FHFA invites comments on all aspects of the proposed rule and will take all comments germane to the proposed rule into consideration before issuing a final rule. Copies of all such comments will be posted without change, including any personal information you provide such as your name, address, email address, and telephone number, on FHFA's public website at http://www.fhfa.gov. In addition, copies of all such comments received will be available for examination by the public through the electronic rulemaking docket for this proposed rule also located on the FHFA website.

Commenters are encouraged to review and comment on all aspects of the proposed rule, including the proposed single-family housing goals and subgoals benchmark levels, the proposed multifamily housing goals benchmark levels, and the other proposed changes to the regulation.

The Safety and Soundness Act requires FHFA to establish several annual housing goals for both single-family and multifamily mortgages purchased by the Enterprises. 1 The annual housing goals are one measure of the extent to which the Enterprises are meeting their public purposes, which include “an affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families in a manner consistent with their overall public purposes, while maintaining a strong financial condition and a reasonable economic return.”  2

Since 2010, FHFA has established annual housing goals for Enterprise purchases of single-family and multifamily mortgages consistent with the requirements of the Safety and Soundness Act. The structure of the housing goals and the rules for determining how mortgage purchases are counted or not counted are defined in the housing goals regulation. 3 The most recent rule established benchmark levels for the housing goals for 2021. 4 This proposed rule would establish benchmark levels for 2022-2024.

Single-family goals. The single-family goals defined under the Safety and Soundness Act include separate categories for home purchase mortgages for low-income families, very low-income families, and families that reside in low-income areas. 5 The Safety and Soundness Act defines “low-income area”  6 to include: (1) Families in low-income census tracts, defined as census tracts with median income less than or equal to 80 percent of area median income (AMI);  7 (2) families with incomes less than or equal to AMI who reside in minority census tracts (defined as census tracts with a minority population of at least 30 percent and a tract median income of less than 100 percent of AMI);  8 and (3) families with incomes less than or equal to 100 percent of AMI who reside in designated disaster areas. 9 The Enterprise housing goals regulation also includes a subgoal, within the low-income areas goal, that is limited to families in low-income census tracts and moderate-income families in minority census tracts. 10 FHFA is proposing a change to the structure of the low-income areas subgoal, as further discussed in Section III.A. below. Performance on the single-family home purchase goals is measured as the percentage of the total home purchase mortgages purchased by an Enterprise each year that qualify for each goal or subgoal. There is also a separate goal for refinancing mortgages for low-income families, and performance on the refinancing goal is determined in a similar way.

Under the Safety and Soundness Act, the single-family housing goals are limited to mortgages on owner-occupied housing with one to four units total. The single-family goals cover conventional, conforming mortgages, defined as mortgages that are not insured or guaranteed by the Federal Housing Administration or another government agency and with principal balances that do not exceed the conforming loan limits for Enterprise mortgages.

Two-part evaluation approach. The performance of the Enterprises on the housing goals is evaluated using a two-part approach, comparing the goal-qualifying share of the Enterprise's mortgage purchases to two separate measures: A benchmark level and a market level. In order to meet a single-family housing goal, the percentage of mortgage purchases by an Enterprise that meet each goal must equal or exceed either the benchmark level or the market level for that year. The benchmark level is set prospectively by rulemaking based on various factors set forth in the Safety and Soundness Act. 11 The market level is determined retrospectively for each year, based on the actual goal-qualifying share of the overall market as measured by the Home Mortgage Disclosure Act (HMDA) data for that year. The overall market that FHFA uses for setting both the prospective benchmark level and the retrospective market level consists of all single-family owner-occupied conventional conforming mortgages that would be eligible for purchase by either Enterprise. It includes loans purchased by the Enterprises as well as comparable loans held in a lender's portfolio. It also includes any loans that are part of a private label security (PLS), although very few such securities have been issued for conventional conforming mortgages since 2008.

While both the benchmark level and the retrospective market level are designed to measure the current year's mortgage originations, the performance of the Enterprises on the housing goals includes all Enterprise purchases in that year, regardless of the year in which the loan was originated. This includes providing housing goals credit when the Enterprises acquire qualified seasoned loans. (Seasoned loans are loans that were originated in prior years and acquired by the Enterprise in the current year.)

Multifamily goals. The multifamily goals defined under the Safety and Soundness Act include categories for mortgages on multifamily properties (properties with five or more units) with rental units affordable to low-income families and mortgages on multifamily properties with rental units affordable to very low-income families. The Enterprise housing goals regulation also includes a small multifamily low-income subgoal for properties with 5-50 units. The multifamily housing goals include all Enterprise multifamily mortgage purchases, regardless of the purpose of the loan. The multifamily goals evaluate the performance of the Enterprises based on numeric targets, not percentages, for the number of affordable units in properties backed by mortgages purchased by an Enterprise. The Enterprise housing goals regulation does not include a retrospective market level measure for the multifamily goals, due in part to a lack of comprehensive data about the multifamily market. As a result, FHFA currently measures Enterprise multifamily goals performance against the benchmark levels only.

The Safety and Soundness Act requires that affordability for rental units under the multifamily goals be determined based on rents that “[do] not exceed 30 percent of the maximum income level of such income category, with appropriate adjustments for unit size as measured by the number of bedrooms.”  12 The Enterprise housing goals regulation considers the net rent paid by the renter and, therefore, nets out any subsidy payments that the renter may receive, including housing assistance payments.

If, after publication of the final rule establishing the housing goals for 2022-2024, FHFA determines that any of the single-family or multifamily housing goals should be adjusted in light of market conditions, to ensure the safety and soundness of the Enterprises, or for any other reason, FHFA will take any steps that are necessary and appropriate to adjust that goal such as reducing the benchmark level through the processes in the existing regulation. FHFA may take other actions consistent with the Safety and Soundness Act and the Enterprise housing goals regulation based on new information or developments that occur after publication of the final rule.

For example, under the Safety and Soundness Act and the Enterprise housing goals regulation, FHFA may reduce the benchmark levels in response to an Enterprise petition for reduction for any of the single-family or multifamily housing goals in a particular year based on a determination by FHFA that: (1) Market and economic conditions or the financial condition of the Enterprise require a reduction; or (2) efforts to meet the goal or subgoal would result in the constraint of liquidity, over-investment in certain market segments, or other consequences contrary to the intent of the Safety and Soundness Act or the purposes of the Enterprises' charter acts. 13

The Safety and Soundness Act and the Enterprise housing goals regulation also take into account the possibility that achievement of a particular housing goal may or may not have been feasible for an Enterprise to achieve. If FHFA determines that a housing goal was not feasible for an Enterprise to achieve, then the statute and regulation provide for no further enforcement of that housing goal for that year. 14

If FHFA determines that an Enterprise failed to meet a housing goal and that achievement of the housing goal was feasible, then the statute and regulation provide FHFA with discretionary authority to require the Enterprise to submit a housing plan describing the specific actions the Enterprise will take to improve its housing goals performance.

On September 6, 2008, FHFA placed each Enterprise into conservatorship. Although the Enterprises remain in conservatorship at this time, they continue to have the mission of supporting a stable and liquid national market for residential mortgage financing. FHFA has continued to establish annual housing goals for the Enterprises and to assess their performance under the housing goals each year during conservatorship.

This proposed rule would establish the benchmark levels for the existing single-family housing goals for 2022-2024 as follows:

The proposed rule would replace the existing low-income areas subgoal with two new area-based subgoals and corresponding benchmark levels. Implementation of the two new subgoals would modify the methodology for measuring the Enterprises' performance in these areas. The first of the proposed subgoals would establish a benchmark level for Enterprise purchases of mortgage loans on properties in minority census tracts, made to borrowers with incomes no greater than 100 percent of AMI. The second of the proposed subgoals would establish a benchmark level for Enterprise purchases of (i) mortgage loans on properties in low-income census tracts that are not minority census tracts, as well as (ii) mortgage loans on properties in low-income census tracts that are minority census tracts, made to families with incomes greater than 100 percent of AMI. The proposed rule would establish the new subgoal benchmark levels for 2022-2024 as follows:

In addition, FHFA will continue to establish by notice to the Enterprises an annual benchmark level for the low-income areas housing goal that takes into account loans from disaster areas. The proposed rule would make one clarifying change to the definition of “designated disaster area,” as described below.

The proposed rule would establish the benchmark levels for the multifamily goal and subgoals for 2022-2024 as follows:

The proposed rule would make minor technical changes to some regulatory definitions and counting rules. These changes would be non-substantive changes intended to conform the regulation to existing FHFA practices in measuring the performance of the Enterprises under the housing goals.

In December 2020, FHFA published an Advance Notice of Proposed Rulemaking (ANPR) requesting public comment on several questions related to potential changes to the Enterprise housing goals regulation. 15 FHFA invited comments in the ANPR on four specific questions identified below, as well as on any other issues that commenters thought should be addressed as part of the rulemaking to establish the housing goals benchmark levels for 2022 and beyond.

FHFA also held a public listening session in March 2021 to solicit additional input on the Enterprise housing goals regulation. FHFA received 16 letters in response to the ANPR and heard from 12 external speakers during the listening session. The comments provided through the letters and by the speakers addressed a range of topics related to the Enterprise housing goals and access to mortgages for low-income borrowers. FHFA appreciates the time and effort that commenters put into responses and has incorporated elements of the feedback received into the proposed rule. Some of the topics raised in the comments require further research or analysis, and FHFA may consider these issues in future rulemaking cycles. A summary of the comments received is included below. All comments received, as well as the transcript of the public listening session, are available at FHFA's website. 16

Question 1: Are there categories of loans that should be excluded from receiving housing goals credit under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act) provisions on “unacceptable business and lending practices”?

Numerous commenters opposed excluding loans from receiving housing goals credit because of certain credit or underwriting features like loan-to-value or debt-to-income ratios. Several commenters stressed their belief that loans that meet safety and soundness standards and are eligible for purchase by the Enterprises should be eligible for housing goals credit. In addition, many of the commenters argued that loans that are eligible for Qualified Mortgage (QM) status should also be eligible for housing goals credit. Two commenters stressed that FHFA should not exclude particular categories of loans from receiving housing goals credit unless the performance of the loan products is unsustainable. Other commenters supported excluding certain loans from receiving housing goals credit. For example, one commenter argued that mortgages with loan-level pricing adjustments should not receive credit. Another commenter recommended that FHFA require the Enterprises to use a historical mortgage default rate matrix to limit certain types of acquisitions.

Several commenters expressed concerns about the January 2021 amendments to the Senior Preferred Stock Purchase Agreements between the Enterprises and the U.S. Department of the Treasury (PSPAs), which place new limits on risk-layering in loans eligible for purchase by the Enterprises. The commenters stressed the potential negative impact the amendments to the PSPAs could have on communities and borrowers of color and encouraged FHFA to evaluate the effect of the new restrictions on the housing goals. The commenters also requested that FHFA provide more data on the impact of the housing goals by income and race or ethnicity in light of the changes to the PSPAs. One commenter requested that FHFA conduct annual evaluations of how its policies, including the PSPAs, impact the ability of the Enterprises to meet the housing goals and satisfy their charter missions. Several commenters raised concerns about the Enterprises' ability to meet the housing goals in light of FHFA's recently adopted capital regulation, which they believe will increase mortgage costs and, in turn, decrease access to mortgage credit for lower-income or lower-wealth borrowers and borrowers of color.

Question 2: Are there ways to determine whether the low-income areas home purchase subgoal has resulted in the displacement of residents from certain communities, or to measure the extent of any such displacement? Should FHFA consider modifying the low-income areas home purchase subgoal to address such concerns? If so, how?

FHFA provided an analysis of whether the low-income areas home purchase subgoal has resulted in the displacement of residents from certain communities in the ANPR based on HMDA data. The data showed that both low-income areas and high-minority areas have increasing shares of borrowers with incomes at or above 100 percent of AMI. 17 The data also showed that the share of loans made to borrowers with incomes greater than 100 percent of AMI and residing in low-income census tracts increased from 40.7 percent in 2010 to 42.8 percent in 2016, but declined to a low of 37 percent in 2019. Numerous commenters broadly agreed with the description of trends provided in the ANPR and encouraged FHFA to continue to provide data on this issue. A few commenters requested that FHFA provide additional data pertaining to the race and ethnicity of borrowers for loans that meet this subgoal. Two commenters recommended that FHFA analyze Census Bureau data over the next five years in an effort to determine if displacement is occurring in certain communities. Another commenter recommended that FHFA, in coordination with other regulators, monitor home sales prices, resident incomes, and other data to determine the impact of the subgoal.

Although one commenter recommended leaving the subgoal in its current form, citing its benefits to socioeconomic diversity, several commenters expressed concern about the Enterprises receiving housing goals credit for loans to borrowers who meet no standard other than living in a low-income area. A number of commenters recommended that FHFA continue to monitor and analyze trends regarding whether the low-income areas home purchase subgoal has resulted in the displacement of residents. Other commenters suggested revising the subgoal to ensure that FHFA allows housing goals credit only for loans to borrowers at or below 80 percent of AMI. One commenter explicitly stated that the housing goals targets should be based only on income, not geography. Another commenter recommended allowing only a certain percentage of loans above 80 percent of AMI to qualify for the subgoal and encouraged FHFA to analyze the potential impact of different caps ( i.e., 100 or 125 percent of AMI).

Question 3: Should FHFA revise the low-income areas home purchase subgoal to consider loans on properties located in Opportunity Zones, and if so, how should such loans be treated?

Some commenters supported the idea of the Enterprises receiving housing goals credit for Opportunity Zone loans for low-income borrowers. For example, one commenter favored providing housing goals credit for loans in Opportunity Zones as a way to help encourage affordable housing investment but did not support giving the Enterprises extra or double credit for loans in Opportunity Zones. Other commenters opposed allowing housing goals credit for Opportunity Zone loans due to the relative newness of the program. One of these commenters encouraged FHFA to conduct more analysis on the types of housing developments found in Opportunity Zones before offering housing goals credit. Another commenter expressed concern about the ultimate beneficiaries of Opportunity Zones, as well as skepticism that low- or moderate-income households or communities would benefit from the program.

Question 4: Is there evidence that the Enterprise housing goals have helped expand low-income homeownership in the marketplace?

FHFA received a number of comments emphasizing the value of the housing goals over time and the importance of maintaining Enterprise focus on these segments of the market. Some commenters stated that there has been a positive impact on low-income homeownership and the housing goals have expanded access to low-income households. Other commenters noted that the housing goals are foundational to the mission of the Enterprises, as laid out in the statute and their charters. Another commenter argued for the importance of the housing goals in incentivizing lending to low-income borrowers.

One commenter stated that the housing goals have served as a catalyst for expanding banks' abilities to serve low- and moderate-income borrowers. Another commenter stated that the housing goals have contributed to increases in Latino home ownership. The commenter also described the benefits of the Enterprises' efforts to standardize eligibility criteria and underwriting factors, enabling more low-income households to obtain credit. The commenter also urged FHFA to monitor mortgage servicing standards and, if necessary, provide notice of any mortgage relief or loss mitigation options to ensure that servicers of Enterprise-backed loans proactively help homeowners who are struggling with payments.

Several commenters encouraged FHFA to establish higher or more rigorous housing goals. One of the commenters argued that the Enterprises could better serve the manufactured housing market segment through purchasing chattel home loans and homes settled as real estate. Another commenter encouraged FHFA to support manufactured home consumer lending through the Enterprise housing goals and the Duty to Serve program.

A number of commenters encouraged FHFA to review its policies to ensure there are no unnecessary barriers to meeting the housing goals and serving low-income households. One commenter specifically focused on the price of guarantee fees because pricing structures can impact whether a creditworthy borrower can afford a mortgage. The commenter highlighted the impact that guarantee fees have with respect to pooling risk, eliminating excessive risk-based pricing, and encouraging greater access to sustainable homeownership.

Although the majority of the commenters expressed support for the housing goals, one commenter argued that they have not been successful and that the rates of homeownership for low-income households have declined over the last 30 years. The commenter recommended that FHFA address risk-layering ( i.e., mortgages with multiple characteristics associated with higher risk) by limiting Enterprise acquisitions of mortgages for low-income borrowers to mortgages with a projected mortgage default rate of less than 14 percent and by encouraging 20-year instead of 30-year mortgages. Another commenter expressed the belief that the housing goals have had a minimal effect on low-income homeownership. The commenter argued that the mortgages captured by the housing goals are not excessively risky and would have been made in the absence of the housing goals. The commenter also argued that there is no evidence that the housing goals have created a lower-priced or more affordable mortgage.

There were additional topics that commenters raised in responses to the ANPR. For example, a number of commenters claimed that their responses to certain questions—specifically, those concerning whether there are categories of loans that should be excluded from the housing goals, the impact of the low-income areas home purchase subgoal, and the impact of the Enterprise housing goals over time—were affected by insufficient access to data. These commenters asserted that they would have been able to better respond to the questions in the ANPR if they had access to additional and more comprehensive data about the composition of housing goals loans and the historical performance of those loans. One commenter suggested supplementing existing reports like the Annual Housing Report with data on the risk characteristics and the performance of loans that receive housing goals credit.

Several commenters focused on the racial homeownership gap between White households and Black or Latino households and emphasized the importance of homeownership to family wealth. The commenters cited the persistently lower rates of homeownership for Black and Latino households and requested that FHFA try to address the gap through the housing goals. One commenter encouraged FHFA to specifically consider the impact that any changes or revisions to the housing goals would have on borrowers of color. Another commenter proposed the creation of a new housing goal to focus on the racial homeownership gap. A number of commenters also noted the disproportionate impact the COVID-19 pandemic has had on low-income households and people of color.

Several commenters expressed concern about whether low-income borrowers have adequate access to affordable refinancing options, particularly in light of the recent low interest rate environment. Two of the commenters suggested that the Enterprises create a streamlined refinance program in order to ensure that rate/term refinances are more available to lower-income households.

FHFA appreciates the thoughtful and thorough responses received on the ANPR and has analyzed the suggestions embedded in the comments. FHFA has taken these comments into account where relevant and possible in formulating the current proposed rule. Other comments or recommendations will require further analysis and the issues raised may be addressed in future rulemakings.

With respect to requests for additional data, FHFA understands the value of data in evaluating and assessing the performance of the Enterprises in achieving the housing goals and is exploring additional ways to provide data to the public. FHFA intends to provide additional data on Enterprise loan purchases on the FHFA website. In determining which data can be provided, FHFA must consider that some data from the Enterprises are confidential or proprietary and may not be disclosed.

In the rulemaking establishing the housing goals for 2021, FHFA did not publish the single-family model paper that it usually publishes for each housing goals rulemaking. FHFA received comments in response to the proposed 2021 housing goals rule and the ANPR that encouraged FHFA to publish the single-family model papers in future rulemakings. As with most previous housing goals rulemakings, FHFA has published the single-family model paper on its public website in conjunction with this housing goals proposed rule. 18

In response to comments about the importance of access to refinancing options for lower income borrowers, FHFA notes that both Enterprises introduced new refinancing options in April 2021. Eligible borrowers must have incomes at or below 80 percent of AMI, and the lender must provide the borrower a savings of at least $50 per month and at least a 50-basis point reduction in the borrower's interest rate. FHFA estimates that borrowers who take advantage of this refinancing option could save an average of $1,200 to $3,000 per year. 19 In addition, in July 2021, FHFA announced the elimination of the Adverse Market Refinance Fee, to help families reduce their housing costs. 20

In response to comments about the racial homeownership gap, FHFA has taken a number of actions. For example, FHFA held a listening session on June 29, 2021 to obtain public input on the topic of closing the gap in sustainable homeownership. FHFA is also publishing on its website additional data on the race and ethnicity of loans that are eligible and qualified for housing goals credit. The additional data should assist those interested in analyzing the current housing goals performance of the Enterprises. Finally, as noted earlier and described in greater detail below, FHFA is proposing the creation of new area-based subgoals that separately measure the Enterprises' purchases of mortgages in minority census tracts and low-income census tracts. FHFA is specifically requesting public comment on the proposed area-based subgoals, as well as all other aspects of this proposed rule.

The Safety and Soundness Act requires FHFA to consider the following seven factors in setting the single-family housing goals:

1. National housing needs;

2. Economic, housing, and demographic conditions, including expected market developments;

3. The performance and effort of the Enterprises toward achieving the housing goals in previous years;

4. The ability of the Enterprises to lead the industry in making mortgage credit available;

5. Such other reliable mortgage data as may be available;

6. The size of the purchase money conventional mortgage market, or refinance conventional mortgage market, as applicable, serving each of the types of families described, relative to the size of the overall purchase money mortgage market or the overall refinance mortgage market, respectively; and

7. The need to maintain the sound financial condition of the Enterprises. 21 FHFA has considered each of these seven statutory factors in setting the proposed benchmark levels for each of the single-family housing goals and subgoals.

In setting the proposed benchmark levels for the single-family housing goals, FHFA typically relies on statistical market models to evaluate these statutory factors and generate a point forecast for each goal as well as a confidence interval for the point forecast. FHFA then considers other statutory factors, as well as other relevant policy issues, to select a specific point forecast within the confidence interval as the proposed benchmark level.

In proposing the benchmark levels for the single-family housing goals for 2022-2024, FHFA considered the statutory factors, including the current economic conditions, national housing needs, recent market developments, and the past performance of the Enterprises on the housing goals.

Market forecast models. The purpose of FHFA's market forecast models is to forecast the market share of the goal-qualifying mortgage originations in the market for the 2022-2024 period. The models are intended to generate reliable forecasts rather than to test various economic hypotheses about the housing market or to explain the relationship between variables. Therefore, following standard practice among forecasters and economists at other federal agencies, FHFA estimates a reduced-form equation for each of the housing goals and fits an Autoregressive Integrated Moving Average (or ARIMA) model to each goal share. The models look at the statistical relationship between (a) the historical market share for each single-family housing goal or subgoal, as calculated from monthly HMDA data, and (b) the historical values for various factors that may influence the market shares, such as interest rates, inflation, house prices, home sales, the unemployment rate, and other factors. The models then project the future value of the affordable market share using forecast values of the model inputs. Separate models are developed for each of the single-family housing goals and subgoals.

FHFA has employed similar models in past rulemaking cycles to generate market forecasts. The models are developed using monthly series generated from HMDA and other data sources, and the resulting monthly forecasts are then averaged into an annual forecast for each of the three years in the goal period. The models rely on 16 years of HMDA data, from 2004 to 2019, the latest year for which public HMDA data was available at the time of model construction. FHFA will be updating the models with HMDA data for 2020 while developing the final rule. Additional discussion of the market forecast models can be found in a research paper, available at http://www.fhfa.gov/PolicyProgramsResearch/Research/. 22

Current market outlook. There are many factors that impact the affordable housing market as a whole, and changes to any one of them could significantly impact the ability of the Enterprises to meet the goals. In developing the market models, FHFA used Moody's forecasts as the source for macroeconomic variables where available. 23 In cases where Moody's forecasts were not available (for example, the share of government-insured/guaranteed home purchases and the share of government-insured/guaranteed refinances), FHFA generated and tested its own forecasts as in past rulemakings. 24 Elements that impact the models and the determination of benchmark levels are discussed below.

Interest rates are very important determinants of the trajectory of the mortgage market. In an effort to continue its support of the U.S. economy and promote maximum employment and price stability, the Federal Reserve reiterated at its April 2021 meeting its commitment to seeking to achieve maximum employment and inflation at 2 percent in the long run by maintaining its target for the federal funds rate at between 0 percent and 0.25 percent until its goals are achieved. 25 The target was first lowered to this level in March 2020 to mitigate the effects of the COVID-19 pandemic. 26 Moody's July 2021 forecast assumes that this target is maintained until the third quarter of 2022, and then projects that mortgage interest rates—in particular the 30-year fixed rate, which is closely tied to the federal funds rate and the 10-year Treasury note yield—will rise gradually from the current historic low of 3.1 percent in 2020 to 4.3 percent by 2024. 27

Moody's July 2021 forecast projects that the unemployment rate will gradually fall from its 2020 peak to 4.0 percent in 2024. Moody's also forecasts a modest increase in per capita disposable nominal income growth—from $53,081 in 2020 to $59,365 in 2024. Furthermore, Moody's estimates that the inflation rate will be in the 2.2-2.4 percent range from 2022 through 2024.

The combination of low interest rates, high deferred demand, and low supply fueled by the pandemic pushed house prices up by 18.0 percent in May 2021 relative to May 2020, based on FHFA's purchase-only House Price Index (HPI). 28 Moody's July 2021 forecast of the same HPI index expects house prices to increase at the annual rates of 4.0, 3.7, and 1.5 percent in 2022, 2023, and 2024, respectively.

Taken together, the expected increase in mortgage interest rates and house prices likely will impact the ability of low- and very low-income households to purchase homes. Housing affordability, as measured by Moody's forecast of the National Association of Realtors' (NAR) Housing Affordability Index (HAI), is projected to decline from an index value of 166.3 in 2020 to 135.4 in 2024. Lower values of the HAI imply that affordability has worsened. 29 The third leg of the housing affordability stool is the supply of affordable housing, but this had not kept pace with the growth of the demographic demand even before the advent of the COVID-19 pandemic.

In many ways, 2020 was an unusual year as it saw record volumes of both home purchase and home refinance loans. Low interest rates coupled with rising house prices created an incentive for many homeowners to refinance, resulting in a surge in refinance activity in 2020. The refinance share of overall mortgage originations since 2001 increased from a low of 28 percent in 2018 to 61 percent in 2020. Moody's forecasts this share to sharply decline to 42 percent in 2021, and continue to decline to 39 percent in 2022, and then to 31 percent and 24 percent in 2023 and 2024, respectively.

The economic forecast from Moody's described above is largely consistent with that provided by other forecasters. According to the Bureau of Economic Analysis (BEA), real Gross Domestic Product (GDP) grew by 33.4 percent in the third quarter of 2020, following two quarters of losses. GDP growth was strong in the subsequent quarters, including the second quarter of 2021 when it grew by 6.5 percent according to the advance estimate released by the BEA. 30 According to the most recent estimate published by the Congressional Budget Office (CBO), GDP is projected to grow by 7.4 percent in 2021, after which GDP growth is projected to decline to 3.1 percent in 2022, and then remain under 2 percent through 2031. 31

According to the Bureau of Labor Statistics (BLS), the unemployment rate peaked at 14.8 percent in April 2020, and fell to 5.9 percent in June 2021. 32 CBO projects this number to be 4.6 percent in the fourth quarter of 2021 and that employment will surpass its pre-pandemic level in mid-2022.

