Cat2, it will not be able to submit a single bid amount for an assignment that includes both categories. Instead, it will submit its bid or bids for assignments in Cat1 separately from its bid or bids for assignments in Cat2.

226. In response to numerous comments requesting that the Commission implement procedures that would prioritize contiguous assignments across categories, OEA and WTB modify the procedures proposed in the Auction 110 Comment Public Notice to ensure that, in PEAs with both Cat1 and Cat2 blocks, if one or more bidders win blocks in both categories in the clock phase, one of those bidders will be assigned licenses that are contiguous across the categories. Specifically, in each assignment round, prior to implementing the proposed optimization procedures separately for each category in the PEA or PEA group, the bidding system will first determine if there are one or more bidders with winnings in both categories. If there are, the bidding system will assign blocks that are contiguous across the categories to one such bidder. To do so, the bidding system will consider the sum of each such bidder's bid for its Cat1 option that includes the highest-frequency block (D) and its bid for the Cat2 option that includes the lowest-frequency block (E). The bidder with the highest bid total will be assigned licenses that are contiguous across the categories ( i.e., that include blocks D and E and any other blocks contiguous to D and/or E that the bidder won. The bidder's assignment payment will be the price of the bidder with the second-highest total bid for options that include blocks that are contiguous across categories.

227. Once the bidding system has determined whether there is at least one bidder with cross-category winnings and if so, has assigned licenses to one of those bidders, the system will, as proposed, use an optimization approach to determine the winning frequency assignment for the remaining blocks in each category in each PEA or PEA group. The auction system will select the assignment that maximizes the sum of bid amounts among all assignments that satisfy the contiguity requirements within categories. Furthermore, if multiple blocks in a category in a PEA remain unsold, the unsold licenses will be contiguous.

228. The additional price a bidder will pay for a specific frequency assignment (above the clock phase price) in a given category will be calculated consistent with a generalized “second price” approach—that is, the winner will pay a price that would be just sufficient to result in the bidder receiving that same winning frequency assignment while ensuring that no group of bidders is willing to pay more for an alternative assignment where each bidder is assigned contiguous spectrum within that category. This price will be less than or equal to the price the bidder indicated it was willing to pay for the assignment. OEA will determine prices in this way because it facilitates bidding strategy for the bidders, encouraging them to bid their full value for the assignment, knowing that if the assignment is selected, they will pay no more than would be necessary to ensure that the outcome is competitive.

229. After the clock phase concludes but before bidding begins in the assignment phase, the bidding system will provide to each assignment phase bidder a menu of bidding options consisting of possible configurations of frequency-specific licenses on which it can bid. These bidding options will be consistent with the bidder's clock-phase winnings but will not take into account the winnings of other bidders. The bidding system will also announce the order in which assignment rounds will take place and indicate which PEAs will be grouped together for bidding. The bidding system will provide clock phase winning bidders with this information as soon as possible and will announce a schedule of assignment phase rounds that will commence no sooner than five business days later.

230. After each assignment round, the bidding system will inform each bidder of its own assignment and assignment payment for each assignment category for each PEA or PEA group assigned in the round. The bidding system will also provide each bidder with its current total payment, which is calculated as the sum of the bidder's total clock payment across all PEAs and the bidder's assignment payments for the PEAs for which an assignment round has already completed. During the assignment rounds this information will provide the bidder a running estimate of the dollar amount it will owe at the end of the auction. A bidder that is claiming a bidding credit will also be informed about its current bidding credit discount and whether the discount has been capped.

231. When all assignment rounds have been completed, a bidder's final auction payment takes into account the sum of final clock phase prices across all licenses that it won, the sum of all of the bidder's assignment payments, and any claimed bidding credits. Specifically, if a bidder is not claiming a bidding credit, its final payment is determined by summing the final clock phase prices across all licenses that it won and its assignment payments across all PEAs or PEA groups.

232. If a bidder claims a bidding credit, a bidding credit discount is calculated by applying the bidder's bidding credit percentage to the sum of the bidder's clock payments and assignment payments, capping the bidding credit discount if it exceeds the applicable caps for small businesses, rural service providers, and small markets. The resulting bidding credit discount is subtracted from the sum of the bidder's clock payments and assignment payments to determine the final payment for a bidder with a bidding credit.