FHFA continues to monitor how these changes in the housing market and recent legislation may impact various segments of the market, including those targeted by the housing goals.

Post-model adjustments. While FHFA's models can address and forecast many of the statutory factors that can make affordability for single-family homeownership more challenging for low-income and very low-income households, including increasing interest rates and rising property values, some factors are not captured in the models. FHFA, therefore, considers additional factors when selecting the benchmark level within the model-generated confidence interval for each of the single-family housing goals. Some of these additional factors may affect a subset of the market rather than the market as a whole. These factors include the effectiveness of COVID-19 vaccination efforts and the path of the virus, as well as other factors that might contribute to an uneven economic recovery, demographic trends, and the Enterprises' share of the mortgage market. Variability in these factors can also have a substantial impact on the ability of the Enterprises to meet the housing goals. Consequently, as discussed further below, FHFA will carefully monitor these factors and consider the potential impact of market shifts or larger trends on the ability of the Enterprises to achieve the housing goals.

Demographic trends. The impact that specific demographic changes, like the housing demand patterns of millennials or the growth of minority households, will have on the housing market is not included explicitly in the market forecast models. Millennials have made up the largest share of home purchase mortgage applications for the past five years. 33 This generation's share of mortgage purchase applications rose about 2 to 4 percentage points a year from 33 percent in 2014 to 47 percent 2019, but jumped dramatically in 2020 to 54 percent. 34

Enterprises' share of the mortgage market. The Enterprises' overall share of the mortgage market is subject to fluctuation. During the mortgage market bubble, the Enterprises' share of the market dropped to about 43 percent in 2005. That share rose to about 65 percent in 2012, but declined to about 55 percent in 2015. This share remained relatively stable until 2019, then jumped to 66 percent in 2020, as the Enterprises continued to acquire mortgages even as other private market participants stepped back.

As shown in Graph 1, over the same time period, the total government share of the mortgage market (including the Federal Housing Administration, Department of Veterans Affairs, and Rural Housing Service) has generally been expanding, albeit with a recent contraction. In 2015, the total government share accounted for about 30 percent of overall mortgage originations, considerably up from about 5 percent a decade earlier. That share was relatively stable until 2019, then declined to 22 percent in 2020.

Table 1 provides the annual performance of both Enterprises on the single-family housing goals between 2010 and 2020. Throughout this proposed rule, Enterprise performance data for 2020 is preliminary. FHFA will make final determinations on Enterprise performance later in 2021.

FHFA is proposing to establish the following benchmark levels for the single-family housing goals and subgoals for 2022-2024.

The low-income home purchase goal is based on the percentage of all single-family, owner-occupied home purchase mortgages purchased by an Enterprise that are for low-income families, defined as families with incomes less than or equal to 80 percent of AMI. The proposed rule would set the annual low-income home purchase goal benchmark level for 2022 through 2024 at 28 percent.

As shown in Table 2, both Enterprises exceeded both the benchmark and market levels in 2018 and 2019. Although FHFA will not officially determine the 2020 housing goals performance of the Enterprises until later in 2021, both Enterprises exceeded the benchmark level in 2020.

The low-income home purchase market levels have increased steadily since 2016. FHFA's current model forecasts that the market for this goal in 2020 will continue to increase and end up between 27 and 31.6 percent. From 2022 through 2024, the proposed goal period, the current forecast is expected to decline slightly from these peaks and stay around 26 percent for each of the three years. As noted previously and in the accompanying market model paper, this forecast is based on the 2019 HMDA data and Moody's forecasts as of July 2021 and will be updated before the release of the final housing goals rule.

FHFA is proposing a benchmark level for the low-income home purchase goal of 28 percent, which is above the middle point of the market forecast but well within the confidence interval for each year. This proposed benchmark level is significantly higher than the benchmark level of 24 percent that has been in place each year since 2015. FHFA is proposing a higher benchmark level for this goal in order to encourage the Enterprises to continue to find ways to support lower income borrowers without compromising safe and sound lending standards. FHFA recognizes that there may be challenges to meeting the goal, particularly in light of the recovery from the global pandemic. FHFA will continue to monitor the Enterprises in its capacities as regulator and as conservator, and if FHFA determines that the benchmark level for the low-income home purchase goal is not feasible for the Enterprises to achieve in light of market conditions, or for any other reason, FHFA will take appropriate steps to adjust the benchmark level.

The very low-income home purchase goal is based on the percentage of all single-family, owner-occupied home purchase mortgages purchased by an Enterprise that are for very low-income families, defined as families with incomes less than or equal to 50 percent of AMI. The proposed rule would set the annual very low-income home purchase goal benchmark level for 2022 through 2024 at 7 percent.

As shown in Table 3, both Enterprises exceeded the benchmark level in 2018 and 2019. In 2018, Fannie Mae exceeded both the benchmark and market levels, and in 2019, Freddie Mac exceeded both the benchmark and market levels. In 2020, both Fannie Mae and Freddie Mac exceeded the benchmark levels. FHFA will officially determine the 2020 market performance of the Enterprises later in 2021.

Like the low-income home purchase market levels, the very low-income home purchase market levels have increased steadily since a low in 2016 of 5.4 percent. FHFA's current model forecasts that the market for this goal in 2020 will continue to increase and end up between 6.5 and 8.1 percent. From 2022 through 2024, the proposed goal period, the current forecast is expected to decline slightly from these peaks and stay between 6.4 and 6.8 percent for each of the three years. This forecast is based on the latest data available and will be updated before the release of the final housing goals rule.

FHFA is proposing a benchmark level for the very low-income home purchase goal of 7 percent, which is close to the market forecast and well within the confidence interval for each year. This proposed benchmark level is an increase from the benchmark level of 6 percent that has been in place each year since 2015. FHFA is proposing a slightly higher benchmark level in order to encourage the Enterprises to continue to find ways to support very low-income borrowers without compromising safe and sound lending standards. FHFA recognizes that there may be challenges to meeting the goal, particularly in light of the recovery from the global pandemic. FHFA will continue to monitor the Enterprises in its capacities as regulator and as conservator, and if FHFA determines that the benchmark level for the low-income home purchase goal is not feasible for the Enterprises to achieve in light of market conditions, or for any other reason, FHFA will take appropriate steps to adjust the benchmark level.

The proposed rule would establish two new area-based subgoals, each with its own benchmark level. The new minority census tracts subgoal would specifically assess the Enterprises' performance in minority areas with respect to loans for families with incomes no greater than 100 percent of AMI. The new low-income census tracts subgoal would assess the Enterprises' performance in low-income census tracts. The low-income census tracts subgoal would not include any loans that would qualify for the minority census tracts subgoal. In other words, the low-income census tracts subgoal would be limited to: (1) Loans in low-income census tracts that are not minority census tracts, and (2) loans to borrowers above 100 percent of AMI in low-income census tracts that are also minority census tracts. The two proposed subgoals would replace the existing low-income areas home purchase subgoal and address some of the issues that FHFA previously identified in the 2018-2020 proposed rule as well as in Question 2 of the recent ANPR (2020) discussed in Section III.D. above. 35

The previous subgoal structure allowed the Enterprises to count all single-family, owner-occupied home purchase mortgages purchased that were either: (1) For families in low-income areas, defined to include census tracts with median income less than or equal to 80 percent of AMI; or (2) for families with incomes less than or equal to AMI who reside in minority census tracts (defined as census tracts with a minority population of at least 30 percent and a tract median income of less than 100 percent of AMI). As a result, borrowers could qualify under either or both conditions. Over the years, this has meant that many goal-qualifying loans purchased by the Enterprises were for higher income families (over 100 percent of AMI) rather than for families at or below 100 percent of AMI. The proposed rule would modify the previous structure and refocus Enterprise efforts towards minority census tracts and families at or below 100 percent of AMI. The new subgoal structure would require the Enterprises to achieve both of the new subgoal benchmark levels each year. FHFA will continue to establish the overall low-income areas housing goal on an annual basis by adding together the benchmark levels for the minority census tracts subgoal and the low-income census tracts subgoal, along with the disaster areas increment determined by FHFA each year.

The proposed rule would establish the benchmark levels for the new subgoals for 2022-2024 as follows:

FHFA recognizes that, in the past, some loans acquired by the Enterprises were from locations considered both minority and low-income census tracts and, as a result, would have been counted under either criterion. The proposed rule would define the new subgoals so that a loan could not be counted under both of the new subgoals. Under the proposed rule, for loans purchased from areas that meet the criteria for both minority and low-income census tracts, the borrower's AMI would determine under which subgoal the loan would be eligible. If the borrower's income is less than or equal to 100 percent of AMI, the loan would be counted towards the minority census tracts subgoal, and if the borrower's income is above 100 percent of AMI, the loan would be counted towards the low-income census tracts subgoal. FHFA believes that requiring the Enterprises to specifically and separately target loans for families living in minority and low-income census tracts will result in better and more transparent reporting on both of these categories.

FHFA will continue to set a benchmark level for the overall low- income areas housing goal that will include mortgages to families with incomes less than or equal to 100 percent of AMI who are located in federally declared disaster areas. 36 The proposed rule would define the low-income areas housing goal to be the sum of (i) the benchmark level for the new minority census tracts subgoal, (ii) the benchmark level for the new low-income census tracts subgoal, and (iii) a disaster areas increment set in accordance with existing practice. Because the minority census tracts subgoal and the low-income census tracts subgoal are defined with no overlap between them, the proposed definition of the overall low-income areas housing goal is exactly equivalent to the current low-income areas housing goal. The disaster low-income areas housing goal benchmark level is set annually by FHFA separately from this rulemaking. Each year, FHFA notifies the Enterprises by letter of the benchmark level for that year, and this practice will continue.

The tables below provide recent performance of both Enterprises in these subgoal areas.

The proposed rule would establish the benchmark level for the minority census tracts subgoal at 10 percent. This proposed benchmark level is slightly higher than the Enterprises' recent performance, when measured as if the proposed subgoal had been in place. FHFA is proposing this higher benchmark level to ensure that the Enterprises are targeting the needs of communities of color and to emphasize the importance of improving access to credit in these communities.

The proposed rule would establish the benchmark level for the low-income census tracts subgoal at 4 percent. This proposed benchmark level is lower than the Enterprises' recent performance, when measured as if the proposed subgoal had been in place. FHFA is proposing this lower benchmark level due to concerns about incentivizing purchases of loans to higher-income borrowers in low-income areas. However, this proposed benchmark level is intended to encourage the Enterprises to continue providing critically needed access to credit in low-income areas.

FHFA believes that the proposed benchmark levels for each of the new area-based subgoals are feasible and would not be disruptive to the market. FHFA specifically requests comments on the new proposed subgoal structure and the proposed benchmark levels.

The low-income refinancing goal is based on the percentage of all single-family, owner-occupied refinance mortgages purchased by an Enterprise that are for low-income families, defined as families with incomes less than or equal to 80 percent of AMI. The proposed rule would set the annual low-income refinancing housing goal benchmark level for 2022 through 2024 at 26 percent.

As shown in Table 4, both Enterprises exceeded the benchmark level for the low-income refinancing goal in 2018 and 2019. In 2020, Fannie Mae exceeded the benchmark level, while Freddie Mac did not. Fannie Mae exceeded the market levels for this goal in 2018 and 2020, but not in 2019. Freddie Mac has trailed the market level each year from 2018 through 2020. As noted, 2020 data reflects FHFA's preliminary determination of Enterprise performance on this goal.

FHFA is proposing a benchmark level for the low-income refinancing goal of 26 percent, which is close to the market forecast and well within the confidence interval for each year. This proposed benchmark level is an increase from the current benchmark level of 21 percent, but on the lower end of the range of estimates for 2023 and 2024. FHFA is proposing a slightly lower benchmark level due to the unpredictability of future interest rates and refinancing volumes, which result in greater volatility in the low-income shares for refinancing mortgages than what is typical for the home purchase mortgage market. FHFA will continue to monitor the Enterprises in its capacities as regulator and as conservator, and if FHFA determines that the benchmark level for the low-income refinancing goal is not feasible, then FHFA will take appropriate steps to adjust the benchmark level.

In setting the proposed benchmark levels for the multifamily housing goals, FHFA has considered the statutory factors outlined in Section 1333(a)(4) of the Safety and Soundness Act. These factors include:

1. National multifamily mortgage credit needs and the ability of the Enterprises to provide additional liquidity and stability for the multifamily mortgage market;

2. The performance and effort of the Enterprises in making mortgage credit available for multifamily housing in previous years;

3. The size of the multifamily mortgage market for housing affordable to low-income and very low-income families, including the size of the multifamily markets for housing of a smaller or limited size;

4. The ability of the Enterprises to lead the market in making multifamily mortgage credit available, especially for multifamily housing affordable to low-income and very low-income families;

5. The availability of public subsidies; and

6. The need to maintain the sound financial condition of the Enterprises. 37

Unlike the single-family housing goals, performance on the multifamily housing goals is measured solely against a benchmark level set by FHFA, without any retrospective market measure. The absence of a retrospective market measure for the multifamily housing goals results, in part, from the lack of comprehensive data about the multifamily mortgage market. Unlike the single-family mortgage market, where HMDA provides a reasonably comprehensive dataset about single-family mortgage originations each year, the multifamily mortgage market (and the affordable multifamily mortgage market segment) has no comparable single, unified source with coverage extending across many years. As a result, it is difficult to correlate different datasets that rely on different reporting metrics.

The lack of comprehensive data for the multifamily mortgage market is even more acute with respect to the segments of the market that are targeted to low-income families, defined as families with incomes at or below 80 percent of AMI, and very low-income families, defined as families with incomes at or below 50 percent of AMI.

Another difference between the single-family and multifamily housing goals is that while there are separate single-family housing goals for home purchase and refinancing mortgages, the multifamily housing goals include all Enterprise multifamily mortgage purchases, regardless of the purpose of the loan. In addition, unlike the single-family housing goals, the multifamily housing goals are measured based on the total number of affordable units in properties financed by multifamily mortgage loans rather than on a percentage of affordable units in properties financed by multifamily mortgage loans. The use of total number of eligible units rather than percentages requires that FHFA take into account the expected size of the overall multifamily mortgage market and the affordable share of the market, as well as the expected volume of the Enterprises' overall multifamily purchases (in dollar terms) and the affordable share of those purchases.

Methodology. FHFA sets the multifamily benchmark levels by estimating the minimum number of affordable rental units in multifamily properties financed by mortgage loans purchased by each Enterprise that would be needed to ensure a strong focus on affordability by the Enterprises in the proposed goal period. FHFA achieves this by considering the required statutory factors, a number of which are related, as discussed below. For the proposed 2022-2024 goal period, FHFA also took into account the PSPA limit on each Enterprise's multifamily mortgage acquisitions, which is $80 billion over a trailing 52-week period and requires that 50 percent of that amount be mission-driven mortgages, as determined by FHFA. 38 Much of the analysis below describes trends in the overall multifamily mortgage market as they apply to setting the proposed benchmark levels. FHFA recognizes that these general trends may not apply to the same extent to all segments of the multifamily mortgage market.

Affordability in the multifamily mortgage market. There are several factors that make it difficult to accurately forecast the affordable share of the multifamily mortgage market. First, the portion of the overall multifamily mortgage market that provides housing units affordable to low-income and very low-income families may vary from year-to-year. Second, the competition between purchasers of mortgages within the multifamily mortgage market overall may differ from the competition within the affordable multifamily mortgage market segment. Finally, the volume for the affordable multifamily mortgage market segment also will depend on the availability of affordable housing subsidies.

FHFA determines affordability based on a family's rent and utility expenses not exceeding 30 percent of AMI. 39 Using this measure, affordability for families living in rental units has decreased in recent years for many families. According to the Joint Center for Housing Studies (JCHS), in its 2020 State of the Nation's Housing Report, prior to 2020, the composition of housing stock had already negatively affected affordability. For example, the report stated that while housing stock grew by 7.5 million units between 2004 and 2019, most of these additions were in single-family rentals or properties with 20 units or higher, whereas the number of units in two- to four-unit buildings declined by 38,000 units. The units in larger multifamily buildings tend to have higher median rents. 40 The supply of apartments with rents of $600 or lower declined by 2.5 million between 2004 and 2019, unlike apartments with rents of over $1,000, which increased by 10.4 million units within the same time period, according to the JCHS report.

The JCHS study of the rental market noted the growing presence of cost-burdened renters in certain income segments. Although, in 2019, the share of tenants that paid more than 30 percent of household income for rental housing decreased, at close to 50 percent, that number was still high. Specifically, the share of cost-burdened households with incomes between $25,000 and $74,999 increased between 2011 and 2019. 41 This is significant because the housing goals statute defines affordability at the 30 percent threshold. 42

The supply gap in affordable units combined with the prevalence of cost-burdened renters has led to an erosion of affordability, with fewer units qualifying for the housing goals. This affordability gap is also reflected in the falling share of the low-income multifamily units backing loans purchased by the Enterprises. While 77 percent of the multifamily units financed by mortgages purchased by Fannie Mae in 2011 were low-income, that share dropped steadily in the intervening years to 64 percent in 2017, rising to 69 percent in 2020. At Freddie Mac, the low-income share also peaked in 2011 and 2012 at 79 percent, and decreased gradually to 65 percent in 2017, rising to 71 percent in 2020.

Financing for affordable multifamily buildings—particularly those that are affordable to very low-income families—often uses an array of state and federal housing subsidies, such as low-income housing tax credits (LIHTCs), tax-exempt bonds, Section 8 rental assistance, or soft subordinate financing. 43 Investor interest in tax credit equity projects of all types and in all markets has been strong in recent years, especially in markets in which bank investors are seeking to meet Community Reinvestment Act (CRA) goals. Consequently, there should continue to be opportunities in the multifamily mortgage market to provide permanent financing for properties with LIHTCs during the 2022-2024 period. Additionally, there should be opportunities for market participants, including the Enterprises, to purchase mortgages that finance the preservation of existing affordable housing units (especially for restructurings of older properties that reach the end of their initial 15-year LIHTC compliance periods and for refinancing properties with expiring Section 8 Housing Assistance Payment contracts).

Availability of public subsidies. Multifamily housing assistance is primarily available in two forms—demand-side subsidies which either directly assist low-income tenants ( e.g., Section 8 vouchers) or provide project-based rental assistance (Section 8 contracts), and supply-side subsidies which support the creation and preservation of affordable housing ( e.g., public housing and LIHTCs). The availability of public subsidies impacts the overall affordable multifamily housing market, and significant changes to historic programs could impact the ability of the Enterprises to meet the housing goals. The Enterprises also play a role in providing liquidity to facilitate the preservation of public subsidies, like expiring Section 8 Housing Assistance Payment contracts and LIHTC properties reaching the end of the use restricted affordability period.

The need for public subsidies persists as the number of cost-burdened renters remains high, at over 20 million renter households in 2019. 44 The Center for Budget Policy Priorities estimates that only one in four households eligible for federal housing assistance currently receives it. 45

Certain public subsidies have been provided since March 2020 to help the affordable housing sector and low-income households during the pandemic. The CARES Act provided supplemental unemployment benefits to help people pay their rent, but those benefits expired on July 31, 2020. In December 2020, the Consolidated Appropriations Act, 2021 reinstated supplemental unemployment benefits through March 14, 2021. In March, the American Rescue Plan Act of 2021 extended those benefits through September 6, 2021.

Multifamily mortgage market. FHFA's consideration of the multifamily mortgage market addresses the size of and competition within the multifamily mortgage market, as well as the subset of the multifamily mortgage market affordable to low-income and very low-income families. The pandemic has impacted the multifamily affordable housing market and renters across the country. In February 2021, the Mortgage Bankers Association (MBA) estimated that multifamily mortgage originations declined by 17 percent in 2020 relative to the previous year. The MBA also anticipated a partial recovery in 2021, with total multifamily mortgage originations projected to be $323 billion, a 7 percent increase from 2020 but still below the 2019 level of $364 billion. 46

In addition, MBA's February forecast anticipated an economic rebound in 2021 that should bring stability to the market and projected that multifamily mortgage lending should almost fully rebound in 2022 to $358 billion, just shy of the 2019 level. Despite that overall expected rebound, recent multifamily housing trends point to likely prolonged and diverse impacts in subsegments. According to the National Multifamily Housing Council's tabulation of American Community Survey microdata, in 2019 about 45.4 percent of renter households (20 million households) lived in multifamily properties, defined as structures with five or more rental units with the remaining renter households living in 1-4 unit single-family structures. 47 Nationally, on a year-over-year basis, rent growth slowed during the pandemic to 0.3 percent in 2020, according to CoStar data. Growth accelerated in the first half of the year, with the second quarter of 2021 growing by 7.1 percent relative to one year earlier. Vacancy rates rose during the pandemic but have begun to decline in 2021.

Role of the Enterprises. In setting the proposed multifamily housing goal benchmark levels, FHFA has considered the ability of the Enterprises to lead the market in making multifamily mortgage credit available. The Enterprises' share of the overall multifamily mortgage origination market increased in the years immediately following the financial crisis, but their share has declined more recently in response to growing private sector participation. The Enterprises' share of the multifamily mortgage origination market was approximately 70 percent in 2008 and 2009, compared to 38 percent in 2015. 48 The total share has remained at around 40 percent since 2015, due for the most part to the cap imposed by FHFA in its role as conservator under the Conservatorship Scorecard, with the exception of 2017 and 2020 when that share was around 50 percent.

FHFA and the Enterprises have also taken numerous actions to support the multifamily housing market and provide relief to renters since March 2020. For example, on March 23, 2020, FHFA and the Enterprises announced that forbearance would be available to Enterprise-backed multifamily property owners on the condition that they suspend eviction of tenants struggling to pay rent due to the pandemic. 49 On June 29, 2020, FHFA announced that the Enterprises would offer extended forbearance agreements for multifamily property owners with existing forbearance agreements for up to three months, for a total forbearance of up to six months. 50 Under the terms of the Enterprise forbearance agreements, while mortgage payments are in forbearance, the landlord must suspend all evictions for renters unable to pay rent and offer other protections for renters. This forbearance program was extended several times, with the most recent extension through September 30, 2021. 51 52 53 On May 4, 2020, the Enterprises published online multifamily property lookup tools so that tenants could determine if the multifamily property in which they reside has an Enterprise-backed mortgage and fell under the CARES Act's 120-day eviction moratorium. On August 6, 2020, FHFA announced that multifamily property owners in new forbearance agreements must inform tenants in writing about tenant protections, and that the Enterprises are improving their online multifamily property loan lookup tools.

FHFA expects the Enterprises to continue to demonstrate leadership in multifamily affordable housing lending by providing liquidity and supporting housing for tenants at different income levels in various geographic markets and in various market segments.

Conservatorship limits on multifamily mortgage purchases (Conservatorship Scorecard cap) and other factors. Beginning in 2015, as conservator for the Enterprises, FHFA has set a yearly cap under the Conservatorship Scorecard that limits the total unpaid principal balance of multifamily loans that each Enterprise may purchase. The multifamily mortgage purchase cap furthers FHFA's conservatorship goals of maintaining the presence of the Enterprises as a backstop for the multifamily finance market while not impeding the participation of private capital. These targets for the Enterprise purchase share of the multifamily origination market reflect what is generally considered by FHFA as an appropriate market share for the Enterprises during normal market conditions. To encourage the Enterprises to participate in purchasing loans financing properties in underserved multifamily market segments, from 2015 through 2019, FHFA excluded several categories of multifamily business from the cap.

FHFA revised the cap structure in September 2019 by placing a cap on all multifamily loan purchases (no exclusions) and requiring a minimum amount of this capped amount to be for affordable and underserved market segments. The cap was set at $100 billion for each Enterprise, a combined total of $200 billion, for the five-quarter period from the fourth quarter of 2019 through the fourth quarter of 2020. In November 2020, FHFA announced the new multifamily loan purchase cap for the 2021 calendar year of $70 billion for each Enterprise, a combined total of $140 billion. 54

The Conservatorship Scorecard cap applies to the entire multifamily business for each Enterprise without any exclusions. To ensure a strong focus on affordable housing and underserved markets, the 2021 Conservatorship Scorecard requires that at least 50 percent of each Enterprises' multifamily loan purchases be mission-driven, affordable housing. Multifamily loans considered to be mission-driven, affordable include: Subsidized/assisted affordable housing; manufactured housing communities; affordable units in small multifamily properties; affordable properties in rural areas; affordable units in seniors housing assisted living properties; and market rate units affordable to residents at or below 80 percent of AMI. Furthermore, the 2021 Conservatorship Scorecard requires that a minimum of 20 percent of Enterprise multifamily loan purchases be affordable to residents at 60 percent of AMI or below. Multifamily loan purchases that meet the minimum 20 percent requirement may also count as loan purchases that meet the minimum 50 percent requirement. 55 56

In addition to the Conservatorship Scorecard cap, FHFA also incorporated the January 2021 PSPA requirements when determining appropriate multifamily benchmarks for 2022-2024. These requirements include a PSPA cap of $80 billion over the prior 52-week period, which is greater than the current Conservatorship Scorecard cap for 2021 and places an upper bound on Enterprise share. FHFA will continue to review its estimates of market size and mission-driven requirements throughout the year. FHFA may take appropriate action to adjust the multifamily housing goals benchmark levels should changes to the Conservatorship Scorecard cap, the PSPAs, or other market conditions warrant an adjustment, whether in 2021 or in future years.

Maintaining the sound financial condition of the Enterprises. In setting the proposed multifamily housing goals benchmark levels, FHFA must balance the role that the Enterprises play in providing liquidity and supporting various multifamily mortgage market segments with the need to maintain the Enterprises in sound and solvent financial condition. The Enterprises have served as a stabilizing force in the multifamily mortgage market. During the conservatorship period, the Enterprises' portfolios of loans on multifamily affordable housing properties have experienced low levels of delinquency and default, similar to the performance of multifamily loans on market rate properties. The Enterprises, therefore, should be able to sustain or increase their volume of purchases of loans on affordable multifamily housing properties without impacting the Enterprises' safety and soundness or negatively affecting the performance of their total mortgage loan portfolios.

FHFA continues to monitor the activities of the Enterprises in FHFA's capacity as safety and soundness regulator and as conservator. If necessary, FHFA will make appropriate changes in the multifamily housing goals benchmark levels to ensure the Enterprises' continued safety and soundness.

Based on FHFA's consideration of the statutory factors described above and the performance of the Enterprises described in this section, the proposed rule would establish benchmark levels for the multifamily housing goals for the Enterprises, as further discussed below. Before finalizing the benchmark levels for the low-income and very low-income multifamily goals in a final rule, FHFA will review any additional data that becomes available about the multifamily housing goals performance of the Enterprises through 2020, any additional information about the Conservatorship Scorecard cap for 2022 that is available, and any other information about the multifamily mortgage market or other factors, along with any comments on the proposed multifamily housing goals benchmark levels.

The multifamily low-income housing goal is based on the total number of rental units in multifamily properties financed by mortgages purchased by the Enterprises that are affordable to low-income families, defined as families with incomes less than or equal to 80 percent of AMI.

Both Enterprises have exceeded the low-income multifamily housing goal by significant margins in recent years. Taking into account the Conservator Scorecard cap and PSPA limits, as well as the multifamily market conditions described above, FHFA is proposing to raise the multifamily low-income housing goal benchmark level to 415,000 units for 2022-2024. This proposed benchmark level would be a significant increase over the benchmark level that has been in place since 2018. FHFA believes that this proposed increase is appropriate and achievable for the Enterprise in light of the past performance of the Enterprises on this housing goal and the current loan purchase volumes that would be permitted for the Enterprises under the applicable Conservatorship Scorecard cap and PSPA limits.

The multifamily very low-income housing subgoal includes units affordable to very low-income families, defined as families with incomes no greater than 50 percent of AMI.

Both Enterprises have exceeded the multifamily very low-income housing subgoal by significant margins in recent years. Taking into account the Conservator Scorecard cap and PSPA limits, as well as the multifamily mortgage market conditions described above, FHFA is proposing to raise the multifamily low-income housing subgoal benchmark level to 88,000 units for 2022-2024. This proposed benchmark level would be a significant increase over the benchmark level that has been in place since 2018. FHFA believes that this proposed increase is appropriate and achievable for the Enterprise in light of the past performance of the Enterprises on this housing subgoal and the current loan purchase volumes that would be permitted for the Enterprises under the applicable Conservatorship Scorecard cap and PSPA limits.

The Enterprise housing goals regulation defines a small multifamily property as a property with 5 to 50 units. The small multifamily low-income housing subgoal is based on the total number of units in small multifamily properties financed by mortgages purchased by the Enterprises that are affordable to low-income families, defined as families with incomes less than or equal to 80 percent of AMI.

This subgoal was created in the 2015-2017 housing goals rulemaking, and initially set at 6,000 units in 2015, gradually increasing to 10,000 units in 2017. Monitoring trends in this multifamily market segment is challenging, and there is evidence that small multifamily properties were hit particularly hard in 2020 as a result of the pandemic. FHFA is proposing to raise the benchmark level for this subgoal to 23,000 units for 2022-2024. This proposed benchmark level would be a significant increase over the benchmark level that has been in place since 2018. FHFA believes that this proposed increase is appropriate and achievable for the Enterprise in light of the past performance of the Enterprises on this housing subgoal and the current loan purchase volumes that would be permitted for the Enterprises under the applicable Conservatorship Scorecard cap and PSPA limits.

The proposed rule would also revise other provisions of the Enterprise housing goals regulation, as discussed below. These proposed changes are non-substantive technical changes intended to conform the housing goals regulation text to FHFA's established practices and procedures in implementing the housing goals.

FHFA welcomes comments on these technical changes and any other technical changes or corrections that are necessary. FHFA may include additional technical changes or corrections in its final rule based on comments received.

Section 1282.1 of the current Enterprise housing goals regulation defines “designated disaster area” as “any census tract that is located in a county designated by the Federal Government as adversely affected by a declared major disaster administered by FEMA, where individual assistance payments were authorized by FEMA.” While this definition accurately reflects the types of disasters that FHFA counts for purposes of calculating the disaster areas increment for the low-income areas housing goal, the definition does not reflect FHFA's longstanding practice regarding the types of assistance covered. The proposed rule would revise the definition of “designated disaster area” to refer to major disasters “where housing assistance payments were authorized by FEMA.”

This proposed change to the definition of “designated disaster area” would be consistent with longstanding FHFA practice. Each year, FHFA identifies the areas that are considered “designated disaster areas” for purposes of the Enterprise housing goals in a dataset published on FHFA's website that can be used in conjunction with other information to determine whether mortgages purchased by an Enterprise would meet the criteria for the low-income areas housing goal. 57 In practice, FHFA's identification of “designated disaster areas” for purposes of the Enterprise housing goals has been limited to areas that the Federal Emergency Management Agency (FEMA) has identified as eligible for “housing assistance” under FEMA's “Individual and Households Program” (IHP). “Individual assistance” is an umbrella term used by FEMA that encompasses a variety of types of assistance in addition to housing assistance under FEMA's IHP. “Individual assistance” includes other types of assistance under FEMA's IHP, as well as disaster case management, disaster legal services, and disaster unemployment assistance, among others. 58 If FHFA included all areas for which individual assistance payments were authorized by FEMA, it would result in areas being included as “designated disaster areas” where the relevant disaster did not have any significant direct impact on the physical housing stock. For example, if FHFA had included all areas that FEMA identified as eligible for “individual assistance” in 2020, every census tract in the United States would have been included as a “designated disaster area” for purposes of the housing goals in 2020 due to assistance related to the COVID-19 pandemic. That outcome would have been inconsistent with the purposes of the low-income areas housing goal and with FHFA's longstanding practice. To avoid this outcome and to clarify the regulation with respect to FHFA's existing practice, the proposed rule would revise the definition of “designated disaster area” for purposes of the low-income areas housing goal to refer specifically to “housing assistance” rather than to the broader category of “individual assistance.”

Section 1282.15(i) of the current Enterprise housing goals regulation provides that an Enterprise is not required to use new data related to housing goals treatment of mortgages it purchases until the start of the quarter after it receives the data. This provision was adopted originally by the U.S. Department of Housing and Urban Development (HUD) in its 1995 final rule establishing housing goals under the Safety and Soundness Act. 59 However, this provision does not reflect FHFA's longstanding practice of independently calculating each Enterprise's housing goals performance on the basis of data provided to FHFA by the Enterprise. For example, FHFA determines the AMIs applicable to each census tract on an annual basis and provides that information to the Enterprises in the first half of each year. However, in calculating Enterprise housing goals performance for that year, FHFA applies the new data to all mortgage purchases in that year. Accordingly, the proposed rule would remove § 1282.15(i) to avoid any implication that the housing goals regulation requires a particular method of calculating or applying affordability data such as AMIs. This proposed change is non-substantive and does not reflect or require any change in any of the processes or standards that FHFA uses to determine Enterprise housing goals performance each year.

Section 1282.16(c)(10) of the current Enterprise housing goals regulation provides that the permanent modification of a mortgage under the Home Affordable Modification Program (HAMP) is counted as a refinancing for purposes of the low-income refinancing goal. Permanent loan modifications under HAMP are the only type of loan modification eligible for counting for purposes of the low-income refinancing goal. The HAMP modification program expired at the end of 2016. The proposed rule would remove § 1282.16(c)(10) from the housing goals regulation as it is no longer necessary in light of the expiration of the HAMP modification program.

The proposed rule would not contain any information collection requirement that would require the approval of the Office of Management and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ). Therefore, FHFA has not submitted the proposed rule to OMB for review.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires that a regulation that has a significant economic impact on a substantial number of small entities, small businesses, or small organizations must include an initial regulatory flexibility analysis describing the regulation's impact on small entities. Such an analysis need not be undertaken if the agency has certified that the regulation will not have a significant economic impact on a substantial number of small entities. 5 U.S.C. 605(b). FHFA has considered the impact of the proposed rule under the Regulatory Flexibility Act. FHFA certifies that the proposed rule, if adopted as a final rule, will not have a significant economic impact on a substantial number of small entities because the rule applies to Fannie Mae and Freddie Mac, which are not small entities for purposes of the Regulatory Flexibility Act.

For the reasons stated in the Preamble, under the authority of 12 U.S.C. 4511, 4513, and 4526, FHFA proposes to amend part 1282 of Title 12 of the Code of Federal Regulations as follows:

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0690; Project Identifier MCAI-2020-01495-E” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, 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 proposal 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 NPRM.

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 NPRM 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 NPRM, 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 NPRM. Submissions containing CBI should be sent to Kevin M. Clark, Aviation Safety Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2020-0243, dated November 5, 2020 (EASA AD 2020-0243), to correct an unsafe condition on RRD Trent 1000-AE3, Trent 1000-CE3, Trent 1000-D3, Trent 1000-G3, Trent 1000-H3, Trent 1000-J3, Trent 1000-K3, Trent 1000-L3, Trent 1000-M3, Trent 1000-N3, Trent 1000-P3, Trent 1000-Q3, and Trent 1000-R3 model turbofan engines.

This proposed AD was prompted by the manufacturer revising the engine TLM life limits of certain critical rotating parts and updating certain maintenance tasks. The FAA is proposing this AD to prevent the failure of critical rotating parts.

The FAA reviewed EASA AD 2020-0243. EASA AD 2020-0243 specifies revising the approved AMP by incorporating the limitations, tasks, and associated thresholds and intervals described in the TLM. This material is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES .

The FAA reviewed Chapter 05-10 of Rolls-Royce (RR) Trent 1000 TLM T-TRENT-10RRT, dated August 1, 2020. RR Trent 1000 TLM T-TRENT-10RRT, Chapter 05-10, identifies the reduced life limits of certain critical rotating parts.

The FAA also reviewed Chapter 05-20 of RR Trent 1000 TLM T-TRENT-10RRT, dated August 1, 2020. RR Trent 1000 TLM T-TRENT-10RRT, Chapter 05-20, identifies the critical rotating part inspection thresholds and intervals.

These engines have been approved by the aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the State of Design Authority, the FAA has been notified about the unsafe condition described in the EASA AD referenced in this proposed AD. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.

This proposed AD would require accomplishing the actions specified in EASA AD 2020-0243, described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this proposed AD and except as discussed under “Differences Between this Proposed AD and the EASA AD.”

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA initially worked with Airbus and EASA to develop a process to use certain EASA ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has since coordinated with other manufacturers and civil aviation authorities (CAAs) to use this process. As a result, EASA AD 2020-0243 will be incorporated by reference in the FAA final rule. This proposed AD would require compliance with EASA AD 2020-0243 in its entirety, through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2020-0243 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2020-0243. Service information specified in EASA AD 2020-0243 that is required for compliance with it will be available at https://www.regulations.gov by searching for and locating Docket No. FAA-2021-0690 after the FAA final rule is published.

This AD does not mandate the “Maintenance Tasks and Replacement of Critical Parts” and “Corrective Action(s)” sections of EASA AD 2020-0243. Where EASA AD 2020-0243 requires compliance from its effective date, this proposed AD would require using the effective date of this AD. Where EASA AD 2020-0243 requires revising the AMP within 12 months from its effective date, this proposed AD would require revising the existing AMP within 90 days after the effective date of this AD. This AD does not mandate compliance with the “Remarks” section of EASA AD 2020-0243.

The FAA estimates that this AD, if adopted as proposed, would affect 4 engines installed on airplanes of U.S. registry.

The FAA estimates the following costs to comply with this proposed AD:

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.

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

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

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

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

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

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

The FAA issued an NPRM that proposed to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus Canada Limited Partnership Model BD-500-1A10 airplanes. The NPRM was published in the Federal Register on April 16, 2021 (86 FR 20091). The NPRM was prompted by a report that an incorrect low-pressure distribution supply duct may be installed in the forward cargo compartment. The NPRM proposed to require an inspection of the low-pressure distribution supply duct to determine the part number, and replacement if necessary, as specified in a Transport Canada Civil Aviation (TCCA) AD.

Since issuance of the NPRM, the FAA has verified that the proposed actions have been done on the affected airplanes. Therefore, the FAA has determined that AD action is not appropriate.

Withdrawal of the NPRM constitutes only such action and does not preclude the FAA from further rulemaking on this issue, nor does it commit the FAA to any course of action in the future.

The Air Line Pilots Association, International (ALPA) expressed support for the NPRM.

Delta Air Lines (Delta) requested that the proposed AD not be issued. DAL stated that replacement of the affected part as required by the proposed AD had already been done on both of the affected airplanes. Alternatively, Delta requested that the FAA allow use of the high-pressure ground connection as an alternative to the auxiliary power units because Delta's affected airplanes had been preserved in storage and could not be started if necessary to perform a required leak check. The FAA agrees with the commenter's requests, but because the FAA is withdrawing the NPRM, Delta's alternative request is no longer necessary.

Upon further consideration, the FAA has determined that the NPRM is unnecessary. Accordingly, the NPRM is withdrawn.

Since this action only withdraws an NPRM, it is neither a proposed nor a final rule. This action therefore is not covered under Executive Order 12866, the Regulatory Flexibility Act, or DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979).

Accordingly, the notice of proposed rulemaking (Docket No. FAA-2021-0298), which was published in the Federal Register on April 16, 2021 (86 FR 20091), is withdrawn.

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0693; Project Identifier MCAI-2020-01666-R” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, 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 proposal 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 NPRM.

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 NPRM 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 NPRM, 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 NPRM. Submissions containing CBI should be sent to Ronnea Derby, Aerospace Engineer, Denver ACO Branch, Compliance & Airworthiness Division, FAA, 26805 E 68th Ave., Mail Stop: Room 214, Denver, CO 80249; telephone (303) 342-1093; email Ronnea.L.Derby@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.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2020-0281, dated December 16, 2020 (EASA AD 2020-0281), to correct an unsafe condition for certain serial-numbered Airbus Helicopters (AH), formerly Eurocopter, Eurocopter France, Aerospatiale Model AS 332 L2 and EC 225 LP helicopters.

This proposed AD was prompted by a design deficiency involving the incorrect wiring routing of the electrical hoist installation. The affected wiring was not protected by the circuit breaker that was intended to provide electrical protection for that wiring. The FAA is proposing this AD to correct the electrical hoist installation wiring routing. See EASA AD 2020-0281 for additional background information.

EASA AD 2020-0281 requires modifying the hoist control power supply.

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

These helicopters have been approved by EASA and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the European Union, EASA has notified the FAA about the unsafe condition described in its AD. The FAA is proposing this AD after evaluating all known relevant information and determining that the unsafe condition described previously is likely to exist or develop on other helicopters of these same type designs.

This proposed AD would require accomplishing the actions specified in EASA AD 2020-0281, described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this proposed AD.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, the FAA proposes to incorporate EASA AD 2020-0281 by reference in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2020-0281 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2020-0281 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2020-0281. Service information required by EASA AD 2020-0281 for compliance will be available at https://www.regulations.gov by searching for and locating Docket No. FAA-2021-0693 after the FAA final rule is published.

The FAA estimates that this AD, if adopted as proposed, would affect 5 helicopters of U.S. Registry. Labor rates are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this proposed AD.

Modifying the electrical hoist control power supply would take about 4 work-hours and parts would cost about $10, for an estimated cost of $350 per helicopter and $1,750 for the affected U.S. fleet.

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.

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

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

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

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

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

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

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0700; Project Identifier 2019-CE-017-AD” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, 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 proposal 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 NPRM.

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 NPRM 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 NPRM, 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 NPRM. Submissions containing CBI should be sent to Jim Rutherford, Aviation Safety Engineer, General Aviation & Rotorcraft Section, International Validation Branch, FAA, 901 Locust, Room 301, Kansas City, MO 64106. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The European Union Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2019-0043, dated March 6, 2019 (referred to after this as “the MCAI”), to correct an unsafe condition on Costruzioni Aeronautiche Tecnam S.P.A. Model P2006T airplanes. The MCAI states:

You may examine the MCAI in the AD docket at https://www.regulations.gov by searching for and locating Docket No. FAA-2021-0700.

Costruzioni Aeronautiche Tecnam S.P.A. Service Bulletin No. SB 288-CS-Ed 1, Revision 1, dated December 22, 2017, is related to this NPRM and provides information about installing nose landing gear (NLG) piston tube kit number SB 288-1.

This product has been approved by the aviation authority of another country and is approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI and service information referenced above. The FAA is issuing this NPRM after determining the unsafe condition described previously is likely to exist or develop on other products of the same type design.

This proposed AD would require replacing NLG piston tubes that are not P/N 26-8-1408-1 and marked “rev F00.”

The FAA estimates that this AD, if adopted as proposed, would affect 59 airplanes of U.S. registry. The FAA also estimates that it would take about 4 work-hours per airplane to comply with the replacement required by this proposed AD. The average labor rate is $85 per work-hour. Required parts would cost about $1,200 per airplane.

Based on these figures, the FAA estimates the cost of this proposed AD on U.S. operators to be $90,860, or $1,540 per airplane.

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected operators.

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.

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

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

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

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

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

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

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0696; Project Identifier MCAI-2021-00032-T” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, 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 the proposal 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 proposed AD.

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 NPRM 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 NPRM, 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 NPRM. Submissions containing CBI should be sent to Siddeeq Bacchus, Aerospace Engineer, Mechanical Systems and Administrative Services Section, FAA, New York ACO Branch, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7362; fax 516-794-5531; email 9-avs-nyaco-cos@faa.gov. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

TCCA, which is the aviation authority for Canada, has issued TCCA AD CF-2021-01, dated January 8, 2021 (TCCA AD CF-2021-01) (also referred to as the Mandatory Continuing Airworthiness Information, or the MCAI), to correct an unsafe condition for certain Airbus Canada Limited Partnership Model BD-500-1A10 and BD-500-1A11 airplanes.

This proposed AD was prompted by reports of loose powerplant FIREX interconnection hoses, and in one instance a hose was found disconnected. An investigation by the manufacturer determined that if the instructions for connecting the FIREX hose are not followed properly, hoses can become loose or disconnected. The FAA is proposing this AD to address the possibility that fire extinguishing agent may not be effectively applied should a fire occur within a powerplant assembly that has a partially or completely disconnected FIREX hose, which could result in the inability to put out a fire in the engine. See the MCAI for additional background information.

TCCA AD CF-2021-01 describes procedures for replacing certain existing FIREX hose assemblies on each powerplant with a newly designed FIREX hose assembly with provisions for the installation of safety cables at each end, in order to prevent the hose from becoming loose or disconnected.

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

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

This proposed AD would require accomplishing the actions specified in TCCA AD CF-2021-01 described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this AD.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA initially worked with Airbus and the European Union Aviation Safety Agency (EASA) to develop a process to use certain EASA ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has since coordinated with other manufacturers and civil aviation authorities (CAAs) to use this process. As a result, TCCA AD CF-2021-01 will be incorporated by reference in the FAA final rule. This proposed AD would, therefore, require compliance with TCCA AD CF-2021-01 in its entirety, through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Service information specified in TCCA AD CF-2021-01 that is required for compliance with TCCA AD CF-2021-01 will be available on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2021-0696 after the FAA final rule is published.

The FAA estimates that this proposed AD affects 36 airplanes of U.S. registry. The FAA estimates the following costs to comply with this proposed AD:

According to the manufacturer, some or all of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected operators. The FAA does not control warranty coverage for affected operators. As a result, the FAA has included all known costs in the cost estimate.

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.

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

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

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

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

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

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

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2021-0695; Project Identifier MCAI-2021-00096-R” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, 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 proposal 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 NPRM.

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 NPRM 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 NPRM, 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 NPRM. Submissions containing CBI should be sent to Andrea Jimenez, Aerospace Engineer, COS Program Management Section, Operational Safety Branch, Compliance & Airworthiness Division, FAA, 1600 Stewart Ave., Suite 410, Westbury, NY 11590; telephone (516) 228-7330; email andrea.jimenez@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.

EASA, which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2021-0031, dated January 22, 2021 (EASA AD 2021-0031), to correct an unsafe condition for Leonardo S.p.A., formerly Finmeccanica S.p.A., AgustaWestland S.p.A., and Agusta S.p.A., Model A109E helicopters, all serial numbers up to 11160 inclusive.

This proposed AD was prompted by reports that certain tail rotor gearbox assemblies were installed on Model A109E helicopters and those parts are not approved for installation on that helicopter model. During revisions to the Model A109E technical publications it was noted that the 90-degree tail rotor gearbox assembly, part number (P/N) 109-0440-01-115, is included in the illustrated parts catalog (IPC) for helicopters with serial numbers (S/N) up to and including S/N 11160. The IPC incorrectly identifies this part number as a replacement part for P/N 109-0440-01-119 or P/N 109-0440-01-121.

The FAA is proposing this AD to address installation of tail rotor gearbox assembly P/N 109-0440-01-115 that is not approved for installation on Model A109E helicopters. Because P/N 109-0440-01-115 is not part of the type design for Model A109E helicopters, there are no overhaul or life limits included in the applicable maintenance manuals. If a tail rotor gearbox is not properly maintained it could fail, resulting in reduced control of the helicopter. See EASA AD 2021-0031 for additional background information.

EASA AD 2021-0031 requires replacement of a tail rotor gearbox assembly P/N 109-0440-01-115 with a serviceable part. EASA AD 2021-0031 also prohibits installation of tail rotor gearbox assembly P/N 109-0440-01-115 on any Leonardo S.p.A. Model A109E helicopter.

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

These helicopters have been approved by EASA and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the European Union, EASA has notified the FAA about the unsafe condition described in its AD. The FAA is proposing this AD after evaluating all known relevant information and determining that the unsafe condition described previously is likely to exist or develop on other helicopters of the same type design.

This proposed AD would require accomplishing the actions specified in EASA AD 2021-0031, described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this proposed AD.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, the FAA proposes to incorporate EASA AD 2021-0031 by reference in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2021-0031 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in EASA AD 2021-0031 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2021-0031. Service information required by EASA AD 2021-0031 for compliance will be available at https://www.regulations.gov by searching for and locating Docket No. FAA-2021-0695 after the FAA final rule is published.

The FAA estimates that this AD, if adopted as proposed, would affect 70 helicopters of U.S. Registry. The FAA estimates the following costs to comply with this proposed AD:

The FAA has included all known costs in its cost estimate. According to the manufacturer, however, some of the costs of this proposed AD may be covered under warranty, thereby reducing the cost impact on affected operators.

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.

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

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

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

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

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

Section 105(e) of the Federal Alcohol Administration Act (FAA Act), codified in the United States Code at 27 U.S.C. 205(e), authorizes the Secretary of the Treasury (the Secretary) to prescribe regulations relating to the packaging, marking, branding, labeling, and size and fill of containers of alcohol beverages that will prohibit consumer deception and provide consumers with adequate information as to the identity and quality of the product. Section 105(e) of the FAA Act also generally requires bottlers and importers of alcohol beverages to obtain certificates of label approval (COLAs) prior to bottling or importing alcohol beverages for sale in interstate commerce.

TTB administers the FAA Act pursuant to section 1111(d) of the Homeland Security Act of 2002, codified at 6 U.S.C. 531(d). The Secretary has delegated various authorities through Treasury Department Order 120-01 (Revised), dated December 10, 2013 (superseding Treasury Department Order 120-01, dated January 24, 2003), to the TTB Administrator to perform the functions and duties in the administration and enforcement of this law.

Part 5 of title 27 of the Code of Federal Regulations (27 CFR part 5) sets forth the regulations implementing those provisions of section 105(e) of the FAA Act as they pertain to distilled spirits.

TTB regulations at 27 CFR 5.51 prohibit the release of bottled distilled spirits from customs custody for consumption unless the person removing the distilled spirits has obtained and is in possession of a COLA covering the product. The bottles must bear labels identical to the labels appearing on the face of the certificate, or labels with changes authorized by TTB. The TTB regulations at 27 CFR 5.55 also generally prohibit the bottling or removal of distilled spirits from a distilled spirits plant unless the proprietor possesses a COLA covering the labels on the bottle.

The TTB regulations at 27 CFR 5.22 establish standards of identity for distilled spirits products and categorize these products according to various classes and types. As used in § 5.22, the term “class” refers to a general category of spirits. Currently, there are 12 different classes of distilled spirits set out in § 5.22, such as whisky, rum, gin, and brandy. As used in § 5.22, the term “type” refers to a subcategory within a class of spirits. For example, “Cognac” and “Pisco” are types of brandy, and “Cachaça” is a type of rum.

The TTB labeling regulations at 27 CFR 5.32(a)(2) and 5.35 require that the class and type of distilled spirits appear on the product's label. These regulations provide that the class and type must be stated in conformity with § 5.22 of the TTB regulations if defined therein. Otherwise, § 5.35 requires that the product must be designated in accordance with trade and consumer understanding thereof, or, if no such understanding exists, by a distinctive or fanciful name, and in either case (with limited exceptions), followed by a truthful and adequate statement of composition.

“Singani” is a term recognized by the Plurinational State of Bolivia (Bolivia) as a designation for an alcohol beverage product that is distilled from grape wine or grape pomace and produced in certain delimited parts of Bolivia. Under current TTB distilled spirits labeling regulations, Singani products are generally classified as brandies. Section 5.22(d) sets forth the standard of identity for brandy as follows:

In § 5.22, paragraphs (d)(1) through (9) categorize the specific types of brandy. As described by petitioners Singani 63, Inc. (Singani 63) and Bolivia, Singani may meet the criteria of several of these types of brandy, such as “fruit brandy” under paragraph (d)(1), or “pomace brandy” (including “grappa brandy”) under paragraph (d)(5), depending on the amount of pomace used.

In § 5.22, paragraph (d)(1) states that fruit brandy, derived from grapes, shall be designated as “grape brandy” or “brandy.” That regulation also generally requires brandies derived from grapes (other than neutral brandy, pomace brandy, marc brandy, grappa brandy, Pisco, Pisco Perú, or Pisco Chileno) that have been aged in oak barrels for less than two years to be labeled as “immature.” The Bolivian standards submitted by petitioners contain no aging requirements, and petitioners' submissions suggest that, unlike many grape brandies, Singani is generally not aged in wood. Accordingly, under current TTB regulations, a Singani product classified as a grape brandy under paragraph (d)(1) would need to be labeled as an immature brandy unless it was aged in oak barrels for at least two years.