233. While final auction payments for winning bidders will be calculated with bidding credit caps and assignment payments applied on an aggregate basis, rather than to individual licenses, the bidding system will also calculate a “per-license” price for each license. Such individual prices may be needed if a licensee later incurs license-specific obligations, such as unjust enrichment payments.

234. After the assignment phase, the auction bidding system will determine a net and gross post-auction price for each license that a bidder won by apportioning assignment payments and bidding credit discounts (only applicable for the net price) across all the bidder's licenses. To calculate the gross per-license price, the auction bidding system will apportion the assignment payment to licenses in proportion to the final clock phase price of the blocks that the bidder is assigned in that assignment category and PEA (or PEA group). Mathematical details of these procedures, including how the system apportions the assignment payment for an assignment that is contiguous across the two categories, are given in the Auction 110 Assignment Phase Technical Guide. To calculate the net price, the auction bidding system will first apportion any applicable bidding credit discounts to each PEA or PEA group in proportion to the gross payment for that market. Then, for each PEA or PEA group, the auction bidding system will apportion the assignment payment and the discount to licenses in proportion to the final clock phase price of the blocks that the bidder is assigned in that assignment category for that PEA (or PEA group).

235. The bidding system will determine winning bidders as described in Section IV.A.9 (Winning Bids in the Clock Phase), above. After release of the public notice announcing auction results, the public will be able to view and download bidding and results data through the FCC Public Reporting System (PRS).

236. Commission staff will use auction announcements to report necessary information, such as schedule changes, to bidders. All auction announcements will be available by clicking a link in the bidding system.

237. The public notice announcing the close of the bidding and auction results will be released shortly after bidding has ended in Auction 110. This public notice will also establish the deadlines for submitting down payments, final payments, and the long-form applications (FCC Form 601) for the auction.

238. The Commission's rules provide that, unless otherwise specified by public notice, within ten business days after the release of the auction closing public notice for Auction 110, each winning bidder must submit sufficient funds (in addition to its upfront payment) to bring its total amount of money on deposit with the Commission to 20% of the net amount of its winning bids (less any bidding credits, if applicable). Because it is not possible to know when bidding in Auction 110 will end, and thus whether post-auction payments will be due in late 2021 or early 2022, some commenters request that OEA and WTB announce before the bidding begins that down payments will be due in early 2022. Commission staff have previously recognized that uncertainties regarding the year in which down payments will be due could affect potential applicants from a capital planning perspective, and that this could in turn affect auction participation. Acknowledging that such uncertainties may be presented under the current schedule for Auction 110, OEA and WTB exercise their discretion under the Commission's rules to set the down payment deadline for Auction 110 to be the later of January 7, 2022, or ten business days after release of the auction closing public notice.

239. Each winning bidder will be required to submit the balance of the net amount for each of its winning bids within 10 business days after the deadline for submitting down payments.

240. The Commission's rules provide that, within 10 business days after release of the auction closing public notice, winning bidders must electronically submit a properly completed post-auction application (FCC Form 601), including the necessary filing fee of $3,175, for the license(s) they won through the auction. The filing fee will be required only if the recently amended section 1.1102 of the Commission's rules is in effect by the post-auction application deadline.

241. A winning bidder claiming eligibility for a small business bidding credit or a rural service provider bidding credit must demonstrate its eligibility for the bidding credit sought in its FCC Form 601 post-auction application. Further instructions on these and other filing requirements will be provided to winning bidders in the auction closing public notice for Auction 110.

242. Winning bidders organized as bidding consortia must comply with the FCC Form 601 post-auction application procedures set forth in section 1.2107(g) of the Commission's rules. Specifically, license(s) won by a consortium must be applied for as follows: (a) An individual member of the consortium or a new legal entity comprising two or more individual consortium members must file for licenses covered by the winning bids; (b) each member or group of members of a winning consortium seeking separate licenses will be required to file a separate FCC Form 601 for its/their respective license(s) in their legal business name; (c) in the case of a license to be partitioned or disaggregated, the member or group filing the applicable FCC Form 601 shall include the parties' partitioning or disaggregation agreement with the FCC Form 601; and (d) if a DE credit is sought (either small business or rural service provider), the applicant must meet the applicable eligibility requirements in the Commission's rules for the credit.

243. Within 10 business days after release of the auction closing public notice for Auction 110, each winning bidder must also comply with the ownership reporting requirements in sections 1.913, 1.919, and 1.2112 of the Commission's rules by submitting an ownership disclosure information report for wireless telecommunications services (FCC Form 602) with its FCC Form 601 post-auction application.

244. If a winning bidder already has a complete and accurate FCC Form 602 on file in the FCC's Universal Licensing System (ULS), then it is not necessary to file a new report, but the winning bidder must certify in its FCC Form 601 application that the information on file with the Commission is complete and accurate. If the winning bidder does not have an FCC Form 602 on file, or if the form on file is not complete and accurate, then the winning bidder must submit a new one.

245. When a winning bidder submits an FCC Form 175, ULS automatically creates an ownership record. This record is not an FCC Form 602, but it may be used to pre-fill the FCC Form 602 with the ownership information submitted on the winning bidder's FCC Form 175 application. A winning bidder must review the pre-filled information and confirm that it is complete and accurate as of the filing date of the FCC Form 601 post-auction application before certifying and submitting the FCC Form 602. Further instructions will be provided to winning bidders in the auction closing public notice.

246. A winning bidder that intends to use its license(s) to deploy facilities and provide services to federally recognized tribal lands that have a wireline penetration rate equal to or below 85% is eligible to receive a tribal lands bidding credit as set forth in sections 1.2107(e) and 1.2110(f)(3) of the Commission's rules. A tribal lands bidding credit is in addition to, and separate from, any other bidding credit for which a winning bidder may qualify.

247. Unlike other bidding credits that are requested prior to the auction, a winning bidder applies for the tribal lands bidding credit after the auction when it files its FCC Form 601 post-auction application. When initially filing the post-auction application, the winning bidder will be required to inform the Commission whether it intends to seek a tribal lands bidding credit, for each license won in the auction, by checking the designated box(es). After stating its intent to seek a tribal lands bidding credit, the winning bidder will have 180 days from the close of the post-auction application filing window to amend its application to select the specific tribal lands to be served and provide the required tribal government certifications. Licensees receiving a tribal lands bidding credit are subject to performance criteria as set forth in section 1.2110(f)(3)(vii). For additional information on the tribal lands bidding credit, including how the amount of the credit is calculated, applicants should review the Commission's rulemaking proceeding regarding tribal lands bidding credits and related public notices.

248. Any winning bidder that defaults or is disqualified after the close of an auction ( i.e., fails to remit the required down payment by the specified deadline, fails to submit a timely long-form application, fails to make a full and timely final payment, or is otherwise disqualified) is liable for default payments as described in section 1.2104(g)(2). A default payment consists of a deficiency payment, equal to the difference between the amount of the bidder's winning bid and the amount of the winning bid the next time a license covering the same spectrum is won in an auction, plus an additional payment equal to a percentage of the defaulter's bid or of the subsequent winning bid, whichever is less.

249. The percentage of the applicable bid to be assessed as an additional payment for defaults in a particular auction is established in advance of the auction. OEA and WTB adopt the Commission's proposal to set the additional default payment for Auction 110 at 15% of the applicable bid for winning bids. The bidding system will calculate individual per-license prices that are separate from final auction payments, which are calculated on an aggregate basis.

250. Finally, in the event of a default, the Commission has the discretion to re-auction the license or offer it to the next highest bidder (in descending order) at its final bid amount. In addition, if a default or disqualification involves gross misconduct, misrepresentation, or bad faith by an applicant, then the Commission may declare the applicant and its principals ineligible to bid in future auctions and may take any other action that it deems necessary, including institution of proceedings to revoke any existing authorizations held by the applicant.

251. All refunds of upfront payment balances will be returned to the payer of record as identified on the FCC Form 159 unless the payer submits written authorization instructing otherwise. Bidders are encouraged to use the Refund Information icon found on the Auction Application Manager page or the Refund Form link available on the Auction Application Submit Confirmation page in the FCC Auction Application System to access the form. After the required information is completed on the blank form, the form should be printed, signed, and submitted to the Commission by mail, fax, or email as instructed below.