According to information submitted by the petitioners, under the standards set forth by Bolivia, certain categories of Singani may have a minimum alcohol content by volume of as low as 35 percent. However, under § 5.22(d), all brandy must be bottled at not less than 80° proof, or 40 percent alcohol by volume. Thus, under TTB's current regulations, only Singani products bottled at a minimum alcohol content by volume of 40 percent may be labeled as any of the types of brandy specifically defined under the standard of identity in § 5.22(d). A Singani product bottled at less than 40 percent alcohol by volume could be labeled as a “diluted” brandy in accordance with Ruling 75-32 of the Bureau of Alcohol, Tobacco and Firearms (ATF) (TTB's predecessor agency), or as a distilled spirits specialty product bearing a statement of composition and fanciful name as required under § 5.35(a). Possible statements of composition for such a specialty product could include “spirits distilled from grapes” or “grape spirits.”

TTB received a petition from Singani 63, a distilled spirits importer, dated November 18, 2014, proposing that TTB amend its regulations to recognize Singani as a type of brandy that is a distinctive product of Bolivia. In support of this petition, Bolivia submitted letters to TTB in December 2015 and January 2017. Singani 63 also submitted a letter to TTB in June 2017 that provided additional information related to the petition.

In its petition, Singani 63 stated that TTB's recognition of Singani as a distinctive product would benefit consumers by informing them that the product was produced and labeled in compliance with Bolivia's laws. It also asserted that Singani is a product that is distinct from other types of brandy. Furthermore, both Singani 63 and Bolivia indicated that Bolivia had established a legal standard for Singani as an exclusively Bolivian product.

In response to these submissions, TTB issued letters in February and October of 2017, in which TTB addressed the petitioner's request for rulemaking and identified several deficiencies in the petition and its supporting documents. For instance, TTB noted that the submitted documents lacked substantiating information regarding Bolivia's standards for the production of Singani. Accordingly, TTB did not undertake rulemaking at that time to amend its regulations as proposed in Singani 63's petition.

TTB subsequently received a joint petition from Singani 63 and Bolivia in November 2018, again proposing that TTB recognize Singani as a type of brandy that is a distinctive product of Bolivia. The 2018 joint petition contained additional information in support of its regulatory proposal, including official translations of Bolivian laws and decrees governing the production of Singani.

Following discussions between officials of Bolivia and the Office of the United States Trade Representative (USTR), and after consultations between USTR and TTB, the United States Trade Representative and Bolivia's Minister of Foreign Affairs exchanged letters on January 6, 2020. The exchange of letters agreed upon a procedure that could potentially lead each party to recognize as distinctive certain distilled spirits products produced in the other party's territory.

The exchange of letters provides that the United States shall endeavor to publish a Notice of Proposed Rulemaking to promulgate a regulation that would provide that Singani is a type of brandy that is a distinctive product of Bolivia. The exchange of letters further provides that if, following this proposed rule, the United States publishes a final rule announcing the promulgation of a regulation establishing Singani as a type of brandy that is a distinctive product of Bolivia, then Bolivia shall, within thirty (30) days thereafter, recognize Bourbon Whiskey and Tennessee Whiskey as distinctive products of the United States. Following such recognition, Bolivia shall prohibit the sale within Bolivia of any product as Bourbon, Bourbon Whiskey, or Tennessee Whiskey, if it has not been manufactured in the United States in accordance with the laws and regulations of the United States governing the manufacture of Bourbon Whiskey and Tennessee Whiskey. These protections also apply to products spelled as “Bourbon Whisky” or “Tennessee Whisky.”

The Bolivian decrees and regulations submitted with the 2018 joint petition, which are included in the rulemaking docket, establish that Bolivia defines “Singani” as a brandy product of Bolivia. Of the Bolivian decrees and regulations submitted, Bolivian Standard NB 324001 contains the most specific standards for Singani. Among other requirements, NB 324001 requires that Singani be obtained exclusively from vitis vinifera grapes grown in the traditional “zones of origin” at a minimum altitude of 1,600 meters above sea level. NB 324001 lists several different categories of Singani, some of which have more specific requirements, such as requiring the product to be made from Muscat of Alexandria grapes specifically. NB 324001 classifies Singani in the group “Brandies and liquors.”

In a prior rulemaking, TTB has distinguished Singani from Pisco, which is a type of grape brandy manufactured in Peru or Chile in accordance with the laws and regulations of those countries. In 2013, TTB updated its labeling regulations to add Pisco as a type of brandy that is manufactured only in Peru and Chile. In regard to brandy produced in Bolivia, TTB determined that it would not recognize Pisco as a type of brandy produced in that country. See T.D. TTB-113 (78 FR 28739, May 16, 2013). TTB stated that Bolivia maintains standards for Singani but not for Pisco, and cited other evidence suggesting that Pisco and Singani are different products.

After reviewing the petitions, the regulations on the standards of identity in 27 CFR part 5, TTB's Certificate of Label Approval (COLA) database, the exchange of letters between USTR and Bolivia's Minister of Foreign Affairs, and the relevant laws and regulations of Bolivia, TTB has determined that amending the standards of identity regulations at § 5.22 to recognize Singani as a distinctive product of Bolivia merits consideration and public comment, as invited in this notice of proposed rulemaking.

TTB believes that Singani generally meets the U.S. standard for brandy and should be classified as a type of brandy. TTB also believes that evidence suggests that the generally recognized geographical limits of the Singani-producing areas do not extend beyond the boundaries of Bolivia, and that Singani production is not associated with any areas outside of Bolivia. Moreover, the results of a search of TTB's COLA database did not show any approved COLAs that use the term “Singani” as the brand name or fanciful name, or as part of the brand name or fanciful name, for distilled spirits produced outside Bolivia.

Therefore, this document proposes to amend the standard of identity in § 5.22(d) by adding Singani as a type of brandy derived from grapes that is manufactured in Bolivia in compliance with the laws and regulations of Bolivia governing the manufacture of Singani for consumption in that country. If TTB recognizes Singani as a type of brandy as proposed, it would be permissible for Singani imported and sold within the United States to simply be labeled as “Singani” without the term “brandy” on the label, in the same way that products labeled with such type designations as “Cognac” or “Pisco” are not required to also bear the designation “brandy.”

The other geographically distinctive types of brandy defined in § 5.22(d), Cognac and Pisco, are defined as grape brandies distinct to their respective places of origin. However, given that Singani could also meet the criteria of other types of brandies (such as pomace brandy under § 5.22(d)(5), depending on the amount of pomace used), the proposed regulatory language describes Singani as “brandy derived from grapes” rather than as a “grape brandy.”

TTB notes that the Bolivian standard allows products designated as Singani to have an alcohol content ranging from 35 to 45 percent alcohol by volume, depending on the type of Singani produced. Because the Bolivian standard allows Singani to have an alcohol content as low as 35 percent alcohol by volume (or 70° proof), TTB is proposing to exempt Singani from the general requirement that brandy be bottled at not less than 80° proof (40 percent alcohol by volume) and is instead proposing a standard for Singani that would include products bottled at not less than 70° proof (35 percent alcohol by volume) in accordance with the laws and regulations of Bolivia. TTB regulations have not previously authorized bottling proofs for a type of product that are below the minimum prescribed for the product's class designation, even when a foreign standard permits a lower proof, so TTB is soliciting comment on authorizing this standard for Singani.

In addition, the regulation at § 5.22(d)(1) generally requires that brandy derived from grapes that has been stored in oak containers for less than two years must be labeled with the word “immature.” However, it also lists several types of brandy (specifically neutral brandy, pomace brandy, marc brandy, grappa brandy, Pisco, Pisco Perú, and Pisco Chileno) that are exempt from this requirement. Because the Bolivian standards for Singani contain no specific aging requirements, TTB is proposing to amend § 5.22(d)(1) to clarify that Singani is likewise exempt from the requirement that it be labeled with the word “immature.”

If finalized, this amendment to the TTB regulations would revoke by operation of regulation any COLA that uses the term “Singani” as a designation for a distilled spirits product that was not manufactured in Bolivia in accordance with the laws and regulations of Bolivia governing the manufacture of Singani for consumption in that country. TTB has searched its COLA database and does not believe that this rulemaking will affect any existing labels.

TTB invites comments from interested members of the public on this proposed rule, including on whether the proposed amendment would have an adverse impact on owners of U.S. trademarks and on the extent to which distilled spirits labeled as “Singani” are produced outside Bolivia. Although information currently before TTB suggests that all distilled spirits currently sold in the United States with “Singani” on the label are produced in Bolivia, comments on the extent of production of Singani outside Bolivia, and on whether any existing labels will be affected by this proposal, will assist TTB in determining whether Singani should be recognized as a distinctive product of Bolivia.

TTB is also soliciting comments on its proposal to authorize a minimum bottling proof of 35 percent alcohol by volume (or 70° proof) for Singani. Because Bolivian standards authorize this 70° proof minimum, TTB is proposing to authorize the same minimum for purposes of the TTB regulations, even though § 5.22(d) generally requires that brandies be bottled at not less than 80° proof.

You may submit comments on this proposal as an individual or on behalf of a business or other organization via the Regulations.gov website or via postal mail, as described in the ADDRESSES section of this document. Your comment must reference Notice No. 205 and must be submitted or postmarked by the closing date shown in the DATES section of this document. You may upload or include attachments with your comment. You also may submit a comment requesting a public hearing on this proposal. The TTB Administrator reserves the right to determine whether to hold a public hearing. If TTB schedules a public hearing, it will publish a notice of the date, time, and place for the hearing in the Federal Register .

All submitted comments and attachments are part of the rulemaking record and are subject to public disclosure. Do not enclose any material in your comments that you consider confidential or that is inappropriate for disclosure.

TTB will post, and you may view, copies of this document, its supporting materials, and any comments TTB receives about this proposal within the related Regulations.gov docket. In general, TTB will post comments as submitted, and it will not redact any identifying or contact information from the body of a comment or attachment.

Please contact TTB's Regulations and Rulings division by email using the web form available at https://www.ttb.gov/contact-rrd, or by telephone at 202-453-2265, if you have any questions regarding comments on this proposal or to request copies of this document, its supporting materials, or the comments received in response.

Pursuant to the requirements of the Regulatory Flexibility Act (5 U.S.C. chapter 6), TTB certifies that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The proposed rule only amends the standards of identity for brandy at 27 CFR 5.22(d) and imposes no new reporting, recordkeeping, or other administrative requirements. Therefore, no regulatory flexibility analysis is required.

It has been determined that this proposed rule is not a significant regulatory action as defined by Executive Order 12866 of September 30, 1993. Therefore, no regulatory assessment is required.

Trevar D. Kolodny of the Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, drafted this notice of proposed rulemaking.

For the reasons discussed in the preamble, TTB proposes to amend title 27, chapter I, part 5, Code of Federal Regulations, as follows:

The revisions and addition read as follows:

On February 12, 2021, the U.S. Army Corps of Engineers notified the Coast Guard of plans to fund dredging operations on the uppermost turning basin of the Piscataqua River in Portsmouth Harbor. The project consists of widening the uppermost turning basin of the Piscataqua River from 800 feet to 1,200 feet to improve navigation maneuverability and safety.

The project includes dredging approximately 12-14 million cubic yards of silt, blue clay, till and weathered rock from the uppermost turning basin of the Piscataqua River in Portsmouth Harbor. The project will include mechanical dredging, drilling, and blasting operations. The extent of drilling and blasting operations will not be known until the top material has been removed and contractors can locate hard rock spots. The Captain of the Port Northern New England (COTP) has determined that potential hazards associated with dredging operations would be a safety concern for anyone within a 100-yard radius around any vessel, barge, or dredging equipment engaged in dredging operations. Additionally, the COTP has determined that potential hazards associated with the explosives to be used in this operation would be a safety concern for anyone within a 500-yard radius around any vessel, barge, or dredging equipment engaged in blasting operations and any blasting worksites. The Coast Guard is proposing this rule to be effective, and enforceable, from October 15, 2021, through April 15, 2022. If the project is completed prior to April 15, 2022, enforcement of the safety zone will be terminated and notice given via Broadcast Notice to Mariners, Local Notice to Mariners, or both.

The purpose of this rulemaking is to ensure the safety of vessels and the navigable waters within a 100-yard radius around any vessel, barge, or dredging equipment engaged in dredging operations and within a 500-yard radius around any vessel, barge, or dredging equipment engaged in blasting operations and any blasting worksites. The Coast Guard is proposing this rulemaking under authority in 46 U.S.C. 70034 (previously 33 U.S.C. 1231).

The COTP is proposing to establish two safety zones from October 15, 2021, through April 15, 2022. The first safety zone will be a 100-yard radius around any vessel, barge, or dredging equipment actively engaged in dredging operations. The second safety zone will be a 500-yard radius around any vessel, barge, or dredging equipment engaged in blasting operations and any blasting worksites. The 500-yard safety zone will be enforced during active blasting operations and will be suspended once successful detonation has been confirmed and blasting operations have been secured. The Coast Guard will notify the public and local mariners of the 500-yard safety zone through appropriate means, which may include, but are not limited to, publication in the Local Notice to Mariners and Broadcast Notice to Mariners via VHF-FM marine channel 16 in advance of any enforcement. No vessel or person would be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative. The regulatory text we are proposing appears at the end of this document.

We developed this proposed 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 NPRM has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, the NPRM has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, duration, time-of-day and time-of-year of the safety zone. The safety zones will be enforced during periods of active dredging or blasting operations from October 15, 2021, through April 15, 2022. The 500-yard radius safety zone around any vessel, barge, or dredging equipment engaged in blasting operations and any blasting worksites will only be enforced when blasting operations are conducted for short durations. Once blasting operations have been secured, vessel traffic would be able to transit around the 100-yard radius safety zone around any vessel, barge, or dredging equipment actively engaged in dredging operations. Dredging vessel(s) conducting operations will accommodate necessary commerce and movement of cargo through daily coordination with U.S. Army Corps of Engineers, contractors, Portsmouth Pilots, and U.S. Coast Guard. Proper public notice of enforcement will be given through appropriate means, which may include, but are not limited to, publication in the Local Notice to Mariners and Broadcast Notice to Mariners via VHF-FM marine channel 16.

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 proposed rule would not have a significant economic impact on a substantial number of small entities.

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

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

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

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

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

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

We have analyzed this proposed 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 made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves establishing two safety zones near the uppermost turning basin of the Piscataqua River in Portsmouth Harbor that will be enforced periodically from October 15, 2021, through April 15, 2022, that prohibits entry within a 100-yard radius around any vessel, barge, or dredging equipment engaged in dredging operations, and within a 500-yard radius around any vessel, barge, or dredging equipment engaged in blasting operations and any blasting worksites. Normally such actions are categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A preliminary Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

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.

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

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

We accept anonymous comments. Comments we post to https://www.regulations.gov will include any personal information you have provided. For more about privacy and submissions in response to this document, see DHS's eRulemaking System of Records notice (85 FR 14226, March 11, 2020).

Documents mentioned in this NPRM as being available in the docket, and public comments, will be in our online docket at https://www.regulations.gov and can be viewed by following that website's instructions. We review all comments received, but we will only post comments that address the topic of the proposed rule. We may choose not to post off-topic, inappropriate, or duplicate comments that we receive.

For the reasons discussed in the preamble, the Coast Guard is proposing to amend 33 CFR part 165 as follows:

Throughout this document, “we,” “us” and “our” refer to the EPA.

Table 1 lists the document addressed by this proposal with the date that it was adopted by the local air agency and submitted by the California Air Resource Board (CARB).

On February 9, 2018 the submittal for the EKAPCD 2017 RACT SIP was deemed by operation of law to meet the completeness criteria in 40 CFR part 51 Appendix V, which must be met before formal EPA review.

There are no previous versions of the RACT SIP and negative declarations in the EKAPCD portion of the California SIP for the 2008 ozone NAAQS.

Emissions of volatile organic compounds (VOCs) and oxides of nitrogen (NO X ) contribute to the production of ground-level ozone, smog and particulate matter (PM), which harm human health and the environment. Section 110(a) of the CAA requires states to submit regulations that control VOC and NOx emissions. Sections 182(b)(2) and (f) require that SIPs for ozone nonattainment areas classified as Moderate or above implement RACT for any source covered by a Control Techniques Guidelines (CTG) document and for any major source of VOCs or NO X . The EKAPCD is subject to this requirement as it regulates the Eastern Kern ozone nonattainment area that was designated and classified as a Moderate nonattainment area for the 2008 8-hour ozone NAAQS at the time of submittal. 1 Therefore, the EKAPCD must, at a minimum, adopt RACT-level controls for all sources covered by a CTG document and for all major non-CTG sources of VOCs or NO X within the ozone nonattainment area that it regulates. Any stationary source that emits or has the potential to emit at least 100 tons per year (tpy) of VOCs or NO X is a major stationary source in a Moderate ozone nonattainment area (CAA section 182(b)(2), (f) and 302(j)).

Section III.D of the preamble to the EPA's final rule to implement the 2008 ozone NAAQS discusses RACT requirements. 2 It states, in part, that RACT SIPs must contain adopted RACT regulations, certifications (where appropriate) that existing provisions are RACT, and/or negative declarations that no sources in the nonattainment area are covered by a specific CTG. 3 It also provides that states must submit appropriate supporting information for their RACT submissions as described in the EPA's implementation rule for the 1997 ozone NAAQS. 4 The EKAPCD's RACT SIP submittal (“2017 RACT SIP”) and negative declarations provide EKAPCD's analyses of its compliance with the CAA section 182 RACT requirements for the 2008 8-hour ozone NAAQS.

The EPA's technical support document (TSD) has more information about EKAPCD's RACT SIP, negative declarations, and the EPA's evaluations thereof.

This proposal is one of three EPA actions on the EKAPCD 2017 RACT SIP submittal. The other two actions are as follows:

(1) On January 14, 2021, the EPA approved EKAPCD's negative declaration for the CTG category associated with the Oil and Natural Gas Industry (EPA-453/B-16-001). We assessed internet sites for California's Department of Conservation Geologic Energy Management Devisions (CalGEM) Well Finder, CARB's pollution mapping tool, and the California Energy Commission's California Natural Gas Pipelines and determined there were no oil and gas operations within EKAPCD's jurisdiction convered by the Oil and Natural Gas CTG. 5

(2) The amended rules for major source NO X were submitted separately on May 23, 2018 and August 22, 2018. These rules and the RACT certification for major source NO X will be addressed in a separate action.

This proposed action addresses the remainder of the 2017 RACT SIP submission. Additional details about the submission and the EPA's separate actions thereon are available in the TSD.

Generally, SIP rules must require RACT for each category of sources covered by a CTG document as well as each major source of VOCs or NO X in ozone nonattainment areas classified as Moderate or above (see CAA section 182(b)(2)). At the time of submittal, the EKAPCD regulated an ozone nonattainment area classified as Moderate for the 2008 ozone standard (40 CFR 81). Therefore, the EKAPCD rules must implement RACT.

States should also submit for SIP approval negative declarations for those source categories for which they have not adopted RACT-level regulations (because they have no sources above the CTG-recommended applicability threshold), regardless of whether such negative declarations were made for an earlier SIP. 6 To do so, the submittal should provide reasonable assurance that no sources subject to the CTG requirements currently exist in the portion of the ozone nonattainment area that is regulated by the EKAPCD.

The District's analysis must demonstrate that each major source of VOCs or NO X in the ozone nonattainment area is covered by a RACT-level rule. In addition, for each CTG source category, the County must either demonstrate that a RACT-level rule is in place or submit a negative declaration. Guidance and policy documents that we use to evaluate CAA section 182 RACT requirements include the following:

EKAPCD's 2017 RACT SIP provides the District's demonstration that the applicable SIP for the EKAPCD satisfies CAA section 182 RACT requirements for the 2008 8-hour ozone NAAQS. This conclusion is based on EKAPCD's analysis of SIP-approved requirements that apply to the following: (1) Source categories for which a CTG has been issued, and (2) major non-CTG stationary sources of VOC or NO X emissions.

With respect to CTG source categories, EKAPCD analyzed in Section VI., “RACT ANALYSIS,” of the 2017 RACT SIP those rules and source categories that had sources within the District subject to the CTGs. Based on our analysis, the EPA concludes that EKAPCD's analysis has demonstrated that the required rules are in place. In this rulemaking, we propose to find that EKAPCD Rules 410.3, 410.4, 410.8, 410.9, and 412 establish RACT-level controls for the sources within the following CTG categories: “Design Criterial for Stage I Vapor Control Systems—Gasoline Service Stations” (EPA-450/R-75-102), “Control of Volatile Organic Emissions from Solvent Metal Cleaning” (EPA-450/2-77-022), “Control of Volatile Organic Emissions from Existing Stationary Sources—Volume VI: Surface Coating of Miscellaneous Metal Parts and Products” (EPA-450/2-78-015), “Control of Volatile Organic Compound Leaks from Gasoline Tank Trucks and Vapor Collection Systems” (EPA-450/2-78-051), “Control Technique Guidelines for Miscellaneous Metal and Plastic Parts Coatings” (EPA-453/R-08-003), “Control of Volatile Organic Compound Emissions from Wood Furniture Manufacturing Operations” (EPA-453/R-96-007), and “Control of Volatile Organic Compound Emissions from Coating Operations at Aerospace Manufacturing and Rework Operations” (EPA-453/R-97-004). Our TSD has additional information about our evaluation of these rules.

Where there are no existing sources covered by a particular CTG document, or no major non-CTG sources of NO X or VOC, states may, in lieu of adopting RACT requirements for those sources, adopt negative declarations certifying that there are no such sources in the relevant nonattainment area. Table 6 of the 2017 RACT SIP lists EKAPCD's negative declarations where it has no sources subject to the applicable CTGs for the 2008 8-hour ozone NAAQS. These negative declarations are listed in Table 2 below. EKAPCD concludes that it has no sources subject to the CTGs based on a review of its permit files, emission inventory, and consultation with permitting and enforcement staff.

Additionally, EKAPCD determined it had sources exceeding the 100 tpy major source threshold for NO X and VOC. However, Table 5 of the 2017 RACT SIP indicates EKAPCD's negative declaration that there are no non-CTG major VOC sources for the 2008 8-hour ozone NAAQS. As described in more detail in our TSD, we conclude that EKAPCD properly identified all major non-CTG sources requiring RACT.

We reviewed EKAPCD's list of negative declarations in Table 6 of the 2017 RACT SIP and California Emissions Inventory data to verify the District's conclusion that it has no stationary sources subject to the CTG source categories for which it has adopted a negative declaration. We agree with the District's negative declarations in the 2017 RACT SIP and propose to approve them into the SIP.

The TSD includes recommendations for future rule improvements. These recommendations address rule stringency and clarity and update rule language.

As authorized in section 110(k)(3) of the Act, the EPA proposes to approve CARB's submittal of the EKAPCD 2017 RACT SIP, as reflected in Tables 3 and 4. As discussed above, the RACT SIP must document current RACT for sources covered by CTGs and for major non-CTG sources for VOC and NO X emissions. We have determined that the 2017 RACT SIP documents RACT for all CTG sources and non-CTG major VOC sources. For these reasons and the reasons discussed above, we are proposing to approve the District's certification that it has met RACT requirements for items reflected in Tables 3 and 4 for the 2008 8-hour ozone NAAQS as demonstrated in its 2017 RACT SIP.

On October 29, 2020, the Federal Maritime Commission (Commission) issued an Advance Notice of Proposed Rulemaking  1 (ANPRM) to obtain comments on potential regulatory changes recommended in the Fact Finding 30 Interim Report on passenger vessel operator (PVO) refund policies. 2 The proposed changes are intended to provide a clear and consistent policy toward vessel passenger ticket refunds, from the PVOs' financial responsibility instruments filed with the Commission, in the case of nonperformance by the vessel operator. Specifically, the Commission recommended modifying regulations in 46 CFR part 540 to (1) adopt a definition of nonperformance of transportation, and (2) detail the process for obtaining refunds under the PVOs' financial responsibility instruments filed with the Commission. In response to the ANPRM, the Commission received four sets of comments from interested parties. These parties are Cruise Lines International Association (CLIA); Passenger Vessel Association (PVA); The Surety & Fidelity Association of America (SFAA); and Kacie Didier. Under this Notice of Proposed Rulemaking (NPRM), the Commission addresses the comments to the ANPRM and seeks further public comments on the proposed modifications to its regulations in part 540.

On November 6, 1966, Congress enacted Public Law 89-777. Section 2 of the statute (codified at 46 U.S.C. 44103) requires owners and charterers of vessels having berth or stateroom accommodations for 50 or more passengers, and embarking passengers at United States ports, to establish financial responsibility to meet any liability incurred for death or injury to passengers or other persons on voyages to or from United States ports. Section 2 is commonly known as the “Casualty” section. Section 3 of the statute (codified at 46 U.S.C. 44102) requires persons arranging, offering, advertising, or providing transportation on such vessels to establish evidence of financial responsibility to indemnify passengers for nonperformance of the transportation. Section 3 is commonly known as the “Performance” section. The Commission published implementing regulations at 46 CFR part 540 in 1967. 3

Under this program, the Commission issues two types of certificates to PVOs of vessels that: (1) Have berths for 50 or more passengers; and (2) embark passengers from U.S. ports. The first type of Certificate (Performance) is issued by the Commission when a PVO provides the Commission with acceptable evidence of coverage to satisfy liability incurred for nonperformance of transportation up to the amount of unearned passenger revenue (UPR) held by the PVO or the monetary cap set in the Commission's regulation. Such coverage may be in the form of insurance, a guaranty, a surety bond, or escrow agreement (collectively referred to as financial responsibility instruments). 4 The coverage is used to reimburse passengers when the PVO fails to perform cruises as contracted and has taken no further actions to refund passengers. 5 The second type of Certificate (Casualty) is issued by the Commission when a PVO provides the Commission with acceptable evidence of coverage to satisfy any liability incurred for death or injury during a voyage, as provided in the regulations and statute.