252. If you have elected not to access the Refund Form through the Auction Application Manager page, the Commission is requesting that all information listed below be supplied in writing.

Name, address, contact and phone number of Bank, ABA Number (capable to accept ACH payments), Account Number to Credit, Name of Account Holder, FCC Registration Number (FRN).

The refund request must be submitted by fax to the Revenue & Receivables Operations Group/Auctions at (202) 418-2843, by email to RROGWIREFAXES@fcc.gov.

253. Supplemental Final Regulatory Flexibility Analysis. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), 5 U.S.C. 603, a Supplemental Initial Regulatory Flexibility Analysis (Supplemental IRFA) was incorporated in the Auction 110 Comment Public Notice released in March 2021. The Commission sought public comment on the proposals in the Auction 110 Comment Public Notice, including comments on the Supplemental IRFA. The Rural Wireless Association, Inc. (RWA) filed comments specifically addressing the Supplemental IRFA, and OEA and WTB address those comments in the Supplemental FRFA in the Auction 110 Procedures Public Notice. The Auction 110 Procedures Public Notice establishes the procedures to be used for Auction 110 and supplements the Initial and Final Regulatory Flexibility Analyses completed by the Commission in the 3.1-3.55 GHz Report and Order (R&O) and Further Notice of Proposed Rulemaking (FNPRM), 85 FR 64062, October 2, 2020, and 85 FR 66888, October 21, 2020, 3.45 GHz Second Report and Order, 86 FR 17920, April 7, 2021, 3.45 GHz Second Report and Order, and other Commission orders pursuant to which Auction 110 will be conducted. This present Supplemental Final Regulatory Flexibility Analysis (Supplemental FRFA) conforms to the RFA.

254. Need for, and Objectives of, the Rules. The Auction 110 Procedures Public Notice implements auction procedures for those entities that seek to bid to acquire licenses in Auction 110. Auction 110 will be the Commission's third auction of mid-band spectrum in furtherance of the deployment of fifth-generation (5G) wireless, the Internet of Things (IoT), and other advanced spectrum-based services. The Auction 110 Procedures Public Notice adopts procedural rules and terms and conditions governing Auction 110, and the post-auction application and payment processes, as well as sets the minimum opening bid amounts for flexible-use licenses in the 3.45-3.55 GHz band (3.45 GHz Service) that will be offered in Auction 110.

255. To promote the efficient and fair administration of the competitive bidding process for all Auction 110 participants, OEA and WTB adopt the following procedures proposed in the Auction 110 Comment Public Notice:

• Establishment of bidding credit caps for eligible small businesses, very small businesses, and rural service providers in Auction 110;

• designation of AT&T, T-Mobile, and Verizon Wireless as nationwide providers for purposes of the prohibition of certain communications;

• use of anonymous bidding/limited information procedures which will not make public until after bidding has closed: (1) The PEAs that an applicant selects for bidding in its short-form application (FCC Form 175), (2) the amount of any upfront payment made by or on behalf of an applicant for Auction 110, (3) an applicant's bidding eligibility, and (4) any other bidding-related information that might reveal the identity of the bidder placing a bid;

• establishment of an additional default payment of 15% under section 1.2104(g)(2) of the rules in the event that a winning bidder defaults or is disqualified after the auction;

• a specific upfront payment amount for products available in Auction 110;

• establishment of a bidder's initial bidding eligibility in bidding units based on that bidder's upfront payment through assignment of a specific number of bidding units for each generic block;

• establishment of a single aggregate reserve price for the auction to ensure that total cash proceeds from the auction equal at least $14,775,354,330;

• use of a simultaneous stopping rule for Auction 110, under which all blocks in both categories in all PEAs would remain available for bidding until the bidding stops in every PEA;

• use of a clock auction format for Auction 110 under which each qualified bidder will indicate in successive clock bidding rounds its demands for categories of generic blocks in specific geographic areas. Categories are determined based on the framework set forth in the 3.45 GHz Second Report and Order, in which the lower frequency bands are affected differently than the upper frequency bands in certain PEAs in the band;