There have been few changes to the regulations in part 540 since its inception. Changes have included several increases to the monetary cap for required performance coverage under section 44102, the elimination of the self-insurance option for PVOs, some limitations on the types of entities acceptable as guarantors, and the elimination of certain sliding-scale provisions as to the amount of coverage required. Most recently, the Commission increased the cap on required performance coverage in two annual steps, from $15 million to $22 million in 2014, and then from $22 million to $30 million in 2015. 6 Since 2015, the cap has been adjusted for inflation every two years based upon the U.S. Bureau of Labor Statistics' Consumer Price Index. The current cap is $32 million. 7

In March of 2020, following the arrival of COVID-19 in the U.S., the Centers for Disease Control and Prevention (CDC) issued a “No Sail Order and Suspension of Further Embarkation,” (CDC No Sail Order) causing most PVOs to cease operations. As a consequence, questions arose concerning future cruises and passengers' ability to obtain refunds of monies paid for transportation disrupted by COVID-19. Fact Finding 30 was initiated on April 30, 2020, to investigate the impact of COVID-19 and identify commercial solutions to COVID-19 related issues that interfered with the operation of the cruise industry. The Fact Finding Officer issued an Interim Report on PVO Refund Policies on July 27, 2020, concluding that clearer guidance is needed in determining whether a passenger is entitled to obtain a refund if a PVO cancels a voyage, makes a significant schedule change, or significantly delays a voyage. 8 The Fact Finding Officer proposed recommending certain regulatory changes in order to provide a clear interpretation of nonperformance of transportation, and to modify the appropriate provisions of the Commission's PVO regulations to make clear how passengers may obtain refunds under the PVOs' financial responsibility instruments filed with the Commission. The Commission voted on August 10, 2020, to initiate a rulemaking to implement the recommended changes. The Advance Notice of Proposed Rulemaking (ANPRM) Docket No. 20-15 Passenger Vessel Financial Responsibility was published in the Federal Register on October 14, 2020, seeking comments on potential regulatory changes to implement the recommendations in the Interim Report.

The Fact Finding Officer proposed, among other things, that the Commission provide a clear interpretation of nonperformance of transportation and modify the appropriate provisions of the Commission's PVO regulations in part 540 to make clear how passengers may obtain refunds under the PVOs' financial instruments filed with the Commission. These recommendations were as follows:

The Fact Finding Officer also recommended the Commission mandate that: (1) PVOs provide on their websites clear instructions on how passengers may obtain refunds; and (2) PVOs submit current web addresses showing their refund instructions to the Commission for publication on the Commission's website. 10

As outlined in Section II above, 46 U.S.C. 44102 requires that PVOs file with the Commission evidence of financial responsibility to indemnify passenger for nonperformance of transportation. The Commission's regulations in 46 CFR part 540 do not expressly define what constitutes nonperformance of transportation, but the substantive provisions and required financial responsibility instrument terms indicate that it means the PVO's failure to provide transportation or other accommodations and services subject to part 540, subpart A, 11 in accordance with the terms of the ticket contract between the PVO and passenger. 12

As discussed in the ANPRM, the Commission sought comment on adopting a definition of nonperformance of transportation. The Commission anticipated that implementing this change would involve amending the regulations in part 540, subpart A, to include the definition and revising the language of the forms for financial responsibility instruments (surety bonds, guaranties, and escrow agreements) to reflect coverage in situations under the definition. 13 To that end, the Commission included in the ANPRM the following draft definition:

PVA maintains that the regulatory changes proposed in the ANPRM are outside the Commission's jurisdiction and believes that while the statutory provision at 46 U.S.C. 44102 imposes duties upon a covered PVO to file with the Commission evidence of financial responsibility to indemnify passengers for nonperformance of transport, it does not grant legal authority to the Commission to address the matter of what constitutes nonperformance. Nevertheless, PVA urges that if the Commission elects to go forward with the proposed rule, it should eliminate any reference to delayed sailing in its definition of nonperformance of transportation, and failing that, the time threshold should be a delay of at least 48 hours. PVA is concerned that the proposed definition of nonperformance could provide incentive for a PVO to begin a cruise despite potentially unsafe conditions, such as bad weather, in an effort to avoid a delay being deemed as nonperformance. PVA remarks that the proposal for a 24 hour delay to constitute nonperformance appears to be based on a U.S. Department of Transportation policy regarding delays in scheduled commercial airline transportation and is not an appropriate standard to apply to a scheduled cruise.

SFAA believes the proposed definition of nonperformance is “overly stringent and will increase the number of claims against this obligation, thereby increasing the likelihood of exposure under the surety bond.” SFAA further states that a standard of requiring refunds if boarding is delayed by 24 hours would add a significant burden to PVOs in terms of an increase in full refunds issued, as well as compliance costs to operationalize procedures to process refunds based on a 24-hour delay to the voyage. SFAA contends the 24-hour delay standard for nonperformance would increase “nuisance” claims against PVOs, which would impact how sureties underwrite the obligation. SFAA believes the proposed definition of nonperformance would cause sureties to require PVOs to have more cash on hand or larger lines of credit, and ultimately decrease the number of PVOs eligible to receive a surety bond. SFAA recommends changing the definition of nonperformance to a minimum of 72 hours.

SFAA also expresses concern over uncertainty about what is covered under the bond in response to a claim based on the new definition of nonperformance. Specifically, SFAA argues that a passenger's unilateral cancellation should be excluded from coverage under the bond. SFAA also requests clarity as to what passenger expenses are covered as a result of PVO nonperformance.

Although the Commission regulations require certain coverage and terms to be included in financial responsibility instruments, the regulations do not include uniform procedures regarding how and when passengers may make claims for refunds against the various financial responsibility instruments. The Fact Finding 30 Interim Report recommended that the Commission revise its regulations to make clear how passengers may obtain refunds under these instruments and include specific provisions related to such claims and the timing of refund payments. 14

Neither part 540 nor the financial responsibility instrument forms provide specific instructions on how or when passengers may obtain refunds under a PVO's financial responsibility instrument. For example, the Guaranty Form (Form FMC-133A) provides that Guarantor will make refund payments to passengers when: (1) The PVO and passenger enter into settlement agreement, approved by the Guarantor; or (2) the passenger obtains a final judgment against the PVO and the PVO does not make payment within 21 days. Similarly, the suggested language for Escrow Agreements in Appendix A states that an Escrow Agent will make refund payments to passengers when either: (1) The PVO provides written instructions to the Escrow Agent to make such payment; or (2) the passenger obtains a final judgment against the PVO, the PVO does not make payment within 21 days, and the Escrow Agent receives a certified copy of the court order.

The Fact Finding 30 Interim Report recommended and the ANPRM requested comments on the following general procedure: (1) The passenger makes a request for a refund from a PVO financial responsibility instrument when nonperformance has occurred; and (2) the refund payment is made within a certain period, depending on certain conditions. 15 The Commission anticipates that implementing these changes would involve amending the regulations in part 540, Subpart A and the language of the financial responsibility instruments forms to reflect the new procedure.

PVA comments that while there is a business relationship between a PVO and its financial responsibility instrument provider, no comparable relationship exists between the provider and the cruise ship passenger. PVA believes the Commission should not attempt to create or force such a relationship. Instead, should the Commission go forward with establishing a process for a passenger to claim a refund for nonperformance of transportation, it should specify that the passenger must submit the refund claim directly to the PVO. The PVO would then be responsible to submit the claim to the financial responsibility instrument provider, if the PVO agrees that nonperformance of transportation has occurred and that satisfaction of a claim is warranted.

SFAA “strongly believes” that the PVO should continue to serve as the primary party designated to receive and handle claims submitted by passengers. In a case of liquidation of the PVO, or if there is no response from the PVO, then claims could be submitted to the surety. SFAA maintains that sureties do not generally have the claims handling capability to process individual claims against the financial responsibility instrument. SFAA believes that implementing a system that allows a direct right of action against the surety bond without requiring a judgment will make claim handling more involved, expensive, and tedious. Further, SFAA asserts that if sureties are designated as the direct claims handling entity with an investigatory requirement under the new regulatory regime, many will likely exit the market. SFAA believes that the net effect of the proposed changes would increase the cost of a surety bond, or a lack of availability of surety bonds. SFAA recommends two alternative approaches to the proposed process:

Commission regulations do not currently prescribe how long passengers have after a scheduled voyage to seek a refund from a PVO financial responsibility instrument. The Fact Finding 30 Interim Report recommended that the Commission specify that a PVO may set a reasonable deadline for passenger refund requests, but the deadline may not be less than six months after the scheduled voyage. 16 The Commission included the following draft provision to reflect this recommendation:

The Commission could include this provision in part 540 and require that the financial responsibility instrument specify the time period for passengers to file refund requests.

No comments were received which specifically address the submission of refund requests.

Commission regulations do not currently specify a time period within which passengers must receive a refund under a PVO financial responsibility instrument. The Fact Finding 30 Interim Report recommended that the Commission specify two different timeframes for payment depending on whether nonperformance was due to “a governmental order or declaration”: (1) When nonperformance is due to a governmental order or declaration, full refund payments must be made within 180 days after the passenger requests a refund; and (2) in all other cases, full refund payments must be made within 60 days after the passenger requests a refund. 18 The Interim Report also recommended that a refund payment be deemed timely notwithstanding that the passenger may not immediately have access to the funds due to the rules and processes of any third party services provider. 19

The Commission requested comment on prescribing a deadline for payment of refunds from financial responsibility instruments providers as a general matter. The ANPRM proposed two different timeframes for payment depending on whether nonperformance is due to a governmental order or declaration, and the ANPRM adopted the deadlines recommended in the Interim Report (180 days when there is a governmental order or declaration; 60 days in all other cases).

It is PVA's position that the Commission's proposed bifurcated time frame for refunds, which varies depending on the reason for the cancellation, is potentially confusing and unfair. PVA poses the question of how the regulation would be applied in the case of a governmental order to cancel sailings that applies to some PVOs that are regulated by the Commission, but not all. PVA states that in such a case, smaller PVOs, that may not be subject to a No Sail Order but that voluntarily choose to cancel a cruise in the interest of passenger and crew health and safety, would have to provide requested refunds in a shorter time period than larger PVOs. PVA believes this is an unfair policy distinction and recommends that a period of payment of the refund be no more than 180 days after the customer's claim is submitted, no matter the reason for the nonperformance of transportation.

Should the Commission choose to retain a specific refund process in the event of nonperformance due to a governmental order or declaration, PVA maintains that it should be “very precise” as to what triggers this process. PVA believes that, as a general rule, states, counties, and municipalities have no or very limited authority over vessel safety and navigation. PVA therefore recommends that only orders and declarations from federal agencies with “clear maritime authority” be specified as the triggering events for the refund process.

Commission regulations do not specify in what form refund payments must be made under PVO financial responsibility instruments.

The Fact Finding 30 Interim Report recommended the Commission specify that refund payments must be made in the same manner as the passenger's original payment, e.g., check, electronic funds transfer, or credit card chargeback. 20 The ANPRM requested comments on the recommendation.

No comments were received which specifically address the form of refunds. However, it is the Commission's experience that financial instrument providers will not likely be able to provide refunds in the same manner as the passenger's original payment. The Commission understands refunds provided by financial instruments are typically in the form of checks that are mailed to the passenger.

Commission regulations provide that the PVO financial responsibility instruments must provide coverage for “unearned passenger revenue,” which is defined as passenger revenue received for water transportation and all other accommodations, services, and facilities relating thereto not yet performed; this includes port fees and taxes paid, but excludes such items as airfare, hotel accommodations, and tour excursions. 21

The Fact Finding 30 Interim Report recommended the Commission specify that refund payments must include all fees, including ancillary fees, paid to the PVO by the passenger. The Commission requested comment on whether to expand the definition of unearned passenger revenue and the scope of the ancillary fees to be included in any revised definition. The Fact Finding 30 Interim Report discusses the following types of ancillary charges paid by passengers to PVOs prior to sailing: Gratuities, shore excursions, pre-cruise onboard purchases, port fees, and taxes. Of these, the current definition of unearned passenger revenue expressly includes port fees and taxes and excludes excursions. The Interim Report does not discuss refunds for airfare or hotel accommodation.

To facilitate comment, the Commission included the following draft definition in the ANPRM:

CLIA urges the Commission to clarify that “unearned passenger revenue” (UPR) should include cruise passage fare and related cruise lines goods and services amounts collected by the cruise line, such as port charges and taxes, pre-paid on-board purchases, gratuities, and shore excursions at the cruise line's own or affiliated destinations. CLIA argues that UPR should not include deposits for airfare, non-affiliated shore excursions or other third party provider costs for which the cruise line is not still holding the passenger's deposit or is contractually obligated to pay such deposit to a third-party provider.

CLIA maintains that if a cruise line contracts with an airline, shore hotel resort, attraction or other unaffiliated “arm's length” third party services provider, the cruise line would be acting as an agent for the passenger in booking such accommodations or activities for the passenger's benefit.

If the cruise line has not yet paid or contractually committed any passenger deposits for such items to the third-party provider, the cruise line may refund them to the passenger. However, if these funds have been paid or contractually committed to such third-party providers, the cruise line will have paid, or will have to pay, those funds to the third-party provider on behalf of the passengers. CLIA states that passengers may be entitled to seek funds directly from such third parties. CLIA believes that statutory law and current Commission regulations support its interpretation that UPR is limited to the passenger vessel transportation only and does not extend to other goods and services for which passengers may make advance payments to the cruise line. CLIA also notes that most cruise passengers are offered cancellation insurance arrangements, or other means of protecting such third-party refunds, at time of booking.

The Fact Finding 30 Interim Report recommended the Commission mandate that: (1) PVOs provide on their websites clear instructions on how passengers may obtain refunds; and (2) PVOs submit current website addresses for their refund instructions to the Commission for publication on the Commission's website. 22 The ANPRM envisioned that this recommendation could be implemented by: (1) Revising the Form FMC-131, Application for Certificate of Financial Responsibility, to require PVOs to provide the uniform resource locator (URL) for their refund instructions; and (2) amending § 540.4 to require PVOs to amend their application if the URL changes. The Commission requested comment on this potential change.

In addition to recommendations related to passenger refunds in the event of nonperformance of transportation, the Fact Finding 30 Interim Report also proposed that the Commission amend its regulations to ensure PVO financial responsibility in the event passengers cancel their booking with a PVO prior to or following certain governmental orders or declarations. Specifically, the Fact Finding 30 Interim Report recommended that: (1) A passenger be entitled to a refund if they cancel their booking no more than 60 days prior to a governmental order or declaration that results in the PVO canceling the voyage or delaying boarding of passengers by more than 24 hours; and (2) a passenger be entitled to a future cruise credit if they cancel their booking following the declaration of a public health emergency and the voyage occurs as scheduled.

The ANPRM requested comments on the recommendation regarding passenger refunds when the passenger cancels their booking, and the voyage is subsequently canceled as a result of governmental orders or declarations.

The ANPRM also requested comments on the recommendation regarding the provision of future cruise credit when the passenger cancels their booking following declaration of a public health emergency, but the voyage occurs as scheduled.

CLIA commented on the provision of the proposed rule which entitles passengers to a full refund when the passenger themselves canceled their booking within 60 days prior to a governmental order or declaration and the commensurate cancelled or delayed sailing (so-called “lookback” refunds). It is CLIA's recommendation that the proposed rule should apply only in cases of:

CLIA maintains the correct standard for the type of emergency that would trigger the rulemaking is a federal nationwide “Public Health Emergency” declaration which affects most or all of the country and the cruise industry, such as the COVID-19 pandemic. CLIA also distinguishes an emergency such as the current pandemic, which was slow-developing and uncertain, from a local or regional event such as storm, which may develop quickly. Cruise line cancellations in the case of a local event give rise to a refund for passengers who were booked on the scheduled sailing, but do not lead to anticipatory passenger cancellations as much as 60 days before the sailing date. CLIA also asserts that state and local authorities have jurisdiction over only localized or regional situations that tend to be more limited in geographic scope, such as a highway obstruction that temporarily disrupts traffic to a cruise port. CLIA believes that the inclusion of emergencies that do not at some point directly require cancellation would allow subjective interpretations as to whether the passengers were acting reasonably when they cancelled bookings due to the advent of the situation. Further, CLIA believes this would create incentives for passengers who had terminated bookings for personal reasons to try to capitalize on later cancellation rationales that had no bearing on their decision to cancel.

CLIA also believes that declarations from international organizations should not qualify as governmental declarations for this provision. CLIA contends that cruise lines are not likely to cancel U.S. sailings based on a multinational organizations' warnings unless the U.S. government also decides to issue an order. Further, even if a foreign government took action to prevent embarking passengers at U.S. ports from calling in their jurisdiction, cruise lines could change their itineraries or omit foreign calls, and this would not likely result in either cancellation of the sailing or anticipatory passenger cancellations.

PVA asks the Commission to refrain from imposing a refund policy to include a situation in which a passenger voluntarily cancels a booking following the declaration of a public health emergency, but the voyage nevertheless occurs as scheduled. PVA believes that the proposed rule would go beyond the problem of nonperformance of transportation, as in this case there is no “nonperformance of transportation” as envisioned by 46 U.S.C. 44102. PVA further poses the question of by whom is the public health emergency to be declared (whether a federal, state, or local official). PVA maintains that this type of situation is best handled in the context of the commercial relationship between the cruise operator and the customer. PVA states that while the vessel operator may wish to provide a refund or cruise credit as a matter of company policy, it should not be required to do so by the Commission.

PVA also requests the Commission to make clear that the term “public health emergency” includes only events such as the coronavirus pandemic, in which the gathering of persons on a vessel has the potential to worsen the emergency.

The Commission believes that adding a definition for nonperformance to 46 CFR part 540 would provide clarity to passengers, PVOs, and the participating financial institutions as to when nonperformance has occurred. The Commission has also taken into consideration the potential negative effects of the proposed definition of nonperformance raised by the commenters, particularly the period of time a vessel is delayed as it relates to the definition of nonperformance of transportation. SFAA proposed the definition of nonperformance to be a period of time greater than 24 hours, a minimum of 72 hours, to ensure PVOs are not inundated with claims. The Commission proposes to define nonperformance as when a passenger vessel operator cancels or delays a voyage by three or more calendar days, if the passenger elects not to embark on the delayed or a substitute voyage offered by the PVO. Adoption of the proposed definition will require corresponding changes to all financial instruments.

Due to the proposed definition of nonperformance of transportation and to ensure that passengers are indemnified for nonperformance of transportation, the Commission is proposing a change to require PVOs to report nonperformance of transportation events to the Commission semi-annually. This reporting is necessary in order for the Commission to be responsive to the public and to provide adequate monitoring and statistical information on occurrences of nonperformance. Nonperformance of transportation events occurring between January 1 and June 30 would be reported no later than July 30 of the same calendar year, and events occurring between July 1 and December 31 would be reported no later than January 31 of the following calendar year.

The Commission reiterates its position on the importance of a clear and consistent policy toward refunds from financial instruments in the event of nonperformance of transportation, in an effort to eliminate uncertainty on the part of passengers. The Commission therefore proposes changes to 46 CFR part 540 by adding a Process for obtaining refunds from the financial instrument in the event of nonperformance by a PVO. This process would apply in a situation where the PVO claims procedure provides less than 180 days for submission of claims after nonperformance of transportation, and the passenger wishes to submit a claim after the PVO's deadline for submission has passed, the passenger may still seek reimbursement from the financial instrument after providing written notification to the PVO. This provides the passenger with up to 180 days to submit their claim, first to the PVO or, secondarily, to the financial instrument provider. If proper documentation is provided, the refund payment shall be issued within 90 days of submission of the claim to the financial instrument provider.

The Commission elected the period of 90 days for the refund payment considering PVA's comments which stated that smaller PVOs may be unfairly treated under the ANPRM language. They cited an example wherein smaller PVOs were not subject to Centers for Disease Control and Prevention's (CDC) No Sail Orders, but nonetheless they chose to voluntarily cancel planned cruises for safety reasons. In this example, smaller PVOs would be required to provide refunds in a shorter time period (60 days) relative to larger PVOs (180 days). To address this concern, the NPRM proposes a refund payment, under a PVO financial responsibility instrument, to be made within 90 days of submission of claims to the financial responsibility provider, regardless of the reason for nonperformance.

Subsequent to receiving formal comments to the ANPRM, the Commission engaged in additional discussions regarding cost and availability of PVO financial instruments with representatives of financial instrument providers. It was indicated there likely would be an abandonment of the PVO program by many of the financial instrument providers due to the possible direct interaction with passengers and the lack of a formal judgement. The NPRM proposes passengers first seek refunds from the PVO in order to minimize the direct interaction between passengers and financial instrument providers, and that the financial instrument providers would be permitted to require a formal court judgement.

The Commission is interested in receiving comments from industry stakeholders regarding the potential availability of financial instruments resulting from the proposed change to the definition of nonperformance, and on the proposed process of obtaining refunds from the financial instrument. As discussed in this NPRM, comments received in response to the ANPRM indicate a concern by some stakeholders that the proposed regulatory changes will constrain the current providers of financial instruments from continuing to provide such instruments to PVOs. Commenters have stated that surety companies would be largely unwilling to act as the direct claims handling entity in cases of alleged nonperformance. The Commission is also aware of a concern that banks may view the new regulations as too burdensome and choose not to offer PVOs the option of an escrow account to satisfy PVOs' financial responsibility requirement. In addition, the increased claims activity of commercial providers of travel insurance during the pandemic may influence their determination whether to offer financial instruments to PVOs. Subsequent to receiving formal comments to the ANPRM, the Commission had additional discussions regarding cost and availability of PVO financial instruments with SFAA and Allianz Partners, the largest U.S. travel insurance provider. SFAA reiterated many of the comments received in response to the ANPRM including the likely abandonment of the PVO program by many, if not all, of the surety participants due to the possible direct interaction of passengers with the surety companies and the lack of a court judgement. Further discussion revealed the lack of a court judgement seemed to be the largest obstacle to continued participation. The Commission also spoke with Allianz Partners in an attempt to determine the availability and cost of insurance to fill the void left by the potential abandonment of other financial instruments. It was surprising to learn that Allianz, and likely other travel insurance providers, would have little interest in providing financial coverage to PVOs in the event of nonperformance. The lack of interest appears to be due to the hesitancy of travel insurance providers to broaden their exposure in the cruise sector due to the impact of the pandemic. The Commission seeks further comment on these and any other anticipated effects on the availability of financial instruments, should the proposed regulations take effect. The NPRM proposes that: (1) The passenger makes a request for refund from the Principal in accordance with the ticket contract. If the ticket contract refund procedure provides less than 180 days to submit a claim, the financial instrument will be available after written notification to Principal; (2) If the passenger is unable to resolve the claim within 180 days after nonperformance, as defined in 46 CFR 540.2, occurs, the passenger may submit a claim against the financial instrument as per instructions on the Commission website. The claim must include a copy of the boarding pass, proof and amount of payment, cancellation notice, and dated proof of properly filed claim against the Principal. All documentation must clearly display the vessel and voyage with scheduled and actual date of sailing. At the discretion of the financial instrument provider a judgment may be required prior to resolving the claim; and (3) valid claims must be paid within 90 days of submission of claim to the financial instrument provider.

Additionally, the Commission decided not to propose a refund process that would apply in a situation when the passenger unilaterally cancels their cruise, which is supported by the ANPRM comments questioning whether those cancellations are nonperformance.

The Commission proposes defining Unearned Passenger Revenue as passenger revenue received for water transportation and all other accommodations, services and facilities that have not been performed by the PVO. Passenger revenue will include port fees, taxes and all ancillary fees submitted to the PVO by the passenger. CLIA recommended to modify the definition to exclude such items as airfare, non-affiliated shore excursions, or other third-party provider costs for which the PVO is no longer holding the passenger's deposit or is contractually obligated to pay such deposit to a third-party provider. In order to provide better protection to the consumer, and because PVOs have the existing relationship with the providers of ancillary services, the Commission believes PVOs should be responsible for refunding all monies collected by the PVOs for all services, and facilities not yet performed.

The Commission proposes:

The Commission seeks further comment on whether the Commission should provide an example web page with refund instructions in Part 540 and if so, what it should include.

Your comments must be written and in English. To ensure that your comments are correctly filed in the docket, please include the docket number of this document in your comments.

You may submit your comments via email to the email address listed above under ADDRESSES . Please include the docket number associated with this notice and the subject matter in the subject line of the email. Comments should be attached to the email as a Microsoft Word or text-searchable PDF document.

The Commission will provide confidential treatment for identified confidential information to the extent allowed by law. If your comments contain confidential information, you must submit the following by email to the address listed above under ADDRESSES :

• A transmittal letter requesting confidential treatment that identifies the specific information in the comments for which protection is sought and demonstrates that the information is a trade secret or other confidential research, development, or commercial information.

• A confidential copy of your comments, consisting of the complete filing with a cover page marked “Confidential-Restricted,” and the confidential material clearly marked on each page.

• A public version of your comments with the confidential information excluded. The public version must state “Public Version—confidential materials excluded” on the cover page and on each affected page, and must clearly indicate any information withheld.

The Commission will consider all comments received before the close of business on the comment closing date indicated above under DATES . To the extent possible, we will also consider comments received after that date.

You may read the comments received by the Commission at the Commission's Electronic Reading Room at the address listed above under ADDRESSES .

Under the Regulatory Flexibility Act (RFA), whenever an agency is required to publish general notice of proposed rulemaking, the agency must prepare and make available for public comments an initial regulatory flexibility analysis (IRFA) describing the impact of the proposed rule on small entities, which in this case are PVOs. 23 5 U.S.C. 603. As discussed below in more detail, the Commission does not collect performance data from small PVOs, nor is such specific information published. Therefore, in this analysis, the Commission has used industry-wide published data as a proxy to estimate the impact of the proposed rule on both small and larger PVOs with a comparative assessment as recommended in the RFA guide of the Small Business Administration (SBA). 24 The Commission encourages comments on its analysis from interested parties with supporting data and information.

The requirements for preparing an IRFA of a proposed rule are set forth in 5 U.S.C. 603 and direct federal agencies to address the following topics:

The proposed rule stems from the Commission's Fact Finding Investigation No. 30: COVID-19 Impact on Cruise Industry, which concluded that clearer guidance is needed in determining whether a passenger is entitled to obtain a refund if a PVO cancels a voyage, makes a significant schedule change, or significantly delays a voyage.

As discussed in the background section, 46 U.S.C. 44102 requires certain persons arranging, offering, advertising, or providing transportation on vessels to establish financial responsibility for indemnification of passengers for nonperformance of transportation. The proposed rule seeks to provide a clear and consistent policy toward vessel passenger ticket refunds from the PVOs' financial responsibility instruments filed with the Commission, in the case of nonperformance by the vessel operator. The proposed rule primarily does this by defining nonperformance. The proposed rule would add a definition of nonperformance for which passengers would be entitled to a refund of their prepaid fares where voyages are canceled or delayed for three or more days and the passenger does not opt to accept an alternative voyage. Additionally, the proposed rule changes the definition of UPR to remove the language “excludes such items as airfare, hotel accommodations, and tour excursions,” to include such items in the definition of UPR, if the PVO offers and collects money from the passenger for such items.

As part of this analysis, 5 U.S.C. 603(b)(3) requires a description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply. The SBA has established regulations to determine whether businesses qualify as small entities. 13 CFR part 121. The regulations use the North American Industry Classification System (NAICS) with codes and descriptions to classify businesses and measure their size by either annual receipts (gross annual revenue) or number of employees. 25 The calculation of total annual receipts or number of employees for the purpose of determining the size of a business includes those of the business itself plus those of its domestic and foreign affiliates. 26

As discussed, the proposed rule would modify the regulations in 46 CFR Subpart A of part 540 governing evidence of PVOs financial responsibility for nonperformance of transportation. The regulated businesses that the proposed rule applies to are PVOs. At present, there are a total of 43 PVOs with certificates of financial responsibility for nonperformance issued by the Commission. Pursuant to the SBA regulations in 13 CFR 121.201, PVOs fall under the classification of NAICS code 483112, Deep Sea Passenger Transportation, and under this classification, businesses with a total number of 1,500 employees or less qualify as small. Accordingly, the Commission estimates that 14 out of the 43 certified PVOs (or 33 percent) qualify as small businesses under the size standard of the SBA. While there may be PVOs that report employees of less than 1,500, lines that are subsidiaries of much larger companies would not qualify as small entities for the intent of receiving regulatory relief under the RFA. See 13 CFR 121.106(b).

In terms of the economic impact on small PVOs, the proposed rule would add a definition of nonperformance for which passengers would be entitled to a refund of their prepaid fares where voyages are canceled or delayed for three or more days and the passenger does not opt to accept an alternative voyage. This new definition would potentially increase the number of claims for refunds, which in turn may affect the cost and method used by a PVO to cover the passengers' prepaid fares. In effect, under the proposed definition, PVOs that perform well and on time as scheduled would be less impacted than PVOs that perform poorly. The Commission has no data or information on the performance of the 14 small PVOs (per the specifics of the proposed definition) by which to gauge which ones would be more significantly impacted by the proposed rule, and no such information is published. The proposed rule would require that all certified PVOs semi-annually report instances of non-performance by which the Commission could make this determination in the future. Therefore, the Commission assumes that all of the 14 small PVOs would be impacted by the proposed rule by varying degrees depending on their performance and other factors affecting their performance. The Commission seeks public comments on its assumption and the economic impact of the proposed rule on small PVOs supported by performance data on the cancelation or delay of voyages, as per the proposed definition of nonperformance.

The Commission estimates the total annual cost of this proposed rule to the Federal government to be $145,356, offset by the collection of $64,482 in filing fees, for a net annual cost of $80,874.

The proposed rule would require that PVOs submit additional semi-annual reports on their instances of nonperformance. The estimated annual cost of the additional reports would be $41,670.

The definition of nonperformance under the proposed rule would likely increase instances of non-performance by PVOs and thus obligations on financial instruments filed with the Commission. The obligations on financial instruments may occur when a cruise has been delayed by more than three days or canceled and the passenger desires a refund instead of a credit on a future cruise. In turn, the change in the definition of UPR to include other items in addition to cruise fare (plus fees and taxes) offered and collected by the PVO could increase the amount of the refund and the cost to the PVO or discourage PVOs from offering such items to passengers. Prior to the proposed rule, the passenger vessel program focused on when PVOs ceased operations and canceled remaining cruises. Existing policies regarding cancelations and refunds vary by PVO. In general, most PVOs provide refunds or credits for cancelled voyages or partial refunds for voyages that are forced to end early, but it is unclear whether PVOs may provide refunds for delayed voyages.

In response to the ANPRM, the Surety and Fidelity Association of America noted that because of the likely increase of instances of nonperformance “sureties likely will require PVOs to have stronger balance sheets, specifically more cash on hand or larger lines of credit, thereby narrowing the universe of PVOs eligible to receive a surety bond guaranteeing this obligation.” Also, they claimed that the required amount or value of collateral could be increased.

The increased costs to the PVOs would be from three factors. First, the increased cost of financial instruments to cover UPR because of possible increases in non-performance and issue more credits or refunds for certain delayed voyages now defined as nonperformance under this NPRM. Second, PVOs would have to refund additional purchases by passengers such as airfare and third-party excursions that were previously excluded from the definition of UPR before the proposed rule. Third, for PVOs using escrow accounts, the opportunity cost of having to hold additional cash on hand that is unable to be deployed as capital elsewhere.

To estimate the total cost to the industry, the Commission would need to know:

• The estimated rate of nonperformance by PVOs;

• The likelihood that passengers would request refunds instead of opting for future cruise credits;

• The impact of the prior two items on the cost of financial instruments;

• Whether or not companies offering financial instruments would leave the market, or if PVOs could meet the requirements to obtain financial instruments; and

• Estimated changes to UPR by removing the exclusion of “such items as airfare, hotel accommodations, and tour excursions” from the definition of UPR, to the extent offered and collected by PVOs.

The Commission believes it has an estimate for historical rates of nonperformance. The Commission is not certain on the likelihood that consumers would request refunds instead of receiving credits, nor the size of increase the proposed rule would have on premiums and the ability of PVOs to obtain financial instruments. The lack of data on these items makes it difficult to provide an accurate cost estimate. The Commission seeks public comments on the aforementioned items from interested parties supported by data and additional information.

The Cruise Line International Association (CLIA) publishes data on significant operational incidents that can be used to estimate past nonperformance by PVOs. Significant operational incidents are defined as delays of more than 24 hours to published itinerary, fatalities occurring to either passengers or crew, and serious injury occurring to either passengers or crew. 27

It is difficult to separate out all the significant operational incidents to know for certain which ones would meet the definition of nonperformance under the proposed rule. However, the total number of significant operational incidents reported by CLIA sets an upper bound limit for how often instances of nonperformance, as defined by the proposed rule, have occurred in the past.

Between 2009 and 2019, there were 195 significant operational incidents for an average of 17.7 annually. The data for significant operational incidents is reported globally so the number of instances occurring from U.S. embarkations would be lower. To estimate the number of incidents in the U.S., the ratio of global incidents to global number of passengers was applied to the number of passengers embarking from the U.S. on an annual basis. The estimated number of annual incidents for the U.S. is 8.4.

As previously stated, this estimate serves as an upper bound of how many instances of nonperformance may occur under the proposed rule. U.S. per capita incident rates may vary from the global per capita incident rates. Additionally, CLIA reports that incidents appear to be trending downward.

Using significant operational incidents as a proxy for nonperformance, the next step in this analysis is to compare it to how many instances of nonperformance occur under the existing program.

Under its program, the Commission records when PVOs cease their operations. Since September 2000, 16 PVOs covered by the Commission's program have ceased operations and another company declared bankruptcy but successfully restarted operations later. 28 There have been 17 PVOs over the last 21 years that ceased operations for an average of 0.81 incidents per year, where a company either declared bankruptcy or ceased operations.

Significant operational incidents occur much more frequently than incidents where PVOs cease operations or declare bankruptcy. The estimated number of significant operational incidents is 8.4 annually compared to a rate of 0.81 under the Commission's current program. Adding the average incident rate of a company ceasing operations or declaring bankruptcy to the rate of significant operation incidents would equate to a rate of 9.21 incidents per year where a PVOs financial instrument may be impacted or a 10-fold increase from the current incident rate of nonperformance, when PVOs cease operating. However, this impact is mitigated by the fact that many PVOs on their own terms, including those determined to be small under the SBA guidelines, already provide refunds of prepaid fares to passengers in the case of voyage cancellations. The Commission seeks public comments from interested parties on the above methodology for incidents of nonperformance, other estimates of PVO nonperformance, and the impact the rate of nonperformance would have on surety bond premiums and other PVO financial instruments, with supporting data and information.

For these reasons, the Commission believes that the proposed rule could increase the cost of UPR coverage to PVOs by 25 percent. Based on the investigation in Fact Finding No. 30 and its own research, the Commission estimates the cost of UPR coverage to range from $75,000 for the smallest of PVOs to around $600,000 for the largest. The total cost of current UPR coverage is estimated to be around $9,830,000. Assuming a 25 percent increase, the cost would rise by $2,457,500 to a total of $12,287,500. However, there is uncertainty about how much the cost would rise given the variance in the rate of incidents of nonperformance for each PVO. Breaking down the costs increases by size of PVOs, the total increase for small PVOs would be $425,000 for a total cost of $2,125,000 and for large PVOs would be $2,032,500 for a total cost of $10,162,500.

The removal of the language “excludes such items as airfare, hotel accommodations, and tour excursions” from the definition of unearned passenger revenue might also increase the amount of refunds to passengers (and the cost to the PVO) and the amount of UPR held by PVOs, to the extent that PVOs offered and collected money for such items. Currently, 22 companies' UPR exceeds the $32 million coverage cap set by the Commission and pegged to inflation and thus would be unaffected by rising UPR. For the remaining 21 companies, their UPR would likely rise causing their premiums or money held in escrow to increase. This change may disproportionately impact smaller PVOs since their UPR is below the current coverage cap. The Commission seeks comments on how the change in the definition would increase the amount of refunds to passengers and UPR for PVOs.

The RFA requires agencies to consider significant alternatives for small businesses. The Commission has demonstrated flexibility during the rulemaking process by publishing an ANPRM and taking into consideration the comments from parties impacted by the proposed rule. The Commission responded to comments about the definition of nonperformance by changing the timing element in the proposed definition of nonperformance from 24 hours to three calendar days.

Exempting small entities from the proposed rule would likely keep costs of obtaining certification the same as they are now for small entities. The commission could move forward with the definition of nonperformance and expanded UPR for entities above a specific revenue threshold. However, exempting small entities would mean the consumer protections from the proposed rule would not apply to passengers booking cruises on small PVOs. Therefore, simply exempting small entities would not meet the consumer protection objectives of the proposed rule.

In comments in response to the ANPRM, the Commission has received feedback that there is uncertainty regarding how financial institutions will respond to the proposed rule with respect to the financial instruments they offer. In the most extreme scenario, some surety companies may leave the market entirely and certain PVOs would be forced to switch to escrow accounts or other forms of financial instruments. Delaying the compliance deadline of the proposed rule for small PVOs would allow for the market for financial instruments to adjust to the new conditions resulting from the proposed rule and potentially new financial instruments to emerge. The transition costs of the proposal would be mainly borne by large PVOs. Companies offering financial instruments would have additional time to study the impacts of the proposed rule on small entities. The Commission requests comments on whether a delay for small PVOs would be beneficial and how long of a delay to allow the market for financial instruments to adjust.

The proposed rule could be amended to allow for a longer period of delay before a cruise is defined as nonperforming. For small PVOs, the proposed rule could allow 4 or 5-day delay of scheduled departure. This would reduce the cost to small entities as they would have a lower likelihood of nonperformance. The drawback to this alternative is that it would create a two-tier structure of refund policies for consumers. One of the main objectives of the proposed rule is to provide clarity to consumers on refunds by creating a standard policy. A separate definition of noncompliance for small entities would lessen consumer protections and go against the objectives of the proposed rule by straying from a standard refund policy.

The Commission is not aware of any other federal rules that duplicate, overlap, or conflict with the proposed rule.

The Commission's regulations categorically exclude certain rulemakings from any requirement to prepare an environmental assessment or an environmental impact statement because they do not increase or decrease air, water or noise pollution or the use of fossil fuels, recyclables, or energy. 46 CFR 504.4. The NPRM discusses potential amendments to Commission's program for certifying the financial responsibility of PVOs. This rulemaking thus falls within the categorical exclusion for “[c]ertification of financial responsibility of passenger vessels” under 46 CFR 504.4(a)(2). Therefore, no environmental assessment or environmental impact statement is required.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA) requires an agency to seek and receive approval from the Office of Management and Budget (OMB) before collecting information from the public. 44 U.S.C. 3507. The agency must submit collections of information in proposed rules to OMB in conjunction with the publication of the notice of proposed rulemaking. 5 CFR 1320.11.

The information collection requirements associated with the Application for Certificate of Financial Responsibility filing requirements in part 540 are currently authorized under OMB Control Number 3072-0012. In compliance with the PRA, the Commission has submitted the proposed revised information collection to the Office of Management and Budget and is requesting comment on the proposed revision.

Title: 46 CFR part 540—Application for Certificate of Financial Responsibility.

OMB Control Number: 3072-0012.

Abstract: 46 U.S.C. 44102, 44103 and 46 CFR part 540 require passenger vessel operators to file unearned passenger revenue reports confidentially with the Commission.

Current Action: The proposed rule would amend (1) the Application for Certificate of Financial Responsibility filing requirements adding the website and (2) unearned passenger revenue reports by PVOs adding nonperformance of transportation occurrences. Currently, part 540 requires that passenger vessel operators file unearned passenger revenue only, on a semiannual basis.

Type of Request: Revision of a previously approved collection.

Needs and Uses: The Commission issues certificates (Performance and Casualty) to PVOs for the Indemnification of Passengers for Nonperformance of Transportation and Financial Responsibility to Meet Liability Incurred for Death or Injury to Passengers or Other Persons under Public Law 89-777 (codified as 46 U.S.C. 44102 and 44103).

Frequency: Filings are submitted to the Commission on a semiannual basis.

Type of Respondents: Passenger vessel operators or their duly appointed agents are required to file applications and unearned passenger revenue reports with the Commission.

Number of Annual Respondents: The Commission does not anticipate that the proposed revisions would affect the number of respondents. As a general matter, however, the number of respondents has decreased since the last revision to the information collection. The Commission estimates an annual respondent universe of 48 passenger vessel operators.

Estimated Time per Response: The Commission does not anticipate that the proposed revisions would affect the estimated time per response, which would continue to be 8 person-hours for reporting and recordkeeping requirements contained in the regulations and for completing Form-131.

Total Annual Burden: The Commission does not anticipate that the proposed revisions would affect the number of applications or unearned passenger revenue reports filed, however there will be an increase in the burden associated with each filing and would in fact affect the total annual burden. Due to the increase in the amount of information being collected since the last revision, the Commission expects that the total annual burden will increase. The Commission estimates the total person-hour burden at 2,087 person-hours.

Comments are invited on:

• Whether the collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility;

• Whether the Commission's estimate for the burden of the information collection is accurate;

• Ways to enhance the quality, utility, and clarity of the information to be collected; and

• Ways to minimize the burden of the collection of information on respondents, including the use of automated collection techniques or other forms of information technology.

Please submit any comments, identified by the docket number in the heading of this document, by the methods described in the ADDRESSES section of this document.

The Commission will ensure that any proposed or final rule issued in this proceeding meets the applicable standards in E.O. 12988 titled, “Civil Justice Reform,” to minimize litigation, eliminate ambiguity, and reduce burden.

The Commission assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda). The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda, available at http://www.reginfo.gov/public/do/eAgendaMain.

For the reasons stated in the preamble, the Federal Maritime Commission proposes to amend part 540 of Title 46 Code of Federal Regulations as follows:

Know all persons by these presents, that we __ (Name of applicant), of __ (City), __ (State and country), as Principal (hereinafter called Principal), and __ (Name of Surety), a company created and existing under the laws of __ (State and country) and authorized to do business in the United States as Surety (hereinafter called Surety) are held and firmly bound unto the United States of America in the penal sum of __, for which payment, well and truly to be made, we bind ourselves and our heirs, executors, administrators, successors, and assigns, jointly and severally, firmly by these presents. Whereas the Principal intends to become a holder of a Certificate (Performance) pursuant to the provisions of 46 CFR part 540, subpart A, and has elected to file with the Federal Maritime Commission (Commission) such a bond to insure financial responsibility and the supplying transportation and other services subject to 46 CFR part 540, subpart A.

Whereas this bond is written to assure compliance by the Principal as an authorized holder of a Certificate (Performance) pursuant to subpart A of part 540 of title 46, Code of Federal Regulations, and shall inure to the benefit of any and all passengers to whom the Principal may be held legally liable for any of the damages herein described. Now, therefore, the condition of this obligation is such that if the Principal shall pay or cause to be paid to passengers any sum or sums for which the Principal may be held legally liable by reason of the Principal's failure faithfully to provide such transportation and other accommodations and services 46 CFR 540, subpart A made by the Principal and the passenger while this bond is in effect for the supplying of transportation and other services pursuant to and in accordance with the provisions of subpart A of part 540 of title 46, Code of Federal Regulations, then this obligation shall be void, otherwise, to remain in full force and effect. Whereas this bond is written to assure compliance by the Principal as an authorized holder of a Certificate (Performance) pursuant to 46 CFR part 540, subpart A, and shall inure to the benefit of any and all passengers to whom the Principal may be held legally liable for any of the damages herein described. Now, Therefore, the condition of this obligation is that the penalty amount of this bond shall be available to pay damages made pursuant to passenger claims, if:

(1) The passenger makes a request for refund from the Principal in accordance with the ticket contract. If, the ticket contract refund procedure provides less than 180 days, this bond shall be available after written notification to Principal.

(2) If the passenger is unable to resolve the claim within 180 days after nonperformance, as defined in 46 CFR 540.2, occurs, the passenger may submit a claim against the bond as per instructions on the Commission website. The claim must include a copy of the boarding pass, proof and amount of payment, cancellation notice, and dated proof of properly filed claim against the Principal. All documentation must clearly display the vessel and voyage with scheduled and actual date of sailing. And, Surety reserves the discretion to require a judgement prior to resolving the claim.

(3) Valid claims must be paid within 90 days of submission to the Surety.

The liability of the Surety with respect to any passenger shall not exceed the passage price paid by or on behalf of such passenger. The liability of the Surety shall not be discharged by any payment or succession of payments hereunder, unless and until such payment or payments shall amount in the aggregate to the penalty of the bond, but in no event shall the Surety's obligation hereunder exceed the amount of said penalty. The Surety agrees to furnish written notice to the Federal Maritime Commission forthwith of all suits filed, judgments rendered, and payments made by said Surety under this bond.

This bond is effective the __ day of __, 20 _, 12:01 a.m., standard time at the address of the Principal as stated herein and shall continue in force until terminated as hereinafter provided. The Principal or the Surety may at any time terminate this bond by written notice sent by certified mail, courier service, or other electronic means such as email and fax to the other and to the Federal Maritime Commission at its office in Washington, DC, such termination to become effective thirty (30) days after actual receipt of said notice by the Commission, except that no such termination shall become effective while a voyage is in progress. The Surety shall not be liable hereunder for any refunds due under ticket contracts made by the Principal for the supplying of transportation and other services after the termination of this bond as herein provided, but such termination shall not affect the liability of the Surety hereunder for refunds arising from ticket contracts made by the Principal for the supplying of transportation and other services prior to the date such termination becomes effective.

The underwriting Surety will promptly notify the Director, Bureau of Certification and Licensing, Federal Maritime Commission, Washington, DC 20573, of any claim(s) or disbursements against this bond.

In witness whereof, the said Principal and Surety have executed this instrument on __ day of __, 20_.

Only corporations or associations of individual insurers may qualify to act as Surety, and they must establish to the satisfaction of the Federal Maritime Commission legal authority to assume the obligations of Surety and financial ability to discharge them.

1. Whereas __ (Name of applicant) (Hereinafter referred to as the “Applicant”) is the Owner or Charterer of the passenger Vessel(s) specified in the annexed Schedule (“the Vessels”), which are or may become engaged in voyages to or from United States ports, and the Applicant desires to establish its financial responsibility in accordance with 46 CFR part 540, subpart A, provided that the Federal Maritime Commission (“FMC”) shall have accepted, as sufficient for that purpose, the Applicant's application, supported by this Guaranty, and provided that FMC shall issue to the Applicant a Certificate (Performance) (“Certificate”), the undersigned Guarantor hereby guarantees to discharge the Applicant's legal liability to indemnify the passengers of the Vessels for nonperformance of transportation within the meaning of 46 CFR part 540.2, in the event that:

(1) The passenger makes a request for refund from the Principal in accordance with the ticket contract. If, the ticket contract refund procedure provides less than 180 days, this Guaranty shall be available after written notification to Principal.

(2) If the passenger is unable to resolve the claim within 180 days after nonperformance, as defined in 46 CFR 540.2, occurs, the passenger may submit a claim against the Guaranty as per instructions on the Commission website. The claim must include a copy of the boarding pass, proof and amount of payment, cancellation notice, and dated proof of properly filed claim against the Principal. All documentation must clearly display the vessel and voyage with scheduled and actual date of sailing. And, Guarantor reserves the discretion to require a judgement prior to resolving the claim.

(3) Valid claims must be paid within 90 days of submission to the Guarantor.

2. The Guarantor's liability under this Guaranty in respect to any passenger shall not exceed the amount paid by such passenger; and the aggregate amount of the Guarantor's liability under this Guaranty shall not exceed $ __.

3. The Guarantor's liability under this Guaranty shall attach only in respect of events giving rise to a cause of action against the Applicant, in respect of any of the Vessels, for nonperformance of transportation within the meaning of 46 CFR 540.2, occurring after the Certificate has been granted to the Applicant, and before the expiration date of this Guaranty, which shall be the earlier of the following dates:

(a) The date whereon the Certificate is withdrawn, or for any reason becomes invalid or ineffective; or

(b) The date 30 days after the date of receipt by FMC of notice in writing delivered by certified mail, courier service or other electronic means such as email and fax, that the Guarantor has elected to terminate this Guaranty except that: (i) If, on the date which would otherwise have been the expiration date under the foregoing provisions (a) or (b) of this Clause 3, any of the Vessels is on a voyage whereon passengers have been embarked at a United States port, then the expiration date of this Guaranty shall, in respect of such Vessel, be postponed to the date on which the last passenger on such voyage shall have finally disembarked; and (ii) Such termination shall not affect the liability of the Guarantor for refunds arising from ticket contracts made by the Applicant for the supplying of transportation and other services prior to the date such termination becomes effective.

4. If, during the currency of this Guaranty, the Applicant requests that a vessel owned or operated by the Applicant, and not specified in the annexed Schedule, should become subject to this Guaranty, and if the Guarantor accedes to such request and so notifies FMC in writing or other electronic means such as email and fax, then, provided that within 30 days of receipt of such notice, FMC shall have granted a Certificate, such Vessel shall thereupon be deemed to be one of the Vessels included in the said Schedule and subject to this Guaranty.

5. The Guarantor hereby designates __, with offices at __, as the Guarantor's legal agent for service of process for the purposes of the Rules of the Federal Maritime Commission, in accordance with 46 CFR part 540, subpart A

We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from other concerned governmental agencies (including those in the species' range in Russia and China), Native American Tribes, the scientific community, industry, or any other interested parties concerning this proposed rule.

We particularly seek comments concerning:

(1) The species' biology, range, and population trends, including:

(a) Biological or ecological requirements of the species, including habitat requirements for feeding, breeding, and sheltering;

(b) Genetics and taxonomy;

(c) Historical and current range, including distribution patterns;

(d) Historical and current population levels, and current and projected trends; and

(e) Past and ongoing conservation measures for the species, its habitat, or both.

(2) Factors that may affect the continued existence of the species, which may include destruction, modification, or curtailment of habitat or range; overutilization for commercial, recreational, scientific, or educational purposes; disease; predation; the inadequacy of existing regulatory mechanisms; or other natural or manmade factors.

(3) Biological, commercial trade, or other relevant data concerning any threats (or lack thereof) to this species and existing regulations that may be addressing those threats.

(4) Additional information concerning the historical and current status, range, distribution, and population size of this species, including the locations of any additional populations of this species.

Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include.

Please note that submissions merely stating support for, or opposition to, the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is an endangered or a threatened species must be made “solely on the basis of the best scientific and commercial data available.” You may submit your comments and materials concerning this proposed rule by one of the methods listed in ADDRESSES . We request that you send comments only by the methods described in ADDRESSES .

If you submit information via http://www.regulations.gov, your entire submission—including any personal identifying information—will be posted on the website. If your submission is made via a hardcopy that includes personal identifying information, you may request at the top of your document that we withhold this information from public review. However, we cannot guarantee that we will be able to do so. We will post all hardcopy submissions on http://www.regulations.gov.

Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on http://www.regulations.gov.

Because we will consider all comments and information we receive during the comment period, and base our determination on the best scientific and commercial data available, our final determination may differ from this proposal. Upon consideration of new information we receive (and any comments on that new information), we may conclude based on the best scientific and commercial data available after considering all of the relevant factors that the species is threatened instead of endangered, or we may conclude that the species does not warrant listing as either an endangered species or a threatened species.

Section 4(b)(5) of the Act provides for a public hearing on this proposal, if requested. Requests must be received by the date specified in DATES . Such requests must be sent to the address shown in FOR FURTHER INFORMATION CONTACT . We will schedule a public hearing on this proposal, if requested, and announce the date, time, and place of the hearing, as well as how to obtain reasonable accommodations, in the Federal Register at least 15 days before the hearing. For the immediate future, we will provide these public hearings using webinars that will be announced on the Service's website, in addition to the Federal Register . The use of these virtual public hearings is consistent with our regulations at 50 CFR 424.16(c)(3).

On March 12, 2012, the National Marine Fisheries Service (NMFS) received a petition dated March 8, 2012, from Friends of Animals and WildEarth Guardians to list the Amur sturgeon and 14 related sturgeon species as endangered or threatened species under the Act. NMFS acknowledged receipt of this petition in a letter dated April 14, 2012, and informed the petitioners that NMFS would determine, under section 4 of the Act, whether the petition presents substantial scientific or commercial information indicating that the petitioned action may be warranted. Although the petition was initially sent to NMFS, as a result of subsequent discussions between NMFS and the Service regarding the August 28, 1974, memorandum of understanding pertaining to “Jurisdictional Responsibilities and Listing Procedures Under the Endangered Species Act of 1973,” we have determined that 10 of the 15 petitioned sturgeon species—including the Amur sturgeon—are under the jurisdiction of the Service. In April 2012, the Service notified the petitioners of this jurisdictional finding. On September 24, 2013, we announced in the Federal Register (78 FR 58507) our 90-day finding that the petition presented substantial scientific and commercial information indicating that the petitioned action may be warranted for these 10 sturgeon species.