• permission for bidders to make two types of bids: Simple bids and switch bids. A “simple” bid indicates a desired quantity of blocks in a product at a price (either the clock price or an intra-round price). A “switch” bid allows the bidder to request to move its demand for a quantity of blocks from Cat1 to Cat2, or vice versa, within the same PEA at a price for the “from” category (either the clock price or an intra-round price);

• use of an activity rule that would require bidders to be active on between 90% and 100% of their bidding eligibility in all regular clock rounds;

• use of an activity rule that does not include a waiver of the rule to preserve a bidder's eligibility;

• a specific minimum opening bid amount for products available in Auction 110;

• establishment of acceptable bid amounts, including clock price increments and intra-round bids, along with a proposed methodology for calculating such amounts;

• establishment of a methodology for processing bids and requests to reduce and increase demand subject to the no excess supply rule for bids to reduce demand and the eligibility rule for bids to increase demand; and

• establishment of an assignment phase that will determine which frequency-specific licenses will be won by the winning bidders of generic blocks during the clock phase.

256. The procedures for the conduct of Auction 110 constitute the more specific implementation of the competitive bidding rules contemplated by parts 1 and 27 of the Commission's rules and the underlying rulemaking orders, including the 3.45 GHz Second Report and Order, and relevant competitive bidding orders, and are fully consistent therewith.

257. Summary of Significant Issues Raised by Public Comments in Response to the Supplemental IRFA. RWA filed comments that address issues discussed in the Supplemental IRFA. RWA argues that the Commission's analysis in the Auction 110 Comment Public Notice's Supplemental IRFA underestimates the costs that small and rural entities incur when participating in an FCC auction. RWA states that, contrary to the Commission's expectations, small and rural providers regularly consult attorneys, engineers, and consultants to participate in Commission auctions, incurring costs of up to $100,000 on average per auction. However, RWA provides no support for this cost figure. Nor does RWA clarify what portion of this figure represents costs associated with applying to participate in the auction and/or whether the figure may be an aggregate amount for all of its trade association members. RWA also claims that the educational materials provided by the Commission are insufficient, as some materials are not provided until after the short-form application deadline.

258. Response to Comments by the Chief Counsel for Advocacy of the Small Business Administration. Pursuant to the Small Business Jobs Act of 2010, which amended the RFA, the Commission is required to respond to any comments filed by the Chief Counsel for Advocacy of the SBA and to provide a detailed statement of any changes made to the proposed procedures as a result of those comments. The Chief Counsel did not file any comments in response to the procedures that were proposed in the Auction 110 Comment Public Notice.

259. Description and Estimate of the Number of Small Entities to Which the Rules Will Apply. The RFA directs agencies to provide a description of, and, where feasible, an estimate of the number of small entities that may be affected by the rules and policies adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. 5 U.S.C. 601(3). Pursuant to 5 U.S.C. 601(3), the statutory definition of a small business applies unless an agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes one or more definitions of such term which are appropriate to the activities of the agency and publishes such definition(s) in the Federal Register . A “small business concern” is one which: (1) Is independently owned and operated, (2) is not dominant in its field of operation, and (3) satisfies any additional criteria established by the SBA.

260. As noted above, Regulatory Flexibility Analyses were incorporated into the 3.1-3.55 GHz R&O and FNPRM and the 3.45 GHz Second Report and Order. These orders provide the underlying authority for the procedures proposed in the Auction 110 Comment Public Notice and are adopted herein for Auction 110. In those regulatory flexibility analyses, the Commission described in detail the small entities that might be significantly affected. In the Auction 110 Procedures Public Notice, in the Supplemental FRFA, OEA and WTB incorporate by reference the descriptions and estimates of the number of small entities from the previous Regulatory Flexibility Analyses in the 3.1-3.55 GHz R&O and FNPRM and the 3.45 GHz Second Report and Order.

261. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities. The Commission designed the auction application process to minimize reporting and compliance requirements for small businesses and other applicants. In the first part of the Commission's two-phased auction application process, parties desiring to participate in an auction file streamlined, short-form applications in which they certify under penalty of perjury as to their qualifications. Eligibility to participate in bidding is based on an applicant's short-form application and certifications, as well as its upfront payment. In the second phase of the process, winning bidders file a more comprehensive long-form application. Thus, an applicant that fails to become a winning bidder does not need to file a long-form application or provide the additional showings and more detailed demonstrations required of a winning bidder.

262. OEA and WTB do not expect that the processes and procedures adopted in the Auction 110 Procedures Public Notice will require small entities to hire attorneys, engineers, consultants, or other professionals to participate in Auction 110 and comply with the procedures adopted in the Auction 110 Procedures Public Notice because of the information, resources, and guidance the Commission makes available to potential and actual participants. OEA and WTB cannot quantify the cost of compliance with the procedures, however, they do not believe that the cost of compliance will unduly burden small entities that choose to participate in the auction. OEA and WTB note that the processes and procedures are consistent with existing Commission policies and procedures used in prior auctions. Thus, some small entities may already be familiar with such procedures and have the processes and procedures in place to facilitate compliance resulting in minimal incremental costs to comply. For those small entities that may be new to the Commission's auction process, the various resources that will be made available, including, but not limited to, the mock auction, remote electronic bidding, and access to hotlines for both technical and auction assistance, should help facilitate participation without the need to hire professionals. For example, OEA intends to release an online tutorial that will help applicants understand the procedures for filing the auction short-form applications (FCC Form 175). OEA also intends to offer other educational opportunities for applicants in Auction 110 to familiarize themselves with the FCC Auction Application System and the bidding system. By providing these resources as well as the resources discussed below, OEA and WTB expect small entities that use the available resources to experience lower participation and compliance costs.

263. RWA does not provide evidence that suggests that outside consultants are needed to comply with the auction procedures adopted here. Instead, RWA claims that small entity bidders cannot make complex decisions on the future impacts of auction bidding, participation, and winning bidder compliance requirements without outside counsel. In doing so, RWA appears to conflate compliance with auction procedures with the development of bidding strategies and compliance with the relevant service rules. As discussed below, the Commission makes every effort to educate auction participants at every stage of the auction process in order to reduce the need for outside consultants.

264. Moreover, neither the short-form application nor the bidding system for Auction 110 require applicants to provide detailed technical or financial information that would require the advice of outside experts, nor do they require technical or legal expertise to access or use. That some entities may elect to hire outside consultants as a matter of convenience and/or to develop bidding strategies is not relevant to the question of whether they are necessary for small entities to comply with auction procedures.

265. Steps Taken to Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered. The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in reaching its approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.

266. The Commission has taken steps to minimize any economic impact of its auction procedures on small entities through, among other things, the many free resources the Commission provides to potential auction participants. As mentioned above, consistent with the past practices in prior auctions, small entities that are potential participants will have access to detailed educational information and Commission personnel to help guide their participation in Auction 110, which should alleviate any need to hire professionals. For example, small entities and other would-be participants will be provided with various materials on the pre-bidding process in advance of the short-form application filing window, which includes step-by-step instructions on how to complete FCC Form 175. In addition, small entities will have access to the web-based, interactive online tutorials produced by Commission staff to familiarize themselves with auction procedures, filing requirements, bidding procedures, and other matters related to an auction.

267. The Commission has also taken steps to ensure that the application system is simple to use and that FCC Form 175 itself is easy to complete. For example, the application will pre-fill ownership information that an applicant has previously provided in FCC Form 175 for prior auctions or in an FCC Form 602.

268. After the initial application stage, auction participants whose applications have been deemed incomplete have the opportunity to correct their errors. An applicant whose application is deemed incomplete will receive a letter from the Commission identifying the specific errors in their application and providing contact information for a specific FCC staff member who has been assigned to provide additional information about the nature of the errors and the information needed to correct them. Additionally, after the application process is complete and the Commission has identified the applicants who will be qualified to bid in Auction 110, all qualified bidders for Auction 110 will automatically be registered for the auction, and registration materials will be distributed prior to the auction by overnight delivery. Applicants are not required to take any further steps until bidding commences.

269. Prior to the start of bidding, eligible bidders will be given an opportunity to become familiar with auction procedures and the bidding system by participating in a mock auction. Eligible bidders will have access to a user guide for the bidding system, bidding file formats, and an online bidding procedures tutorial in advance of the mock auction. Further, OEA and WTB will conduct Auction 110 electronically over the internet using a web-based auction system that eliminates the need for small entities and other bidders to be physically present in a specific location. These mechanisms are made available to facilitate participation in Auction 110 by all eligible bidders and may result in significant cost savings for small entities that use them. Moreover, the adoption of bidding procedures in advance of the auction, consistent with statutory directive, is designed to ensure that the auction will be administered predictably and fairly for all participants, including small businesses.

270. Small entities and other auction participants may seek clarification of, or guidance on, complying with competitive bidding rules and procedures, reporting requirements, and using the bidding system at any stage of the auction process. Additionally, an FCC Auctions Hotline will provide small entities one-on-one access to Commission staff for information about the auction process and procedures. Further, the FCC Auctions Technical Support Hotline is another resource that provides technical assistance to applicants, including small entities, on issues such as access to or navigation within the electronic FCC Form 175 and use of the bidding system.

271. The Commission also makes various databases and other sources of information, including the Auctions program websites and copies of Commission decisions, available to the public without charge, providing a low-cost mechanism for small entities to conduct research prior to and throughout the auction. Prior to the start of bidding, and at the close of Auction 110, OEA will post public notices on the Auctions website that articulate the procedures and deadlines for the auction. The Commission makes this information easily accessible and without charge to benefit all Auction 110 applicants, including small entities, thereby lowering their administrative costs to comply with the Commission's competitive bidding rules.

272. Another step taken to minimize the economic impact for small entities participating in Auction 110 is the Commission's adoption of bidding credits for small businesses and rural service providers. In accordance with the service rules applicable to the 3.45 GHz Service licenses to be offered in Auction 110, bidding credit discounts will be available to eligible small businesses and small business consortia on the following basis: (1) A bidder with attributed average annual gross revenues that do not exceed $55 million for the preceding five years is eligible to receive a 15% discount on its overall payment or (2) a bidder with attributed average annual gross revenues that do not exceed $20 million for the preceding five years is eligible to receive a 25% discount on its overall payment. Eligible applicants can receive only one of the available small business bidding credits—not both.

273. An eligible rural service provider may request a 15% discount on its overall payment using a rural service provider bidding credit. To be eligible for a rural service provider bidding credit, an applicant must: (1) Be a service provider that is in the business of providing commercial communications services and, together with its controlling interests, affiliates, and the affiliates of its controlling interests, has fewer than 250,000 combined wireless, wireline, broadband, and cable subscribers; and (2) serve predominantly rural areas. Rural areas are defined as counties with a population density of 100 or fewer persons per square mile. Eligible applicants can request either a small business bidding credit or a rural service provider bidding credit, but not both.

274. The total amount of bidding credit discounts that may be awarded to an eligible small business is capped at $25 million and there is a $10 million cap on the total amount of bidding credit discounts that may be awarded to an eligible rural service provider. In addition, to create parity among eligible small businesses and rural service providers competing against each other in smaller markets, OEA and WTB adopt a $10 million cap on the overall amount of bidding credits that any winning designated entity may apply to winning licenses in PEAs with a population of 500,000 or less. Based on the technical characteristics of the 3.45-3.55 GHz band and OEA and WTB's analysis of past auction data, OEA and WTB anticipate that the caps adopted in the Auction 110 Procedures Public Notice will allow the majority of small businesses to take full advantage of the bidding credit program, thereby lowering the relative costs of participation for small businesses.

275. These procedures for the conduct of Auction 110 constitute the more specific implementation of the competitive bidding rules contemplated by parts 1 and 27 of the Commission's rules and the underlying rulemaking orders, including the 3.45 GHz Second Report and Order and relevant competitive bidding orders, and are fully consistent therewith.

276. Report to Congress. The Commission will send a copy of the Auction 110 Procedures Public Notice, including the Supplemental FRFA, in a report to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Auction 110 Procedures Public Notice, including the Supplemental FRFA, to the Chief Counsel for Advocacy of the SBA.