This document constitutes our review and determination of the status of the Amur sturgeon, our 12-month finding on this species as required by the Act's section 4(b)(3)(B), and our proposed rule to list this species.

We prepared a species status assessment (SSA) report for the Amur sturgeon. The SSA analysis was led by a Service biologist, in consultation with other Service staff and species experts. The SSA report represents a compilation of the best scientific and commercial data available concerning the status of the species, including the impacts of past, present, and future factors (both negative and beneficial) affecting the species. The Service sent the SSA report to six independent peer reviewers and received one response.

A thorough review of the taxonomy, life history, ecology, and overall viability of the Amur sturgeon is presented in the SSA report (Service 2020; available at http://www.regulations.gov ). The following discussion is a summary of the biological background on the species from the SSA report.

The Amur sturgeon ( Acipenser schrenckii ) is one of 27 species of sturgeon in the family Acipenseridae (Fricke et al. 2019, not paginated). The synonyms Acipenser schrenki and Acipenser schrenkii are sometimes used, but are now considered invalid (Fricke et al. 2019, not paginated; ITIS 2019, not paginated). We are not aware of any taxonomic disputes regarding the validity of the Amur sturgeon as a species. Thus, we determined that the Amur sturgeon is a valid species for listing under the Act.

Amur sturgeon are large fish reaching up to 3 meters (m) (10 feet) in length and 190 kilograms (420 pounds) in weight (Zhuang et al. 2002, p. 659). They have a downward-facing mouth, cartilaginous skeleton, and a series of bony plates in rows along their back (Billard and Lecointre 2001, p. 363). Tactile barbels hang from the mouth (Billard and Lecointre 2001, p. 359). A rare brown morph of Amur sturgeon grows more slowly than the more common gray morph (Zhuang et al. 2002, p. 660). The presence of two color morphs (Zhuang et al. 2002, p. 660; Krykhtin and Svirskii 1997, p. 236) indicates some level of ecological or genetic diversity in the Amur sturgeon.

Amur sturgeon live in the Amur River basin along the far eastern border between China and Russia. The species' range includes the main river, its tributaries, and the Amur Estuary. The species was historically found as far west as Nerschinsk, Russia, in the upper Shilka River (Georgi 1775 cited in Vaisman and Fomenko, p. 4) and in all major tributaries of the Amur. Amur sturgeon are rare in areas of the estuary with salinity over 7.5 parts per thousand (ppt) (Koshelev et al. 2014a, p. 1314). The species occurs at low densities in the southern (and possibly northern) Sea of Okhotsk. Very rarely, Amur sturgeon are found in the Sea of Japan (Koshelev et al. 2014a, p. 1313). The species may also be present in very small numbers in Lake Khanka in extreme southeast Russia (Ruban and Qiwei 2010, not paginated), although few authors confirm this.

Amur sturgeon are slow to mature; males require 7 to 12 years, and females 9 to 14 years, before reproducing (Novomodny et al. 2004, p. 19; Zhuang et al. 2002, p. 659). This long time to maturity can slow the species' recovery from disturbance, relative to that of species with shorter generation times. On reaching maturity, fish are between 1.1 and 1.3m (43 to 51 in) long and weigh 6 to 19 kg (13 to 42 pounds; Zhuang et al. 2002, p. 660). Individuals can live up to 60 years (Krykhtin and Svirskii 1997, p. 236) and reproduce every 3 to 4 years (Ruban and Qiwei 2010, not paginated; Vaisman and Fomenko 2006, p. 5; Krykhtin and Svirskii 1997 p. 236).

Spawning adults migrate upstream, mostly in spring (Koshelev et al. 2014b, p. 1126; Zhuang et al. 2002, p. 659; Krykhtin and Svirskii 1997, p. 237; Wei et al. 1997, p. 245). A smaller number of reproductive fish migrate the previous fall (mid-August to late September) and overwinter on the spawning grounds (Ruban 2020, pers. comm.).

The exact distance that fish move upstream is unclear, although fish appear to spawn within the same river regions (lower, middle, upper) as those in which they spend the rest of the year (Ruban and Qiwei 2010, not paginated; Novomodny et al. 2004, p. 18). Few migrations are greater than 500 kilometers (km) (about 300 miles) in length, although some estuary fish travel 1,000 km (600 miles) or more up the river (Novomodny et al. 2004, p. 18) and may spend up to 2 years there prior to reproducing (Krykhtin and Svirskii 1997, p. 237).

Spawning occurs following migration, between May and September. Known spawning sites are primarily in the middle Amur River, including several major grounds in Luobei, Xunke, and Tongjiang counties (Wei et al. 1997, p. 245). This evidence is consistent with findings that the population of Amur sturgeon was historically greatest in this stretch of the river (Krykhtin and Svirskii 1997, p. 237).

Females can lay upwards of 1.3 million eggs in a single spawning, although the norm is between 190,000 and 300,000 eggs (Koshelev et al. 2014b, p. 1127; Zhang 1985 cited in Zhuang et al. 2002, pp. 660-661). In related sturgeon, only about 1 in 2,000 survive their first year post-hatching (Jaric and Gessner 2013, table 1; Jager et al. 2002, table 1). Thereafter, 20 to 90 percent of juvenile fish survive annually (Jaric and Gessner 2013, table 1; Jager et al. 2002, table 1). Although age-specific survival data for Amur sturgeon in particular are not available, the species very likely has similar patterns of survival by age (Kappenmann 2020, pers. comm.).

Larvae hatch faster in warmer compared to colder water, emerging in 3 to 14 days (Krykhtin and Svirskii 1997, p. 237), then likely drift downstream. They begin feeding around 9 days post-hatching (Zhuang et al. 2003, figure 5; Krykhtin and Svirskii 1997, p. 237). After about 30 days, they metamorphose into juvenile fish of about 4 centimeters (cm) (2 inches) in length and 3 grams (0.1 ounces) in weight (Zhuang et al. 1999a and Liu et al. 2000 cited in Zhuang et al. 2002, p. 661). Juveniles feed in shallow shorelines and smaller tributaries and lakes (Zhuang et al. 2002, p. 659).

By 1 year of age, fish average approximately 30 cm (12 inches; Nikolskii 1960 cited in Zhuang et al. 2002, p. 660). Six-year-old individuals may be 90 cm (35 inches), 25-year-old fish 2 m (7 feet), and large 40-year-old fish can approach 2.5 m (8 feet; Zhang 1985 cited in Zhuang et al. 2002, p. 660).

Amur sturgeon prey on larval insects, small mollusks, crustaceans, and fish (Novomody et al. 2004, p. 19; Nikolskii 1960 and Sun et al. 2000 cited in Zhuang et al. 2002, p. 660), with geographic and age-based variation in preferred food items (Kolybov and Koshelev 2014, p. 489; Sun et al. 2000 and Nikolskii 1960 cited in Zhuang et al. 2000, p. 660; Krykhtin and Svirskii 1997, p. 236).

Amur sturgeon are thought to spawn primarily within the same larger river regions as those in which they feed throughout the year (Ruban and Qiwei 2010, not paginated; Novomodny et al. 2004, p. 18). Therefore, we followed the limited literature ( e.g., Koshelev et al. 2014a, entire; Krykhtin and Svirskii 1997, pp. 236-238) and considered fish in four river regions to be the analysis units for our assessment of the species' status. These units are:

• Amur Estuary, inclusive of the few individuals found in the Sea of Japan and Sea of Okhotsk;

• Lower Amur, from Khaborovsk, Russia, to the mouth of the river where it meets the estuary;

• Middle Amur, from Heihe, China, to Khaborovsk, Russia, inclusive of the Zeya and Bureya Rivers, both northern tributaries of the Amur; and

• Upper Amur, upstream of Heihe, China, inclusive of the Shilka and Argun Rivers whose confluence form the Amur headwaters.

Some fish from the Lower, Middle, and Upper Amur may enter the estuary to forage, but this is likely rare (Zhuang et al. 2003, p. 38).

We use the analysis units to describe what we determine to be regions where Amur sturgeon likely have reproduced in at least partially distinct populations, where they may face different conservation threats, and where their status may be different. Although the exact migration routes, spawning locations, delineations between, and levels of interbreeding among fish from these regions are not known, there are clearly different breeding stocks, separated by time and location. For instance, fish from the Zeya and Bureya breed in the Upper and upper Middle Amur (Krykhtin and Svirskii 1997, pp. 235-236), whereas fish from the estuary and lower river migrate upstream to breed between Luobei, Xunke, and Tongjiang counties along the lower Middle Amur (Wei et al. 1997, pp. 245).

Fish that do not reproduce in a given year do not migrate ( e.g., Koshelev et al. 2014a, entire; Krykhtin and Svirskii 1997, pp. 236-238). All estuary fish that reproduce do so only after having migrated upstream into the river. Offspring from the estuary population may spend up to 2 years in the river before reproducing and returning to the estuary to mature (Krykhtin and Svirskii 1997, p. 237).

A series of Amur sturgeon surveys conducted between 2005 and 2011 (Koshelev et al. 2014a, pp. 1310-1314) are the most comprehensive, quantitative appraisal of the species we are aware of, for either contemporary or historical population estimates. A greater than 95 percent decline in the species' abundance was estimated between 1960 and 2010 (Ruban and Qiwei, 2010, not paginated), and sizeable populations now exist only in the Amur Estuary and Lower Amur analysis units (see table 1, below). The species is extirpated from the Upper Amur and largely so from the Middle Amur (Koshelev et al. 2014a, pp. 1313-1316). The remaining population exhibits a skewed sex ratio of 1 female per 2 males, very likely due to preferential poaching of females for caviar and use in aquaculture (Koshelev et al. 2014b, pp. 1127, 1129, and chapter 3 of the SSA for a detailed discussion of sturgeon harvesting).

Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species is an “endangered species” or a “threatened species.” The Act defines an “endangered species” as a species that is in danger of extinction throughout all or a significant portion of its range, and a “threatened species” as a species that is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range. The Act requires that we determine whether any species is an “endangered species” or a “threatened species” because of any of the following factors:

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

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

(C) Disease or predation;

(D) The inadequacy of existing regulatory mechanisms; or

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

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

We use the term “threat” to refer in general to actions or conditions that are known to or are reasonably likely to negatively affect individuals of a species. The term “threat” includes actions or conditions that have a direct impact on individuals (direct impacts), as well as those that affect individuals through alteration of their habitat or required resources (stressors). The term “threat” may encompass—either together or separately—the source of the action or condition or the action or condition itself.

However, the mere identification of any threat(s) does not necessarily mean that the species meets the statutory definition of an “endangered species” or a “threatened species.” In determining whether a species meets either definition, we must evaluate all identified threats by considering the species' expected response and the effects of the threats—in light of those actions and conditions that will ameliorate the threats—on an individual, population, and species level. We evaluate each threat and its expected effects on the species, then analyze the cumulative effect of all of the threats on the species as a whole. We also consider the cumulative effect of the threats in light of those actions and conditions that will have positive effects on the species, such as any existing regulatory mechanisms or conservation efforts. The Secretary determines whether the species meets the definition of an “endangered species” or a “threatened species” only after conducting this cumulative analysis and describing the expected effect on the species now and in the foreseeable future.

The SSA report documents the results of our comprehensive biological review of the best scientific and commercial data available regarding the status of the species, including an assessment of the potential threats to the species. The SSA report does not represent a decision by the Service on whether the species should be proposed for listing as an endangered or threatened species under the Act. It does, however, provide the scientific basis that informs our regulatory decisions, which involve the further application of standards within the Act and its implementing regulations and policies. The following is a summary of the key results and conclusions from the SSA report; the full SSA report can be found at Docket No. FWS-HQ-ES-2020-0100 on http://www.regulations.gov.

To assess the Amur sturgeon's viability, we used the three conservation-biology principles of resiliency, redundancy, and representation (Shaffer and Stein 2000, pp. 306-310). Briefly, resiliency supports the ability of the species to withstand environmental and demographic stochasticity (for example, wet or dry, warm or cold years), redundancy supports the ability of the species to withstand catastrophic events (for example, droughts, large pollution events), and representation supports the ability of the species to adapt over time to long-term changes in the environment (for example, climate changes). In general, the more resilient and redundant a species is and the more representation it has, the more likely it is to sustain populations over time, even under changing environmental conditions. Using these principles, we identified the species' ecological requirements for survival and reproduction at the individual, population, and species levels, and described the beneficial and risk factors influencing the species' viability.

The SSA process can be categorized into three sequential stages. During the first stage, we evaluated the individual species' life-history needs. The next stage involved an assessment of the historical and current condition of the species' demographics and habitat characteristics, including an explanation of how the species arrived at its current condition. The final stage of the SSA involved making predictions about the species' responses to positive and negative environmental and anthropogenic influences. Throughout all of these stages, we used the best scientific and commercial information available to characterize viability as the ability of a species to sustain populations in the wild over time. We use this information to inform our regulatory decision.

In this discussion, we review the biological condition of the species and its resources, and the threats that influence the species' current and future condition, in order to assess the species' overall viability and the risks to that viability.

Unsustainable harvest for caviar and meat consumption is the foremost threat to the Amur sturgeon (Vaisman and Fomenko 2006, entire; Zhuang et al. 2002, p. 659). Both domestic and international demand fuel the market for these products and are a primary reason that 85 percent of sturgeon species are listed as critically endangered or extinct in the wild on the International Union for the Conservation of Nature's Red List (note that while informative the Red List has no legal effect and uses different standards for inclusion than does the Act; Rachler and Reinartz 2017, p. 1).

The threat posed by overfishing is despite both Russian and Chinese prohibition of open commercial fishing and trade of the Amur sturgeon. In China, permits have been required since 2001 (Harris and Shiraishi 2018, pp. 46-47; Wang and Chang 2006, p. 48) and the country's law enforcement efforts limit poaching in Chinese territory (Simonov and Dahmer 2008, p. 130; Novomodny et al. 2004, p. 24). In Russia, the commercial Amur sturgeon fishery has been banned since 1984 and was previously limited or closed by a series of temporary regulations as early as the 1920s (Harris and Shiraishi 2018, p. 9). However, since 1991 Russian state-sanctioned harvests (so-called “test fishing” or “controlled catches”), purportedly for population monitoring, have likely been used as cover for continued fishing and commercial sale (Vaisman and Fomenko 2006, pp. v, 9-18; CITES 2001, p. 35). There is no restriction on the sale of caviar produced from fish caught in test fishing and it is likely that test fishing quotas are regularly exceeded (Vaisman and Fomenko 2006, p. 10). Overall, fishing bans (Wang and Chang 2006, p. 51; Xinhuanet, June 11, 2002) have not been successful at protecting or restoring the species, given the long history of overexploitation and ongoing harvests, both illegal (see below) and state-sanctioned.

Prior to the current set of fisheries regulations, legal overharvest caused a greater than 99 percent decline in the volume of Amur sturgeon caught in Russia between 1891 and 1948 (Kryukov 1894 cited in Krykhtin and Svirskii 1997, pp. 231-232). Fishing records from China similarly indicate that overfishing has caused massive population declines in the Amur sturgeon (Wang and Chang 2006, p. 45). After a peak of 461 mt (508 t) in 1981, the Chinese catch declined precipitously to an average of just less than 120 mt (130 t) between 1996 and 2002, with just 50 and 25 mt (55 and 28 t) caught in the final 2 years (Vaisman and Fomenko 2006, table 6). Overall, the species' population declined by greater than 95% between 1960 and 2010 (Ruban and Qiwei 2010, not paginated).

In the 1990s and early 2000s, the Amur sturgeon was by far the most commonly traded sturgeon species in China (Zhu et al. 2008, p. 31). Although this demand was largely fulfilled with captive-bred fish, the large-scale use of wild-caught Amur sturgeon as broodstock in aquaculture contributed to a crash in Amur sturgeon populations (Simonov and Dahmer 2008, p. 129 and figure 3.4; Wei no date, p. 1). By 2017, some residents of the Amur region within China reported that the fish's population was so low that it could not support a profitable fishery (Harris and Shiraishi 2018, p. 46).

The Amur sturgeon was included in Appendix II of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) in 1998, along with all other species in the order Acipenseriformes not previously listed under Appendix I (CITES 1997a, pp. 80-84; CITES 1997b, pp. 171; Ruban and Qiwei 2010, not paginated; Wang and Chang 2006, p. 48). Both range countries, Russia and China, are Parties to CITES, as is the United States. CITES Parties adopted a series of recommendations to improve regulation of the international sturgeon trade (Harris and Shirashi 2018, pp. 19-22), including reporting of scientifically based quotas for any legal wild-caught sturgeon (CITES 2015, entire; CITES 2010, entire) and a caviar-labeling system to verify its legal origin (CITES 2015; 50 CFR 23.71; USFWS OLE 2008).

Since the inclusion of all sturgeon species in the CITES Appendices in 1998, the proportion of caviar in international trade reported to be of captive-bred origin has climbed from near zero to near 100 percent (CITES Trade database cited in Harris and Shiraishi 2018, p. 25; UNEP-WCMC 2008 p. 31). Since 2011, no quotas for wild-caught Amur sturgeon have been reported to CITES, indicating that no wild-caught Amur sturgeon can be legally traded internationally until quotas are reestablished. This is in line with the existing bans on commercial fishing in Russia and China. Still, some wild-sourced caviar is very likely traded internationally using fraudulent labels or without reporting (UNEP-WCMC 2012, pp. 22). The sale of caviar and meat with mislabeled origin, species, or both makes enforcement difficult (Harris and Shiraishi 2018, Table 9) and it is very challenging for enforcement officials to confidently differentiate wild from captive-bred caviar ( e.g., DePeters et al. 2013, pp. 130-131; Czesny et al. 2000, pp. 147-148). Domestic sale of caviar (including in the United States, China, and Russia) is not subject to CITES labeling requirements, likely facilitating trade in wild-sourced products (Harris and Shiraishi 2018, p. 54; Vaisman & Fomenko 2006, p. 20). In addition, legitimate CITES labels and containers are resold for use in concealing transport of illegal caviar (van Uhm and Siegel 2016, p. 81).

Following the inclusion of the Amur sturgeon in CITES Appendix II in 1998, there was a notable increase in illegal Russia-to-China transport of caviar and meat (Vaisman and Fomenko 2006, p. 24). Fertilized eggs were also confiscated in transit from Russia to China and very likely destined for use in aquaculture (Harris and Shiraishi 2018, p. 40; Vaisman and Fomenko 2006, p. 24).

The Amur River was identified in 2018 as one of the most concerning regions for sturgeon poaching globally (Harris and Shiraishi 2018, p. 12) and an estimated 95 percent of spawning Amur sturgeon are harvested annually (Simonov and Dahmer 2008, p. 47; note: This is 95 percent of the approximately one quarter of all adults that spawn annually, not of all adults in the population). Illegal sturgeon harvesting has been widespread, intense, and sometimes sophisticated, with up to 750 metric tons (mt) (830 U.S. tons (t)) of Amur sturgeon harvested illegally (Erickson et al. 2007, p. 31) and up to 1,000 poachers detained in Russia annually (all sturgeon species, not just Amur sturgeon; Vladivostok News, June 24, 2003). Organized and sometimes violent crime units control the harvest of Amur sturgeon in Russia, especially in the vicinity of Khabarovsk (Vaisman and Fomenko 2006, p. 19; Krykhtin and Svirskii 1997, p. 237), and fishing impacts have been especially intense on the Middle Amur spawning grounds (Krykhtin and Svirskii 1997, p. 237). As a result, the species became markedly less common in the early 2000s (Vaisman and Fomenko, 2006, p. 16).

Although the caviar resulting from test fishing was legal for sale in Russia, between 90 and 100 percent of domestically sold Amur sturgeon was believed to be illegally caught in recent years (Harris and Shiraishi 2018 p. 33; Vaisman and Fomenko 2006, p. 22). Nearly every market stall in the city of Khaborosk sold illegally sourced caviar, and one could place an advance order for up to several metric tons of sturgeon meat (potentially several hundred smaller fish) (Vaisman and Fomenko 2006, p. 20). In 2018, Khabarovsk residents indicated that sturgeon products remained easy to find on the black market (Harris and Shiraishi 2018, p. 40). Russian law does not provide for punishments strong enough to deter poaching (Musing et al. 2019, p. 20; Harris and Shiraishi 2018, p. 40; Erickson et al. 2007, p. 30; Vaisman and Fomenko 2006, p. 18), most arrests led to dismissal of the case before prosecution due to a pardon or the expression of remorse by defendants (Vaisman and Fomenko 2006, p. 17), and Russia remains the largest consumer of Amur sturgeon (Vaisman and Fomenko 2006, pp. iv-vii).

Illegal international trade in Amur sturgeon products adds to the threat faced by the species. About 8 percent of 17 mt (19 t) of Amur sturgeon caviar arriving in the United States between 2000 and 2019 was determined to be illegal and was seized before import (CARS 2020, not paginated; CITES and UNEP-WCMC 2019). However, because of the very nature of illegal trade, its volume cannot be fully captured by the available data. Nonetheless, the United States has been the largest importer of sturgeon and sturgeon products (all Acipenser species) since 1998 (Harris and Shiraishi 2018, p. 26; UNEP-WCMC 2012, p. 22). At least through the mid-2000s, illegal import of sturgeon products to the United States was common among major caviar retailers (Wyler and Sheikh 2013, p. 10; Service 2005, p. 7). Most seized caviar was confiscated because of violations of CITES requirements ( e.g., incorrect label design, missing information, or misidentified species), and some purportedly captive-sourced caviar is likely wild-sourced product misrepresented as of farmed origin (Irving 2021, pers. comm.).

Nearly 3.8 mt (4.2 t) of Amur sturgeon caviar were imported into the European Union between 1998 and 2006 (UNEP-WCMC 2008, p. 31), representing 19 percent of the total reported exports from China and Russia (Engler and Knapp 2008, table 3). Between 2007 and 2015, Belgium alone imported almost 3 mt (3.3 t) of Amur sturgeon—mostly as caviar—and over 14.5 mt (15.9 t) of kaluga-Amur sturgeon hybrid products (Musing et al. 2018, p. 37). Most French vendors said that wild-sourced caviar is no longer available, although one said it could be obtained on the black market (Harris and Shiraishi 2018, p. 45).

A growing trade in sturgeon-containing cosmetics has opened newer markets, especially in Japan (Harris and Shiraish 2018, p. 68), where poached Amur sturgeon products were reported to be continuously available in the mid-2000s (Vaisman and Fomenko 2006, p. 23) and where illegal sturgeon-containing cosmetics were seized in large volumes in 2016 (Harris and Shiraishi 2018, p. 59).

In summary, there is abundant evidence that heavy fishing pressure has for several decades put severe strain on Amur sturgeon populations. The black-market trade and the laundering of wild-caught fish and caviar into the legal market for captive-bred products has continued to negatively affect the species in the wild despite the CITES requirements for international trade in Amur sturgeon. More detail on the harvest and trade of the Amur sturgeon is available in the SSA report.

The main stem of the Amur River remains one of the largest undammed rivers in the world (GRanD 2019, not paginated; Lehner et al. 2011, pp. 494-502; Simonov and Dahmer 2008, p. 185), but repeated proposals to build dams there have occurred for at least 70 years (Simonov and Markina 2010, not paginated). The construction of dams blocks migration routes between Amur sturgeon feeding grounds (downstream) and spawning grounds (upstream); in several major tributaries of the Amur, this has stopped reproduction (Zhuang et al. 2016, p. 66; Wu et al. 2015, pp. 839-842; Gessner et al. 2010, not paginated). Dams can also increase sediment and pollution concentrations, limiting sunlight that benefits egg development and reducing the adhesion of eggs to the substrate (Li et al. 2012, p. 557).

The Russian state hydrological plan for the Amur region does not include development of hydropower dams on the river's main stem, and little regional demand exists for additional electrical capacity on the Russian side of the river (Simonov 2016, not paginated). However, proposals still exist for as many as 13 dams on the Amur River or the Shilka River, its source (Simonov et al. 2019, figure 2).

Some Russian water-management agencies are now promoting flood control for property protection in the Amur floodplain, and Chinese institutions remain interested in future hydropower development as the much larger human population on their side of the river demands electricity (Simonov 2016, not paginated). Construction of any dam on the Lower or lower Middle Amur main stem would be catastrophic for Amur sturgeon by hindering or preventing connectivity (Simonov and Dahmer 2008, pp. 193-196). The Khingansky-Taipinggou Dam, proposed for the Middle Amur, would have severe hydrological impacts on the river, creating a complete barrier to migrating fish (Simonov and Egidarev 2018, pp. 9-10). Until recently, prevailing economic and social conditions made it unlikely that Chinese and Russian counterparts would agree to advance such a project in the next several years (Simonov and Egidarev 2018, p. 10); however, recently thawing China-Russia relations (Chen 2019, pp. 62-64) could now lead to further discussion and construction of a main stem dam.

While the Amur itself remains free-flowing, approximately 100 dams dot its tributaries (Simonov et al. 2019, p. 4). Many of these are small and the impacts of smaller dams on Amur sturgeon are uncertain, but they more likely than not prevent connectivity along stretches of several tributaries and have likely contributed to the species' decline.

Several tributaries also have larger dams; in all such cases, Amur sturgeon have been extirpated from these rivers due in large part to the inability of Amur sturgeon to pass over or around the dams. The Songhua River, a major tributary in the lower section of the Middle Amur, is interrupted by the Baishan, Hongshi, and Xiao Fengman dams (GRanD 2019, not paginated; Lehner et al. 2011, pp. 494-502), which are approximately 150, 50, and 150 m tall, respectively. The Nierji Dam on the Nen River was built in 2006, after the Amur sturgeon was extirpated from this tributary (Lehner et al. 2011; GRanD 2019, not paginated), but because it blocks the route taken by Nen River spawners, its presence would make any restoration efforts there difficult.

Farther upstream, the Zeya and Bureya Rivers are interrupted by dams built in 1975 and 2003, respectively (GRanD 2019, not paginated; Simonov et al. 2019, p. 4; Lehner et al. 2011, pp. 494-502). These two large hydroelectric dams are 115 and 140 m high (Lehner et al. 2011, pp. 494-502), and have the greatest ecological impacts of any of the dams in the Amur basin (Simonov and Dahmer 2008, p. 191). They block Amur sturgeon migrations and destroyed downstream wetlands (Simonov and Egivdarev 2008, p. 192), contributing substantially to the extirpation of the species from these rivers (Koshelev et al. 2014a, pp. 1313, 1316; Krykhtin and Svirskii 1997, p. 237). Another dam downstream of the existing Bureya impoundment began operating in 2017 (Simonov et al. 2019, p. 4) and its presence and effect on the river further limits the potential to restore sturgeon to the Bureya River by making yet a longer stretch of river inaccessible to Amur sturgeon.

Sturgeon are slower swimmers with large bodies; therefore, both fish elevators and fish ladders have been relatively ineffective at allowing sturgeon to transit around dams (Billard and Lecointre 2001, p. 380). For the Amur sturgeon, fish passageways made to allow travel through or around dams must include resting pools between fast velocity runs and must be wider than the maximum tail-beat width during swimming (Cai et al. 2013, p. 153). However, we have no information indicating that such structures are built into dams in the Amur basin, and the best scientific and commercial information available shows that the Amur sturgeon is unable to traverse the larger existing dams constructed in the Amur basin, limiting its range to stretches of river below existing large dams and contributing to its decline. Remaining available spawning grounds are substantially reduced compared to their historical extent.

Pollution of the Amur basin has likely contributed to the decline of the Amur sturgeon, given the volume and extent of pollution in the Amur basin, the susceptibility of the species to pollutants, and reports of large-scale fish kills in polluted river reaches (Simonov and Dahmer 2008, pp. 47, 212-236; Zhang 1985 cited in Zhuang et al. 2003, p. 38). Extensive human settlements, agriculture, and industry—especially but not exclusively in China—all pollute the Amur River and its tributaries with petrochemicals, heavy metals, and persistent organic pollutants such as polychlorinated biphenyls (PCBs) (Jiang et al. 2016, p. 537; Meng et al. 2016, pp. 1-5). Many Amur River fish, including the single Amur sturgeon sampled, contained copper, chromium, arsenic, and mercury (Jiang et al. 2016, p. 540, table 2).

In the late 1990s and early 2000s, pollution in the Lower Amur was considered at an emergency level, and mass fish kills were not uncommon (Erickson 2007, p. 30; Jen 2003, p. 3). Sewage, domestic animal feces, pesticides, petrochemicals, heavy metals, and industrial pollutants including PCBs (Jiang et al. 2016, p. 537; Meng et al. 2016, pp. 1-5; Kondratyeva et al. 2012, p. 186), as well as eutrophication (the process by which waters lose oxygen following extreme plant growth triggered by excessive nutrient inputs) due to fertilizer runoff, all damaged the river basin's ecosystems (Erickson 2007, p. 30; Jen 2003, pp. 2-3).

In the Middle Amur analysis unit, the Zeya and Bureya catchments were substantially polluted with mercury, cadmium, and lead as of 2005 (Kondrat'eva et al. 2013, p. 131). In addition, these two river basins are home to more than 30 reservoirs storing heavily polluted wastewater and mining residues. The potential for future failure of the smaller dams that contain these reservoirs and the consequent release of toxic pollutants into the river system poses a high risk to remaining habitats suitable for Amur sturgeon (Simonov and Dahmer 2008, p. 191).

In 2001, 100 million mt (110 million t) of wastewater containing 2,500 mt (2,800 t) of organic chemicals, 80 mt (88 t) of oil products, more than 1,000 mt (1,100 t) of nitrogenous waste, and 2.5 mt (2.8 t) of phenols were discharged into the Amur from Blagoveschensk, Russia at the boundary of the Middle and Upper Amur (Simonov and Dahmer 2008, p. 2016). In the Upper Amur, including the Shilka, Amgun, and Argun Rivers, illegal gold mining causes sedimentation and turbidity, hampering sturgeon reproductive success (Pacific Environment 2016, not paginated; Egidarev and Simonov 2015, pp. 900, 906-907).

Historically, the Songhua River in the Middle Amur has been the most contaminated tributary (Kondratyeva et al. 2012, p. 185); the Amur sturgeon is extirpated from this river, very likely in part due to pollution (Cai et al. 2013, p. 150; Simonov and Dahmer 2008, p. 129; Novomodny et al. 2004, p. 18). Two industrial accidents at Jilin City, China, contaminated the Songhua (and eventually the Amur River, 1,000 km (600 miles) downstream) in 2005 and 2010. They released a combined 600 mt (660 t) of methyl chloride, trimethyl chloride, nitrobenzene, benzene, aniline, chloroform, chlorobenzene, and other chemicals into the Songhua (Kondratyeva et al. 2012, p. 186; The Guardian, November 25, 2005). Concentrations of these chemicals were as high as 600 times the government-accepted levels (Kondratyeva et al. 2012, p. 186) and were later detected in fish tissues, including those of Amur sturgeon (Kondratyeva et al. 2012, pp. 187-189; Levshina et al. 2009, table 1, p. 779). Also in the Songhua, heavy metals leach into the river from nearby mines (Jen 2003, p. 4), and fish tissues have PCB concentrations up to 10,000 times those in the sediment (Li et al. 1989 cited in Meng et al. 2016, p. 5). Some Amur River fish are even said to smell of chemicals (Simonov and Dahmer 2008, p. 225).

The impacts of pollution on wild Amur sturgeon have not been well-studied, but their life history and some laboratory studies indicate they are likely quite susceptible. Because the Amur sturgeon is a river bottom species, it is exposed to pollutants that accumulate in sediments and in its bottom-dwelling prey (Kasymov 1994 cited in He et al. 2017, p. 10; Kondrat'eva et al. 2013, p. 129; Kocan et al. 1996, p. 161). Larvae and small juveniles may be especially sensitive to petrochemicals polluting the Amur (Kondratyeva and Stukova 2009, p. 46; Bickham et al. 1998, pp. 514-515; Kocan et al. 1996, p. 163), although extrapolating results from laboratory trials to impacts on wild fish is not straightforward (Tabak et al. 2002, table 3; Bickham 1998, pp. 514-515).

Comprehensive toxin concentration data from around the basin and knowledge of the concentration thresholds at which Amur sturgeon are affected are unavailable, and field studies definitively linking population declines to pollution also do not exist, to our knowledge. However, sturgeon are, at least at their early life stages, sensitive to polycyclic aromatic hydrocarbons (PAHs), one class of petrochemicals polluting the Amur (Kondratyeva and Stukova 2009, p. 46; Tabak et al. 2002, table 3; Bickham et al. 1998, pp. 514-515; Kocan et al. 1996, p. 163;). Methyl mercury, another pollutant found in the Amur basin, interferes with sturgeon growth and reproduction and can even cause direct mortality (Depew et al. 2012, table 2; Webb et al. 2006, pp. 447-450).

The future trajectory of water quality in the Amur basin is uncertain, but possibly improving as wastewater and industrial waste treatment capacity have been developed since the early 2000s (Meng et al. 2016, pp. 4-5, table 1). Mercury concentrations in Amur River sediments have declined since the 1990s, likely due to a Russian economic slowdown that limited industrial emissions (Kot et al. 2009, p. 133). In addition, human populations of most Chinese industrial cities in the region are shrinking, as cost-efficient raw materials are exhausted and industry declines (Duhalde et al. 2019, not paginated).

When and how progressing climate change will affect the species is uncertain. Air temperatures in the region are rising (see the SSA report for a detailed analysis), and all species have a thermal maximum; for example, the closely related Yangtze sturgeon becomes stressed above 23 degrees Celsius (°C) (Chang et al. 2017, p. 1449). On the other hand, warmer water can speed the maturation of Amur sturgeon (Krykhtin and Svirskii 1997, p. 237) and so may have short-term positive impacts on the species, but we cannot currently estimate their magnitude or at what point increasing water temperature stops being beneficial. We also do not have information on the water temperatures Amur sturgeon experience at present or reliable projections of what the water temperatures are likely to be in the future. Indirect effects of warming temperatures may impact the Amur sturgeon as climate change progresses. For example, between 1955 and 2014, the average annual duration of ice cover in the Amur basin decreased by 7 days per decade, and the maximum ice thickness decreased by 17 cm (6.7 inches; Vuglinsky and Valantin 2018, p. 83; Ohshima et al. 2016, pp. 10-11). This potentially exposes Amur sturgeon to fishing pressure for a greater proportion of the year.

Hybridization, disease, and predation presently constitute lesser or negligible threats to the viability of the Amur sturgeon and are addressed in more detail in the SSA report (Service 2020, pp. 28-29). Although very little information is available on the genetic structure of wild Amur sturgeon populations, representation of the species would be diminished if its genome were diluted by hybridization with escaped captive-bred fish or other sturgeon species. From a fitness perspective, hybridization can erase locally adaptive features that evolved over evolutionary time, and from a conservation-management perspective, muddled genomes make DNA-based identification of traded specimens more difficult (Ludwig 2006, pp. 6). That said, we are not aware that wild Amur sturgeon have been documented hybridizing with fish escaped from aquaculture facilities yet (Osipov 2020, pers. comm.). However, the presence of over 1,200 sturgeon farms across the whole of China (Bronzi et al. 2017, pp. 260) and confirmed escapes and releases of hybrid fish created in aquaculture suggests it is likely to occur soon, if it has not already (Boscari et al. 2017, pp. 250). The best scientific and commercial information available shows that disease and predation do not presently pose a threat to the viability of the Amur sturgeon.

The primary conservation effort targeting recovery of the Amur sturgeon is the release of captive-bred fish into wild habitats, but these activities are not sufficient to restore wild populations and must employ sound genetic management to avoid the potential impacts of hybridizing maladapted captive-bred fish with wild ones. Whereas some experts have suggested 10 to 11 million fish would need to be released annually to successfully replenish the species (Krykhtin and Gorbach 1994 cited in Koshelev et al. 2014a, p. 1316), no more than 10 percent of this volume has been released, on average, in years since restocking began in 1988 (Simonov and Dahmer 2008, p. 130; Wei et al. 2004, p. 330; Zhuang et al. 2002, p. 361; Qiuzhi and Dajiang 1994, p. 67). As of the early 2000s, 99 percent of the Amur sturgeon produced by China's aquaculture industry (approximately 15 million fish per year) (Wei et al. 2011, figure 2) were sold for meat or caviar (Simonov and Dahmer 2008, p. 131; Wei et al. 2004, p. 330).

We are not aware of any studies that have tracked the growth or reproductive success of Amur sturgeon released from captive-breeding operations. However, when releases do occur, they almost always use very young fish, 30 to 45 days old and weighing in the range of 1 to 5 grams (0.1 ounces). In other sturgeon species, no more than 1 in 2,000 fish survive their first year, although survival rates are much higher thereafter (Jaric and Gessner 2013, table 1; Jager et al. 2002, table 1). If hatcheries grew fish to a larger size before release, their survival and population recovery may improve (Koshelev et al. 2009 and Mikhailova 2004 cited in Koshelev et al. 2014a, p. 1316, scenario 3 in chapter 5 of the SSA, figures 5.2 and 5.3, tables 5.3 and 5.4).

We assessed the current status of the Amur sturgeon in light of the species' demographic and habitat requirements for maintaining low-risk levels of resilience, redundancy, and representation. Resilience is a population-level metric; therefore, we only scored its present levels for the three analysis units where Amur sturgeon are extant (Amur Estuary, Lower Amur, and Middle Amur). The species is extirpated from a large portion of its range, including the entire Upper Amur unit and several major tributaries.

High-resilience units are those in a self-sustaining condition and experiencing little, if any, risk of extirpation; they have relatively higher abundance of adult females, connectivity between feeding and spawning grounds, high water quality, and fish survive to reproduce multiple times. Moderate-resilience units are unlikely to be self-sustaining and are experiencing some level conservation threat that could eventually lead to extirpation. Low- and very-low-resilience units are not self-sustaining, due to ongoing conservation threats; they may become extirpated, perhaps rapidly in the case of very low-resilience units. Highly redundant species have a large number of populations, which safeguards against rare, localized catastrophic events. Representation is a measure of the species' capacity to adapt to changing environments.

The species as a whole is estimated to have experienced a population decline of greater than 95 percent between 1960 and 2010 (Ruban and Qiwei 2010, not paginated). However, using a 1960 baseline underestimates actual historical declines in the species' abundance because intense fishing occurred at least as early as the 1890s (Koshelev et al. 2016, p. 240; Vaisman and Fomenko 2006, p. 11). Sizeable populations now exist only in the Amur Estuary and Lower Amur analysis units (Koshelev et al. 2014a, pp. 1313-1316). The species has a skewed sex ratio of 1 female per 2 males, very likely due to preferential poaching of females for caviar and use in aquaculture (Koshelev et al. 2014b, pp. 1127, 1129), and the largest fish—which are also the most reproductively valuable—have been removed from the population (Koshelev et al. 2014a, table 5).

Our assessment of the resilience of each of the three extant analysis units indicates that none are in self-sustaining condition (see table 2, below). Only the Amur Estuary unit has even moderate resilience. Details of how we determined overall resilience from the four demographic- and habitat-based criteria in table 2, below, can be found in the SSA report.

Amur sturgeon redundancy is considerably reduced compared to its historical level, which was never high, given that the species is endemic to a single large river system. One of four units (the Upper Amur) is extirpated, and the Middle Amur unit is on the brink of extirpation, too. The Amur sturgeon has been extirpated from several major tributaries ( e.g., the Zeya and Bureya) within the Middle and Lower Amur units. Despite the species' low redundancy, we assess that its geographically dispersed nature, across a several-hundred km stretch of the Lower Amur and Estuary, means that complete extinction of the population due to a single catastrophic event is unlikely, at present.

We have very little information about the contemporary population genetic structure of wild Amur sturgeon, making it difficult to fully assess the species' representation. However, we can assess that the variety of ecological settings inhabited by Amur sturgeon is at least somewhat reduced in the last century as the geographic range of the species has contracted to primarily the Lower Amur and Amur Estuary, now excluding the Upper Amur, as well as the Zeya, Bureya, and Songhua Rivers, all tributaries of the Amur. In turn, we expect that adaptive potential of the species is also lower than before, although we cannot quantify this at present.

We note that, by using the SSA framework to guide our analysis of the scientific information documented in the SSA report, we have not only analyzed individual effects on the species, but we have also analyzed their potential cumulative effects. We incorporate the cumulative effects into our SSA analysis when we characterize the current and future condition of the species. To assess the current and future condition of the species, we undertake an iterative analysis that encompasses and incorporates the threats individually and then accumulates and evaluates the effects of all the factors that may be influencing the species, including threats and conservation efforts. Because the SSA framework considers not just the presence of the factors, but to what degree they collectively influence risk to the entire species, our assessment integrates the cumulative effects of the factors and replaces a standalone cumulative effects analysis.

Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species meets the definition of an “endangered species” or a “threatened species.” The Act defines an “endangered species” as a species in danger of extinction throughout all or a significant portion of its range, and a “threatened species” as a species likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range. The Act requires that we determine whether a species meets the definition of an “endangered species” or a “threatened species” because of any of the following factors: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E) other natural or manmade factors affecting its continued existence.

After evaluating threats to the species and assessing the cumulative effect of the threats under the Act's section 4(a)(1) factors, we find that existing threats to the Amur sturgeon—primarily overfishing, loss of connectivity due to dams, and pollution—have caused and will continue to cause a decline in the species' viability through reduction of resilience, redundancy, and representation. For the four historical analysis units, one is extirpated, and the remaining three are not self-sustaining. The species is already extirpated from much of its historical range, including most upstream portions of the Amur basin and several major tributaries where dams block access to spawning grounds and migration routes (Factor A). The Middle Amur unit is on the brink of being the second unit extirpated. Thus, a relatively small portion of the historical range now accounts for most of the remaining Amur sturgeon, increasing the species' susceptibility to stochastic and catastrophic events.

Fish throughout the range experience very intensive fishing pressure, estimated at 95 percent of spawning fish annually (Factor B). This includes fish in the present relative stronghold of the species, the Amur Estuary analysis unit, because they migrate into the river to breed, where they are heavily fished.

Existing conservation measures are Russian and Chinese fishery regulations, the national laws and regulations (Russia, China, U.S., and other CITES Parties) for implementing CITES requirements for international trade in the Amur sturgeon, and limited restocking of wild populations using captive-bred Amur sturgeon. These measures are currently inadequate to stop population declines (Factor D). Organized networks for corrupt and illegal trade of Amur sturgeon caviar and meat, and sometimes involving government officials, create challenges for law enforcement (Vaisman and Fomenko 2006, pp. 14-18). Moreover, it is difficult for even scrupulous law-enforcement agencies to discern between captive-bred and wild-sourced caviar at the point of sale or import. This makes control of illegal harvest and trade challenging (Factors B and D). CITES requirements ( e.g., labeling and quota systems) are not applicable to domestic trade, further hampering law-enforcement efforts to control the sale of wild-caught Amur sturgeon in Russia, where the majority of Amur sturgeon products are consumed (Vaisman and Fomenko 2006, pp. iv-vii; Factors B and D). Pollution is also a widespread threat to the Amur sturgeon's habitat and health (Factor A) and is not well regulated (Factor D).

The species is endemic to a single large river basin and is extirpated from much of its historical range already (lost redundancy). At present, no population has the resilience to be self-sustaining. Among the remaining three extant populations, one has moderate resiliency (Amur Estuary), one has low resiliency (Lower Amur), and one has very low resiliency (Middle Amur). Overfishing and dams have reduced the viability of the Amur sturgeon across its distribution. The vast decrease in population abundance is very likely associated with a decrease in genetic diversity (representation) and adaptive potential. Restocking efforts are not currently sufficient to stop declines in resilience and overall abundance. Thus, after assessing the best scientific and commercial information available, we conclude that the Amur sturgeon currently lacks sufficient resiliency, redundancy, and representation for its continued existence to be secure. We therefore determine that the Amur sturgeon is in danger of extinction throughout all of its range. The species does not fit the statutory definition of a threatened species because it is currently in danger of extinction, whereas threatened species are those in danger of extinction in the foreseeable future.

Under the Act and our implementing regulations, a species may warrant listing if it is in danger of extinction or likely to become so in the foreseeable future throughout all or a significant portion of its range. We have determined that the Amur sturgeon is in danger of extinction throughout all of its range and accordingly did not undertake an analysis of any significant portion of its range. Because the Amur sturgeon warrants listing as endangered throughout all of its range, our determination is consistent with the decision in Center for Biological Diversity v. Everson, 2020 WL 437289 (D.D.C. Jan. 28, 2020), in which the court vacated the aspect of our Final Policy on Interpretation of the Phrase “Significant Portion of Its Range” in the Endangered Species Act's Definitions of “Endangered Species” and “Threatened Species” (79 FR 37578; July 1, 2014) that provided that the Service and NMFS do not undertake an analysis of significant portions of a species' range if the species warrants listing as threatened throughout all of its range.

Our review of the best scientific and commercial information available indicates that the Amur sturgeon meets the definition of an endangered species. Therefore, we propose to list the Amur sturgeon as an endangered species in accordance with sections 3(6) and 4(a)(1) of the Act.

Conservation measures provided to species listed as endangered or threatened species under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition through listing results in public awareness, and encourages and results in conservation actions by Federal, State, Tribal, and local agencies, foreign governments, private organizations, and individuals. The Act encourages cooperation with the States and other countries and calls for recovery actions to be carried out for listed species. The protection required by Federal agencies and the prohibitions against certain activities are discussed, in part, below. Section 7(a) of the Act requires Federal agencies to evaluate their actions with respect to any species that is proposed or listed as an endangered or threatened species and with respect to its critical habitat, if any is designated. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any action that is likely to jeopardize the continued existence of a species proposed for listing or result in destruction or adverse modification of proposed critical habitat. If a species is listed subsequently, section 7(a)(2) of the Act requires Federal agencies to ensure that activities they authorize, fund, or carry out are not likely to jeopardize the continued existence of the species or destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency must enter into consultation with the Service.

An “action” that is subject to the consultation provisions of section 7(a)(2) is defined in our implementing regulations at 50 CFR 402.02 as “all activities or programs of any kind authorized, funded, or carried out, in whole or in part, by Federal agencies in the United States or upon the high seas.” With respect to this species, there are no “actions” known to require consultation under section 7(a)(2) of the Act. Given the regulatory definition of “action,” which clarifies that it applies to activities or programs “in the United States or upon the high seas,” the Amur sturgeon is unlikely to be the subject of section 7 consultations, because the entire life cycle of the species occurs in freshwater and nearshore marine areas outside of the United States unlikely to be affected by U.S. Federal actions. Additionally, no critical habitat will be designated for this species because, under 50 CFR 424.12(g), we will not designate critical habitat within foreign countries or in other areas outside of the jurisdiction of the United States.

Section 8(a) of the Act (16 U.S.C. 1537(a)) authorizes the provision of limited financial assistance for the development and management of programs that the Secretary of the Interior determines to be necessary or useful for the conservation of endangered or threatened species in foreign countries. Sections 8(b) and 8(c) of the Act (16 U.S.C. 1537(b) and (c)) authorize the Secretary to encourage conservation programs for foreign listed species, and to provide assistance for such programs, in the form of personnel and the training of personnel.

The Act and its implementing regulations set forth a series of general prohibitions and exceptions that apply to all endangered wildlife. The prohibitions of section 9(a)(1) of the Act, codified at 50 CFR 17.21, make it illegal for any person subject to the jurisdiction of the United States to import; export; deliver, receive, carry, transport, or ship in interstate or foreign commerce, by any means whatsoever and in the course of commercial activity; or sell or offer for sale in interstate or foreign commerce any species listed as an endangered species. In addition, it is unlawful to take (which includes harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect; or to attempt any of these) endangered wildlife within the United States or on the high seas. It is also illegal to possess, sell, deliver, carry, transport, or ship, by any means whatsoever any such wildlife that has been taken illegally. Certain exceptions apply to employees of the Service, NMFS, other Federal land management agencies, and State conservation agencies. We may issue permits to carry out otherwise prohibited activities involving endangered wildlife under certain circumstances. Regulations governing permits for endangered wildlife are codified at 50 CFR 17.22, and general Service permitting regulations are codified at 50 CFR part 13. With regard to endangered wildlife, a permit may be issued for the following purposes: For scientific purposes, to enhance the propagation or survival of the species, and for incidental take in connection with otherwise lawful activities. The Service may also register persons subject to the jurisdiction of the United States through its captive-bred-wildlife (CBW) program if certain established requirements are met under the CBW regulations (50 CFR 17.21(g)). Through a CBW registration, the Service may allow a registrant to conduct certain otherwise prohibited activities as part of conservation breeding activities that enhance the propagation or survival of the affected species: Take; export or re-import; deliver, receive, carry, transport or ship in interstate or foreign commerce, in the course of a commercial activity; or sell or offer for sale in interstate or foreign commerce. A CBW registration may authorize interstate purchase and sale only between entities that both hold a registration for the taxon concerned. The CBW program is available for species having a natural geographic distribution not including any part of the United States and other species that the Director has determined to be eligible by regulation. The individual specimens must have been born in captivity in the United States. There are also certain statutory exemptions from the prohibitions, found in sections 9 and 10 of the Act. For example, a limited exemption from the prohibitions on import and export is available under section 9(b)(1) for a specimen of fish or wildlife which was held in captivity or in a controlled environment on the date the species is listed under the Act, provided that such holding and any subsequent holding or use of the fish or wildlife was not in the course of a commercial activity.

It is our policy, as published in the Federal Register on July 1, 1994 (59 FR 34272), to identify to the maximum extent practicable at the time a species is listed, those activities that would or would not constitute a violation of section 9 of the Act. The intent of this policy is to increase public awareness of the effect of a proposed listing on proposed and ongoing activities within the range of the species proposed for listing. Based on the best available information, the following actions are unlikely to result in a violation of section 9, if these activities are carried out in accordance with existing regulations and permit requirements; this list is not comprehensive:

(1) Take of the Amur sturgeon in its native range in China and Russia; and

(2) Trade in the Amur sturgeon and its products that is both outside the United States and conducted by persons not subject to U.S. jurisdiction (although this activity would still be subject to CITES requirements).

Based on the best available information, the following activities may potentially result in a violation of section 9 of the Act if they are not authorized in accordance with applicable law; this list is not comprehensive:

(1) Import into the United States of the Amur sturgeon and its products, including fish originating from the wild or captive-bred, without obtaining permits required under Section 10 of the Act and without following applicable CITES requirements at 50 CFR part 23.

(2) Export of the Amur sturgeon and its products, whether originating from the wild or captive-bred, from the United States without obtaining permits required under Section 10 of the Act and without following applicable CITES requirements at 50 CFR part 23.

Separate from its proposed listing as an endangered species, as a CITES-listed species, all international trade of Amur sturgeon by persons subject to the jurisdiction of the United States must also comply with CITES requirements pursuant to Section 9(c), (g) of the Act and 50 CFR part 23. Applicable wildlife import/export requirements established under Section 9(d)-(f) of the Act, the Lacey Act Amendments of 1981 (16 U.S.C. 3371, et seq. ), and 50 CFR part 14 must also be met for Amur sturgeon imports and exports. Questions regarding whether specific activities would constitute a violation of section 9 of the Act should be directed to Mary Cogliano, Chief of the Branch of Permits ( mary_cogliano@fws.gov ).

We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:

(1) Be logically organized;

(2) Use the active voice to address readers directly;

(3) Use clear language rather than jargon;

(4) Be divided into short sections and sentences; and

(5) Use lists and tables wherever possible.

If you feel that we have not met these requirements, send us comments by one of the methods listed in ADDRESSES . To better help us revise the rule, your comments should be as specific as possible. For example, you should tell us the numbers of the sections or paragraphs that are unclearly written, which sections or sentences are too long, the sections where you feel lists or tables would be useful, etc.

We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act (42 U.S.C. 4321 et seq. ), need not be prepared in connection with listing a species as an endangered or threatened species under the Endangered Species Act. We published a notice outlining our reasons for this determination in the Federal Register on October 25, 1983 (48 FR 49244).

A complete list of references cited in this rulemaking is available on the internet at http://www.regulations.gov and upon request from the Branch of Delisting and Foreign Species (see FOR FURTHER INFORMATION CONTACT ).

The primary authors of this proposed rule are staff members of the Service's Branch of Delisting and Foreign Species.

Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below: