Authority

Title V, section 502 of the Housing Act of 1949, as amended; 42 U.S.C. 1472.

The RHS is committed to helping improve the economy and quality of life in rural areas by offering a variety of programs. The Agency offers loans, grants, and loan guarantees to help create jobs, expand economic development, and provide critical infrastructure investments. RHS also provides technical assistance loans and grants by partnering with agricultural producers, cooperatives, Indian tribes, non-profits, and other local, state, and Federal agencies.

Affordable housing is essential to the vitality of communities in rural America. RHS's Single Family Housing Programs give families and individuals the opportunity to purchase, build, repair their existing home, or to refinance their current mortgage under certain criteria. Eligibility for these loans, loan guarantees, or grants is based on income, which varies according to the average median income for each eligible rural area. Through various program options, RHS offers qualifying individuals and families the opportunity to purchase or build a new single family home with no money down, to repair their existing home, or to refinance their current mortgage under certain qualifying circumstances. There are also programs to assist non-profit entities in their efforts to provide new homes or home repair to qualifying individuals and families. One such program is the Section 502 Guaranteed Loan Program, implemented under 7 CFR part 3555, which provides a 90% loan note guarantee to approved lenders which are intended to assist low- and moderate-income households with the opportunity to own adequate, modest, decent, safe, and sanitary dwellings as their primary residence in eligible rural areas.

The SFHGLP offers applicants without sufficient resources to provide the necessary housing on their own account, and unable to secure the credit necessary for such housing from other sources upon terms and conditions, which the applicant can reasonably be expected to fulfill without the guarantee, an opportunity to acquire, build, rehabilitate, improve, or relocate dwellings in rural areas. Eligible applicants may purchase, build, rehabilitate, improve, or relocate a dwelling in an eligible rural area. Applicant eligibility for this program is determined by an approved lender.

The RHS is exploring ways the SFHGLP may be able to assist in breaking down barriers in lending on tribal land. One such way is to use its statutory authority to authorize limited demonstration programs ( i.e., pilot programs) as allowed by law. The objective of these pilot programs is to test new approaches to offering housing under the statutory authority granted to the Secretary, as set forth in 7 CFR 3555.2(b) (Demonstration programs). Such demonstration programs may not be consistent with some of the provisions contained in 7 CFR part 3555. However, any SFHGLP requirements that are statutory will remain in effect. These pilot programs are intended to assist more eligible very low to moderate income applicants seeking to purchase or rehabilitate affordable housing on tribal land. This notification outlines two new pilot programs under the Section 502 SFHGLP, the Tribal Property Valuation Pilot Program and the Tribal Rehabilitation Pilot Program.

Native American stakeholders have identified significant barriers regarding mortgage lending on tribal land. These include obtaining accurate and fair priced appraisals and being able to secure funds to improve a dwelling even when the dwelling is owned without any encumbrances.

With the unique aspects of real estate located on tribal land, it has become increasingly difficult to secure a traditional appraisal that is both accurate and completed at a reasonable price. There are very few local appraisers and lenders are forced to hire appraisers from different counties, and sometimes different states, to complete appraisal reports. These appraisals often yield reports that are very expensive and frequently completed by individuals that are unfamiliar with the local market area. The local market area will have few or no comparable housing units. The result can be an appraisal report that is not accurate, with a value that is not reflective of the true property value, or the report is not completed to industry standards. The Tribal Property Valuation Pilot Program intends to provide more individuals the ability to purchase homes on tribal lands by allowing an alternative appraisal option to obtain the value of the property.

On tribal lands, it is typical to hand down dwellings from one generation to another and many of these dwellings need extensive renovations. In many situations, the property does not have liens. Over time, many of these homes require substantial repairs or restoration. The current SFHGLP regulations do not allow RHS to finance these properties unless the applicant was to purchase the property, instead of inheriting the home, or unless they currently have an existing Single Family Housing Guaranteed Loan.

The National Congress of American Indians (NCAI)  1 estimates that 40% of housing on tribal land is considered substandard, with less than 50% connected to public sewer systems and 16% lacking indoor plumbing. The U.S. Department of Health and Human Services  2 reported that as of 2019, an estimated 5.7 million people living in the United States are American Indian and/or Alaska Native, with approximately 22% living on tribal land. The median household income for American Indian and Alaska Native families is $46,906, compared to $71,664 for non-Hispanic white households. According to the World Population Review, 33 percent of all Native Americans live in poverty. 3 Consequently, many live in homes on tribal lands that are overcrowded and in poor condition.

These statistics show there is a significant need for affordable financial resources to be made available to improve housing conditions on tribal land. Currently, the SFHGLP can assist with purchase transactions on tribal land, which may provide funding for repairs at acquisition. The SFHGLP, however, cannot assist those that already own their own home on tribal land. The Tribal Rehabilitation Pilot Program intends to help those that currently own a home without encumbrances and need to make improvements to ensure these individuals have adequate and safe housing for their families on tribal land.

These pilot programs will provide additional flexibility in lending on tribal lands. One pilot program offers an alternative appraisal option and the other offers funding to rehabilitate homes owned without liens or encumbrances that will facilitate additional homeownership opportunities and allow others to remain in improved and safer homes on tribal land.

The implementation of the Tribal Property Valuation pilot program is an alternative approach to obtain values when providing financing in remote rural properties on tribal lands. Currently, the SFHGLP regulation at 7 CFR 3555.107(d) (Appraisals) requires the lender to “supply a current appraisal report of the property for which the guarantee is requested.” Furthermore, 7 CFR 3555.107(d)(6) (Appraisals) specifies that the “[u]se of an alternative approach to value for appraisals performed in remote rural areas, on tribal lands, or where a lack of market activity exists may be accepted at the Agency's discretion.” Qualified appraisers that understand and are in close proximity to tribal land in rural areas are limited. This forces lenders to often use appraisers that must travel long distances. Many times, the appraisal report will cost substantially more, and, in some cases, the appraiser will not be familiar with the local market which will affect the accuracy of the appraisal report itself.

Typically, Tribally Designated Housing Entities (TDHE), Tribal Housing Authorities (THA), Tribal Housing Programs, and other tribal organizations have experience determining property values, adjustments, satisfactory comparables, cost of improvements, etc. on tribal land. Many Tribes have established relationships with appraisers that are familiar with their market area and trends, however many times travel is required to complete a traditional appraisal report. Additionally, the Agency has appraisal staff who are familiar with lending on tribal land. Building partnerships between Rural Development programs and appraisal staff, lenders, tribal organizations, and appraisers to develop a method to obtain accurate appraisals on tribal land would eliminate a significant barrier in tribal mortgage lending and provide a path to increase affordable homeownership opportunities for tribal members. The alternative method would be a desktop appraisal, as explained in the eligibility requirements section of this notification.

(i) Eligibility Requirements. Approved lenders in the SFHGLP do not require additional approval to participate in this pilot program. Under 7 CFR 3555.107(d)(6), (Appraisals) the “[u]se of an alternative approach to value for appraisals performed in remote rural areas, on tribal lands, or where a lack of market activity exists may be accepted at the Agency's discretion.” This pilot program will allow lenders to provide property information obtained from a qualified entity to either a qualified appraiser or the Agency for review and completion of a desktop appraisal to accurately determine the appraised value of properties located on tribal land. To be eligible for financing under the Tribal Property Valuation Pilot Program, all program requirements of 7 CFR part 3555 must be met, with the following exceptions and/or considerations:

(A) property must be located on tribal land;

(B) property must meet the existing dwelling property standards and new construction inspection requirements described in 7 CFR 3555.202 (Dwelling requirements);

(C) the site must have acceptable water and wastewater disposal systems to ensure the property is decent, safe, sanitary, and meets community standards. Inspections of private water and wastewater disposal systems are required in accordance with 7 CFR 3555.201 (Site requirements);

(D) fees charged by the qualified entity providing the property documentation required to complete the appraisal constitute an eligible loan cost under 7 CFR 3555.101(b) (Eligible costs); and

(E) the applicant(s) and property must meet all other criteria set forth in 7 CFR part 3555.

(ii) Desktop Appraisals. Based on the availability of qualified appraisers, the lender may use one of the following two options to obtain a desktop appraisal on tribal land:

Option 1— When a qualified appraiser is readily available to complete a desktop appraisal, at reasonable terms, the following process will be used:

(A) A qualified entity, as determined by the lender and appraiser, will provide all required property documentation to the lender for consideration. Examples of qualified entities include TDHE, THA, or other entities familiar with housing construction, repair, and conditions on tribal lands. Documentation provided by a party who has a financial interest in the sale of the property may be accepted if the appraiser verifies such data from a disinterested source.

(B) The lender will submit the required property *documentation to the appraiser for review. The appraiser will review the documentation provided by the lender and determine if the information is accurate, reliable, and sufficient to produce a creditable report.

(C) Once all necessary information has been received, the appraiser will complete a desktop appraisal. Upon completion, the appraisal will be provided to the lender for review and acceptance. The appraisal will be included in the complete loan application package submitted to Rural Development for a Conditional Commitment request.

(D) If the lender determines this option is not available, they may use option two.

Option 2— When the lender determines a qualified appraiser is not readily available to complete a desktop appraisal at reasonable terms, a Rural Development Staff Appraiser will become involved, and the following process will be used:

(A) A qualified entity, as determined by the lender and concurred with by Rural Development, will provide all required property documentation to the lender for consideration. Documentation provided by a party who has a financial interest in the sale or financing of the property may be accepted if the Rural Development Staff Appraiser verifies such data from a disinterested source.

(B) The lender will submit the required property *documentation to Rural Development for review. The Rural Development Staff Appraiser will review the documentation provided by the lender and determine if the information is accurate, reliable, and sufficient to produce a creditable report. Once all necessary information has been received, the Rural Development Staff Appraiser will complete a desktop appraisal.

(C) When an approved lender needs to use RD for the desktop appraisal, they will email SFH.GLPDTA@USDA.GOV with their lender name, lender number, contact name, phone number, email address, and property address. A staff member from the Agency will complete the request for the appraisal division to complete a desktop appraisal for the transaction on tribal land. The request will be placed on the national SharePoint for appraisal requests to be completed by the RD team of staff appraisers. The RD appraisal division uses SharePoint to track all appraisal requests and will forward a request out to the lender with all items needed. The appraisal will be completed with USDA identified as the client.

(D) Upon completion, a copy of the appraisal prepared for Rural Development will be provided to the lender and the Policy, Analysis and Communication (PAC) Branch. The lender will have the appraisal available to submit with the rest of the file to the Origination and Processing Division (OPD) in the complete loan application package for a Conditional Commitment request.

(iii) *Documentation. At a minimum, include the following, as applicable:

(A) address of property;

(B) legal description;

(C) assessor data from local website;

(D) status of utilities (present, working condition, etc.);

(E) site plan-approximate well and septic location;

(F) all property structures and any improvements;

(G) copy of floor plan with exterior dimensions and approximate interior walls;

(H) purchase agreement;

(I) seller disclosure statement;

(J) copy of specifications, including materials list for construction and interior finishes ( for new constructions );

(K) scope of rehabilitation/repairs to be completed;

(L) copy of specifications including materials list for repairs and interior finishes;

(M) copy of land leases;

(N) photos of site and street providing access to the site;

(O) prior appraisal assignment results if available;

(P) photos of existing home; exterior front and back, interior photos of each room, interior and exterior photo repair, and rehabilitation items necessary;

(Q) street providing access;

(R) any information deemed relevant to accurately value the property.

(iv) Submission to the Agency. These guaranteed loan applications must be manually underwritten; however, the documents may be uploaded through Guaranteed Underwriting System (GUS). A job aid for this type of submission is available in our USDA LINC Training and Resources Library in the “Loan Origination” menu at the following link: https://www.rd.usda.gov/resources/usda-linc-training-resource-library/loan-origination. Use of the job aid is optional and not required. The lender will use the Lender Loan Closing (LLC) system to load the loan closing documents.

When option 2 is utilized, thus the appraisal is prepared by Rural Development, the requirements of 7 CFR 3555.108(d)(1)(iv) will be waived. All other requirements of 7 CFR 3555.108(d)(1) remain in effect. In all instances, the lender remains responsible for the accuracy of the property documentation provided to complete the appraisal and to ensure compliance with all investor requirements that may apply.

Please be aware investors may require a note be made at loan delivery that a desktop appraisal was used as the appraisal method in the mortgage transaction. The lender is responsible for ensuring all investor requirements are met.

The implementation of the Tribal Rehabilitation pilot program is intended to focus on providing a rehabilitation loan program for homes free of encumbrances on tribal lands. The Agency is proposing to provide loan funds to finance renovations of an existing home without being part of an acquisition, provided the property is on tribal land. Consistent with the statute, the SFHGLP regulation 7 CFR 3555.101(a) (Eligible purposes) identifies the following eligible purposes which loan funds may be utilized for: (1) the construction or purchase of a new dwelling; (2) the cost of acquisition of an existing dwelling; (3) the cost of repairs associated with the acquisition of an existing dwelling; or (4) acquisition and relocation of an existing dwelling.

In addition, 7 CFR 3555.101(d) (Refinancing) authorizes utilizing loan funds for refinancing transactions, in limited circumstances, however funding for repairs associated with a refinance transaction is not permitted.

With many homes on tribal lands being passed on from one generation to the next, many of these homes need renovations to make them safe and bring them up to current codes. Additionally, many of these properties are free of encumbrances, which would enable this pilot to benefit many homes on tribal lands. The pilot program will allow individuals to remain in safe and improved housing on tribal lands and improve their quality of life.

(i) Eligibility Requirements. Approved lenders in the SFHGLP do not require additional approval to participate in this pilot program. The regulation at 7 CFR 3555.101(a) (Eligible purposes) allows the cost of repairs associated with the acquisition of an existing dwelling. Since the inception of the program, the SFHGLP has restricted loan funds from being used to finance solely the rehabilitation of an existing home, without being part of an acquisition. Since many properties on tribal land need significant rehabilitation, this pilot program will allow loan funds to be utilized to finance repairs to existing dwellings located on tribal land that are owned and are free of encumbrances.

To be eligible for financing under the pilot, all program requirements of 7 CFR part 3555 must be met, with the following exceptions and/or considerations:

(A) The home must be located on tribal land;

(B) The home must be owned by the proposed applicant(s), with no outstanding mortgages encumbering or other liens on the property;

(C) The guaranteed loan must have first lien position at closing. The acceptable lien position requirements outlined in 7 CFR 3555.204 (Security requirements) apply for the purpose of this pilot program;

(D) The transaction will be considered as a “purchase” transaction;

(F) The loan amount cannot exceed the as-improved appraised value of the property, only to the extent that the excess represents the financed guarantee fee;

(G) Additional guidance on appraisal requirements may be found in 7 CFR 3555.107(d) (Appraisals);

(H) Property and construction requirements described in 7 CFR 3555.105 (Combination construction and permanent loans) apply;

(I) The site must have acceptable water and wastewater disposal systems to ensure the property is decent, safe, sanitary, and meets community standards.

(J) Inspections of private water and wastewater disposal systems are required in accordance with 7 CFR 3555.201(b) (Site standards);

(K) Upon completion of the repairs, the home must meet the minimum property requirements of Department of Housing and Urban Development (HUD) Handbook 4000.1;

(L) Properties must have adequate hazard insurance on the collateral to protect against fire and weather-related damage (7 CFR 3555.252(b) (Payment of taxes and insurance), and an escrow account for property taxes (if applicable) and hazard insurance will be maintained by the lender.

(M) Manufactured home requirements.

(1) Repairs to existing manufactured homes constitute an eligible loan purpose under the pilot program when the requirements of 7 CFR 3555.208 are met, including: The manufactured home was constructed on or after January 1, 2006; in conformance with the Federal Manufactured Home Construction and Safety Standards (FMHCSS), as evidenced by an affixed Housing and Urban Development (HUD) Data Plate and Certification Label.

(2) The unit inspection is required using one of the following two methods:

Option 1 —Form HUD-309, “HUD Manufactured Home Installation Certification and Verification Report,” completed in accordance with 24 CFR 3286.507(b) by a party qualified as required by 7 CFR 3286.511 such as: a manufactured home or residential building inspector employed by the local authority having jurisdiction over the site of the home, provided that the jurisdiction has a residential code enforcement program; a professional engineer; a registered architect; a HUD-accepted Production Inspection Primary Inspection Agency (IPIA) or a Design Approval Primary Inspection Agency (DAPIA), or an International Code Council (ICC) certified Inspector.

Option 2 —Obtain a certification that the foundation design meets the requirements of either HUD Handbook 4930.3G or HUD Publication 7584, which updated and revised the pre-1996 version of HUD Handbook 4930.3G, “Permanent Foundations Guide for Manufactured Housing (PFGMH).” Certifications referencing either Publication 7584 or Handbook 4930.3G are acceptable. The foundation certification must be from a licensed professional engineer, or registered architect, who is licensed/registered in the state where the manufactured home is located and must attest to compliance with current guidelines of the PFGMH. The certification must be site specific and contain the engineer's or registered architect's signature, seal and/or state license/certification number. This certification can take place of Form HUD-309.

(3) The unit must not have had any alterations or modifications to it since construction in the factory, except for porches, decks or other structures which were built to engineered designs or were approved and inspected by local code officials.

(4) The unit must not have been previously installed on a different homesite.

(5) The unit must have a floor area of not less than 400 square feet.

(6) The unit must meet the Comfort Heating and Cooling Certificate Uo (coefficient of heat transmission) Value Zone for the location.

(7) The towing hitch and running gear must have been removed.

(8) The manufactured home must be classified and taxed (if applicable) as real estate.

(9) The remaining economic life of the property must meet or exceed the 30-year term of the proposed loan.

(N) The applicant(s) and property must meet all other criteria set forth in 7 CFR part 3555. Loan servicing will be conducted in accordance with 7 CFR part 3555.

(ii) Submission to the Agency. These Guaranteed loan applications must be manually underwritten; however, the documents may be uploaded through GUS. A job aid for this type of submission is available in our USDA LINC Training and Resources Library in the “Loan Origination” tab or directly here: https://www.rd.usda.gov/resources/usda-linc-training-resource-library/loan-origination. Use of the job aid is optional and not required.

The lender will use the Lender Loan Closing (LLC) system to load the loan closing documents. The Loan Note Guarantee will be issued prior to the completion of the repairs. Once the repairs are completed, the lender is responsible to go back in the LLC System and complete the Lender Administration Page. A job aid for this task is available in our USDA LINC Training and Resources Library in the “Loan Closing” tab or directly here: https://www.rd.usda.gov/resources/usda-linc-training-resource-library/loan-closing. Use of the job aid is optional and not required.

The regulatory waivers for this pilot program contain no new reporting or recordkeeping burdens under Office of Management and Budget (OMB) control number 0575-0179 that would require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

In accordance with Federal civil rights laws and USDA civil rights regulations and policies, the USDA, its Mission Areas, agencies, staff offices, employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.

Program information may be made available in languages other than English. Persons with disabilities who require alternative means of communication to obtain program information ( e.g., Braille, large print, audiotape, American Sign Language) should contact the responsible Mission Area, agency, or staff office; the USDA TARGET Center at (202) 720-2600 (voice and TTY); or the Federal Relay Service at 711.

To file a program discrimination complaint, a complainant should complete a Form AD-3027, USDA Program Discrimination Complaint Form, which can be obtained online at http://www.ascr.usda.gov/complaint_filing_cust.html, from any USDA office, by calling (866) 632-9992, or by writing a letter addressed to USDA. The letter must contain the complainant's name, address, telephone number, and a written description of the alleged discriminatory action in sufficient detail to inform the Assistant Secretary for Civil Rights (ASCR) about the nature and date of an alleged civil rights violation. The completed AD-3027 form or letter must be submitted to USDA by:

(1) Mail: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, Washington, DC 20250-9410; or

(2) Fax: (833) 256-1665 or (202) 690-7442; or

(3) Email: Program.Intake@usda.gov.

DOE maintains previously approved incorporations by reference and incorporates by reference the following industry standard into part 430:

AHAM Standard DH-1-2022, Energy Measurement Test Procedure for Dehumidifiers, copyright 2022 (“AHAM DH-1-2022”).

A copy of AHAM DH-1-2022 can be obtained from the Association of Home Appliance Manufacturers (“AHAM”), 1111 19th Street NW, Suite 402, Washington, DC 20036, (202) 872-5955; or www.aham.org.

For a further discussion of this standard, see section IV.N of this document.

Dehumidifiers are included in the list of “covered products” for which DOE is authorized to establish and amend energy conservation standards and test procedures. (42 U.S.C. 6293(b)(13); 42 U.S.C. 6295(cc)) DOE's energy conservation standards and test procedures for dehumidifiers are currently prescribed at 10 CFR 430.32(v); and 10 CFR part 430, subpart B, appendix X (“appendix X”) and appendix X1 (“appendix X1”), respectively. The following sections discuss DOE's authority to establish test procedures for dehumidifiers and relevant background information regarding DOE's consideration of test procedures for this product.

The Energy Policy and Conservation Act, Public Law 94-163, as amended (“EPCA”), 1 authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. (42 U.S.C. 6291-6317) Title III, Part B of EPCA  2 established the Energy Conservation Program for Consumer Products Other Than Automobiles, which sets forth a variety of provisions designed to improve energy efficiency. These products include dehumidifiers, the subject of this document. (42 U.S.C. 6291(34); 42 U.S.C. 6293(b)(13); 42 U.S.C. 6295(cc))

The energy conservation program under EPCA consists essentially of four parts: (1) testing, (2) labeling, (3) Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA specifically include definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296).

The testing requirements consist of test procedures that manufacturers of covered products must use as the basis for (1) certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA (42 U.S.C. 6295(s)), and (2) making other representations about the efficiency of those products (42 U.S.C. 6293(c)). Similarly, DOE must use these test procedures to determine whether the products comply with any relevant standards promulgated under EPCA. (42 U.S.C. 6295(s))

Federal energy efficiency requirements for covered products established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297) DOE may, however, grant waivers of Federal preemption for particular State laws or regulations, in accordance with the procedures and other provisions of EPCA. (42 U.S.C. 6297(d))

Under 42 U.S.C. 6293, EPCA sets forth the criteria and procedures DOE must follow when prescribing or amending test procedures for covered products. EPCA requires that any test procedures prescribed or amended under this section shall be reasonably designed to produce test results which measure energy efficiency, energy use, or estimated annual operating cost of a covered product during a representative average use cycle (as determined by the Secretary) or period of use and shall not be unduly burdensome to conduct. (42 U.S.C. 6293(b)(3))

EPCA also requires that, at least once every 7 years, DOE evaluate test procedures for each type of covered product, including dehumidifiers, to determine whether amended test procedures would more accurately or fully comply with the requirements for the test procedures to not be unduly burdensome to conduct and be reasonably designed to produce test results that reflect energy efficiency, energy use, and estimated operating costs during a representative average use cycle or period of use. (42 U.S.C. 6293(b)(1)(A))

If the Secretary determines, on her own behalf or in response to a petition by any interested person, that a test procedure should be prescribed or amended, the Secretary shall promptly publish in the Federal Register proposed test procedures and afford interested persons an opportunity to present oral and written data, views, and arguments with respect to such procedures. The comment period on a proposed rule to amend a test procedure shall be at least 60 days and may not exceed 270 days. In prescribing or amending a test procedure, the Secretary shall take into account such information as the Secretary determines relevant to such procedure, including technological developments relating to energy use or energy efficiency of the type (or class) of covered products involved. (42 U.S.C. 6293(b)(2)) If DOE determines that test procedure revisions are not appropriate, DOE must publish its determination not to amend the test procedures. (42 U.S.C. 6293(b)(1)(A)(ii))

In addition, EPCA requires that DOE amend its test procedures for all covered products to integrate measures of standby mode and off mode energy consumption into the overall energy efficiency, energy consumption, or other energy descriptor, unless the current test procedure already incorporates the standby mode and off mode energy consumption, or if such integration is technically infeasible. (42 U.S.C. 6295(gg)(2)(A)) If an integrated test procedure is technically infeasible, DOE must prescribe separate standby mode and off mode energy use test procedures for the covered product, if a separate test is technically feasible. Id. Any such amendment must consider the most current versions of the IEC 62301  3 and IEC Standard 62087  4 as applicable. Id.

DOE is publishing this final rule in satisfaction of the 7-year review requirement specified in EPCA. (42 U.S.C. 6293(b)(1)(A))

DOE last amended the test procedure for dehumidifiers at appendix X on July 31, 2015 (“July 2015 Final Rule”), to provide technical clarifications and improve repeatability of the test procedure. 80 FR 45801. The July 2015 Final Rule also established a new test procedure for dehumidifiers at appendix X1 that, among other things, changed the test conditions for portable dehumidifiers and established separate provisions for testing whole-home dehumidifiers. Id. Manufacturers were not required to use appendix X1 until the compliance date of a subsequent amendment to the energy conservation standards for dehumidifiers. On June 13, 2016, DOE published a final rule establishing amended energy conservation standards for dehumidifiers, for which compliance, and the use of appendix X1, was required beginning June 13, 2019. 81 FR 38337.

On June 30, 2021, DOE published in the Federal Register an early assessment review request for information (“June 2021 RFI”) in which it sought data and information regarding issues pertinent to whether an amended test procedure would more accurately or fully comply with the requirement that the test procedure produces results that measure energy use during a representative average use cycle for the product without being unduly burdensome to conduct. 86 FR 34640. DOE also requested comments on specific topics relevant to the proposed dehumidifier test procedure, including updates to industry test standards, variable-speed dehumidifiers, psychrometer setup, network functions, and ventilation air for whole-home dehumidifiers. Id.

On June 9, 2022, DOE published in the Federal Register a notice of proposed rulemaking (“June 2022 NOPR”) proposing to reference the current version of an applicable industry standard, allow the rating test period to be two or six hours, permit the use of a sampling tree in conjunction with an aspirating psychrometer or relative humidity sensor, and specify for dehumidifiers with network capabilities that all network functions must be disabled throughout testing. DOE requested comments from interested parties on the proposal. 87 FR 35286. DOE held a public meeting related to the June 2022 NOPR on July 12, 2022.

In response to the June 2022 NOPR, DOE received comments from the interested parties listed in Table II.1.

A parenthetical reference at the end of a comment quotation or paraphrase provides the location of the item in the public record. 5 To the extent that interested parties have provided written comments that are substantively consistent with any oral comments provided during the July 12, 2022 public meeting, DOE cites the written comments throughout this final rule. Any oral comments provided during the webinar that are not substantively addressed by written comments are summarized and cited separately throughout this final rule.

In this final rule, DOE amends the test procedures for dehumidifiers as follows:

(1) Incorporate by reference the most recent version of the relevant industry test procedure, AHAM DH-1-2022, “Energy Measurement Test Procedure for Dehumidifiers”;

(2) Amend the definitions at 10 CFR 430.2 for “portable dehumidifier” and “whole-home dehumidifier” to reference the manufacturer instructions available to a consumer as they relate to the ducting configuration and installation;

(3) Change the rating test period in sections 4.1.1, 4.1.2, and 5.4 of appendix X1 to 2 hours;

(4) Add a provision in section 3.1.1.2 of appendix X1 allowing for the use of a sampling tree for all dehumidifier tests; and

(5) Add a requirement in section 3.1.2.4 of appendix X1 that dehumidifiers be tested in accordance with Section 5.5 of AHAM DH-1-2022, including with the network functions in the “off” position if it can be disabled by the end-user; otherwise test in the factory default setting.

(6) Remove appendix X and references to appendix X at 10 CFR 430.3 and 10 CFR 430.23.

The adopted amendments are summarized in Table II.1 compared to the test procedure provision prior to the amendment, as well as the reason for the adopted change.

DOE has determined that the amendments described in section III of this document and adopted in this document will not alter the measured efficiency of dehumidifiers or require retesting or recertification solely as a result of DOE's adoption of the amendments to the test procedures. Additionally, DOE has determined that the amendments will not increase the cost of testing. DOE's actions are addressed in detail in section III of this document.

The effective date for the amended test procedures adopted in this final rule is 30 days after publication of this document in the Federal Register . Representations of energy use or energy efficiency must be based on testing in accordance with the amended test procedures beginning 180 days after the publication of this final rule.

In the following sections, DOE provides certain amendments to its test procedures for dehumidifiers. For each amendment, DOE provides relevant background information and discusses relevant public comments.

In response to the June 2022 NOPR, DOE received the following general comments regarding the proposed changes to the test procedure.

According to an anonymous commenter, the amended test procedure should require the same level of rigor as the current one. (Anonymous, No. 12 at p. (1)

DOE has evaluated the changes to the test procedure adopted in this rulemaking and determined that they will not adversely affect test procedure representativeness or reproducibility and will not be unduly burdensome to conduct.

AHAM stated that the overlapping comment periods for this test procedure rulemaking and the preliminary technical support document from the dehumidifier energy conservation standards rulemaking posed a challenge to manufacturers seeking to evaluate both documents. AHAM stated that DOE should fully receive stakeholder comments on the test procedure before proceeding with the energy conservation standards rulemaking. AHAM commented that the current process diminishes the value of stakeholder engagement early in the process. (AHAM, No. 17 at pp. 4-5)

MIAQ supported the finalization of changes to the test procedure before undertaking a new standards rulemaking. (MIAQ, No. 15 at p. 10)

Section 8(d)(1) of appendix A to 10 CFR part 430, subpart C (“appendix A”) generally provides that new test procedures and amended test procedures that impact measured energy use or efficiency will be finalized at least 180 days prior to the close of the comment period for a NOPR proposing new or amended energy conservation standards. DOE will continue to conduct additional analyses based on this finalized test procedure before proposing any new energy conservation standards, and stakeholders will be provided an opportunity to comment on any updated analysis as part of any proposal published regarding new or amended standards.

EPCA defines a dehumidifier as a self-contained, electrically operated, and mechanically encased assembly consisting of (1) a refrigerated surface (evaporator) that condenses moisture from the atmosphere; (2) a refrigerating system, including an electric motor; (3) an air-circulating fan; and (4) a means for collecting or disposing of the condensate. (42 U.S.C. 6291(34)) In the July 2015 Final Rule, DOE codified a regulatory definition of “dehumidifier” that clarified the definition by excluding products that may provide condensate removal or latent heat removal as a secondary function. 80 FR 45801, 45805. DOE, therefore, adopted a definition that explicitly excluded portable air conditioners, room air conditioners, and packaged terminal air conditioners, because these are products that may provide condensate removal or latent heat removal as a secondary function.

Consumer products meeting the definition of “dehumidifier” as codified at 10 CFR 430.2 are subject to DOE's regulations for testing, certifying, and complying with energy conservation standards.

In the July 2015 Final Rule, DOE established definitions for two groups of dehumidifiers: “portable dehumidifiers” and “whole-home dehumidifiers.” 80 FR 45801, 45805. A “portable dehumidifier” is a dehumidifier designed to operate within the dehumidified space without ducting (although means may be provided for optional duct attachment). 10 CFR 430.2. A “whole-home dehumidifier” is a dehumidifier designed to be installed with ducting to deliver return process air to its inlet and dehumidified process air to one or more locations in the dehumidified space. Id. The July 2015 Final Rule also established a definition for “refrigerant-desiccant dehumidifier” to mean a whole-home dehumidifier that removes moisture from the process air by means of a desiccant material in addition to a refrigeration system. Id.

As stated, a whole-home dehumidifier is designed to be installed with ducting while a portable dehumidifier is designed to operate without the attachment of additional ducting, although a means may be provided for optional duct attachment [emphasis added]. In the June 2022 NOPR, DOE stated that the “designed to” wording in these definitions may imply that DOE makes subjective determinations about how a dehumidifier is categorized, which may lead to confusion. 87 FR 35286, 35291. DOE proposed to amend the portable dehumidifier and whole-home dehumidifier definitions to instead reference manufacturer instructions available to a consumer as they relate to the ducting configuration. Id. Specifically, DOE proposed to define a portable dehumidifier as a dehumidifier that, in accordance with any manufacturer instructions available to a consumer, operates within the dehumidified space without the attachment of additional ducting, although means may be provided for optional duct attachment. Id. DOE proposed to define a whole-home dehumidifier as a dehumidifier that, in accordance with any manufacturer instructions available to a consumer, operates with ducting to deliver return process air to its inlet and to supply dehumidified process air from its outlet to one or more locations in the dehumidified space. Id. DOE also proposed not to delineate a definition for “crawlspace dehumidifiers,” as suggested by commenters, because of concerns that such a definition would not only reduce regulatory transparency but also create challenges for enforcement. Id.

The anonymous commenter supported the use of clear product categories for dehumidifiers and specifically supported DOE's decision not to create a “crawlspace dehumidifier” definition. The commenter stated that new dehumidifier definitions that do not represent true differences between units could lead to new retail price tiers, which would negatively affect the secondary market. (Anonymous, No. 12 at p. 1)

MIAQ proposed that DOE change the configuration names from portable dehumidifier and whole-home dehumidifier to “ductless dehumidifier” and “ducted dehumidifier,” respectively. MIAQ stated that these changes to the definition would reduce market and regulatory confusion and result in more units being tested using the most representative conditions. MIAQ commented that its proposed “ductless” definition would eliminate confusion around dehumidifiers intended for crawlspace use, as these units meet the DOE definition of a portable dehumidifier because manufacturers provide instructions for operation without ducting, but industry stakeholders consider the units to be different from portable dehumidifiers because they are often hung from joists or placed in inaccessible areas. (MIAQ, No. 15 at pp. 2-3)

DOE notes that the currently applicable definition in 10 CFR 430.2, as well as the definition proposed in the June 2022 NOPR and finalized in this final rule, for “portable dehumidifier” expressly states that such a dehumidifier is designed to operate within the dehumidified space without ducting (although means may be provided for optional duct attachment), thereby providing as much clarity in determining product classification on the basis of duct configuration as would MIAQ's proposed term “ductless dehumidifier.” Similarly, the definition of “whole-home dehumidifier” states that it is designed to be installed with ducting ( i.e., is a “ducted dehumidifier”). Further, the “portable” and “whole-home” dehumidifier categories are widely known and used in industry and are the basis of the current DOE energy conservation standards. Additionally, the installation circumstances of portable dehumidifiers mounted between joists do not in themselves necessitate a change in test approach, as the portable dehumidifier test conditions and test setup are representative of typical conditions encountered by dehumidifiers without installed ducting. For these reasons, DOE is maintaining the current nomenclature of “whole-home” and “portable” dehumidifiers in this final rule.

MIAQ also suggested that DOE remove the words “to deliver return process air to its inlet and” from the whole-home dehumidifier definition because whole-home dehumidifiers may be installed such that they draw air from a single space, such as a basement or hallway, rather than from the heating, ventilation, and air conditioning (“HVAC”) return air supply. MIAQ said that if DOE removed “to deliver return process air to its inlet and” from the whole-home dehumidifier definition, it would suggest that some whole-home dehumidifiers typically operate with inlet air conditions of 65 degrees Fahrenheit (“°F”) and 60 percent relative humidity. (MIAQ, No. 15 at pp. 3-4)

DOE recognizes that whole-home dehumidifiers may be installed in various ducting configurations, as specified by manufacturers. These include installation with inlet ducting connected to the HVAC supply, as well as other sources of return air, ( e.g., return air from a centrally located area of the structure, as identified by MIAQ in their comment), or other areas. DOE notes that whole-home dehumidifier configurations that include ducting from either the HVAC return or from other central locations in the dwelling both meet the existing whole-home dehumidifier definition, as these units “operate with ducting” to collect return process air and supply dehumidified process air from its outlet. As discussed in the June 2015 Final Rule, DOE considers an inlet air temperature of 73 °F, representing a whole-home dehumidifier ducted to an HVAC return air supply, to be the most representative test configuration for whole-home dehumidifiers. 80 FR 45802, 45811. In this way, DOE's whole-home dehumidifier test procedure determines performance in the most representative configuration and with the most representative test conditions. Therefore, in this final rule, DOE is making no further amendments to the whole-home dehumidifier definition beyond those proposed in the June 2022 NOPR and discussed previously.

In the June 2022 NOPR, DOE responded to comments suggesting that DOE clarify how the current dehumidifier definitions apply to non-residential dehumidifiers, such as horticultural dehumidifiers. 87 FR 35286, 35291. With respect to horticultural dehumidifiers and other dehumidifiers marketed for non-residential applications, DOE noted that dehumidifiers are “consumer products.” Id. EPCA defines a “consumer product” as any article (other than an automobile, as defined in section 32901(a)(3) of title 49) of a type (A) which in operation consumes, or is designed to consume, energy or, with respect to showerheads, faucets, water closets, and urinals, water; and (B) which, to any significant extent, is distributed in commerce for personal use or consumption by individuals; without regard to whether such article of such type is in fact distributed in commerce for personal use or consumption by an individual. (42 U.S.C. 6291(1)) Accordingly, DOE stated in the June 2022 NOPR that to the extent that a dehumidifier model is of a type distributed in commerce for personal use or use by an individual, it would be within the scope of the dehumidifier test procedure, regardless of how they are marketed and whether they are distributed for personal or individual use. 87 FR 35286, 35291.

MIAQ also commented that the use of “portable” in the “portable dehumidifier” definition could lead to confusion regarding the applicability of appendix X1 to fire and flood remediation dehumidifiers, which are portable but not intended for consumer use. Further, MIAQ stated that changing the name of “whole-home dehumidifiers” to “ducted dehumidifiers” would clearly indicate that this product category is intended to be ducted dehumidifier whether that unit is ducted into a home, apartment, or light commercial space or any other space units in the product category can be found. (MIAQ, No. 15 at pp. 2-3)

In response to MIAQ, DOE reiterates its discussion from the June 2022 NOPR that with respect to dehumidifiers marketed for non-residential applications, such as horticultural, flood and fire remediation, and light commercial uses, to the extent that a dehumidifier model is of a type that is, to any significant extent, distributed in commerce for personal use or use by an individual, it would meet the definition of “dehumidifier” and would be within the scope of the dehumidifier test procedure in accordance with the definition of a consumer product in 42 U.S.C. 6291(1)(B), regardless of how it is marketed and whether the model is distributed for personal or individual use. To the extent that dehumidifiers marketed for non-residential applications do not meet the definition of consumer product, such as dehumidifiers that are connected exclusively to three-phase power that is not present in U.S. households, they are excluded from the DOE test procedure. DOE has not received any information from commenters about specific features or designs that would differentiate horticultural, fire and flood remediation, or non-residential dehumidifiers from those within the scope of the DOE test procedure. DOE has published guidance on making “of a type” determinations at www.energy.gov/gc/enforcement-policies-and-statements, “Guidance Concerning Consumer/Commercial Distinction.” A manufacturer may submit a petition to waive any test procedure requirements if it believes that its dehumidifier contains one or more design characteristics that either (1) prevent testing of the basic model according to the prescribed test procedure; or (2) cause the prescribed test procedure to evaluate the dehumidifier in a manner so unrepresentative of its true energy and/or water consumption characteristics as to provide materially inaccurate comparative data. 10 CFR 430.27(a). The petition should suggest an alternative method for testing the basic models identified in the waiver. 10 CFR 430.27(b)(1)(iii).

In the June 2022 NOPR, DOE responded to a comment from MIAQ suggesting that DOE consider a definition that includes dehumidifiers with external heat rejection, which MIAQ described as units that provide cool, dry air as an air conditioner does, except that the focus is on obtaining the proper level of dehumidification first, and cooling is a by-product of the process. 87 FR 35286, 35290. In response, DOE explained that the primary function of an air conditioner is to provide cooling by removing both sensible and latent heat, whereas a dehumidifier is intended to remove only latent heat. Id. Accordingly, portable air conditioners, room air conditioners, and packaged terminal air conditioners are explicitly excluded in the existing definition of “dehumidifier.” These explicit exclusions include the unitary air conditioning products of concern to MIAQ. Id. Any other non-dehumidifier product on the market that would meet the definition of “dehumidifier” is already explicitly excluded. Id. Accordingly, DOE tentatively determined that the explicit exclusions in the regulatory definition of dehumidifier already address MIAQ's concern and therefore did not propose to add any such exclusions to the dehumidifier definition. Id.

In response to the June 2022 NOPR, MIAQ recommended that DOE revise the dehumidifier definition by replacing the wording “that is self-contained” with “that is predominately intended to remove latent heat.” MIAQ commented that this change would acknowledge that there are dehumidifiers that include external heat rejection with an outdoor condenser and that these products provide cooling but, because their primary purpose is dehumidification, they should be considered dehumidifiers. MIAQ asserted that adding this phrase to the dehumidifier definition would clarify that units with a primary function of dehumidification should be certified as dehumidifiers. (MIAQ, No. 15 at p. 2)

Following a review of the market, DOE is not aware of any residential dehumidifiers on the market that are not self-contained. With respect to latent heat removal, DOE reiterates its discussion from the June 2022 NOPR that the primary function of an air conditioner is to provide cooling by removing both sensible and latent heat, whereas a dehumidifier is intended to remove only latent heat. 87 FR 35286, 35290. The dehumidifier definition explicitly excludes portable air conditioners, room air conditioners, and packaged terminal air conditioners to ensure that other non-dehumidifier products on the market that would meet the definition of “dehumidifier” but primarily provide cooling, do not meet the definition. These explicit exclusions limit the dehumidifier definition to units that primarily remove latent heat, instead of both sensible and latent heat. Accordingly, DOE has determined that the explicit exclusions in the regulatory definition of dehumidifier found in 10 CFR 430.2 already address MIAQ's concern. Therefore, DOE is not adding exclusions to the dehumidifier definition in this final rule.

Dehumidifiers are currently tested in accordance with appendix X1, which adopts certain text provisions from ANSI/AHAM DH-1-2008, with modification. In part, the DOE test procedure specifies a different dry-bulb temperature (65 °F for portable dehumidifiers and 73 °F for whole-home dehumidifiers) than ANSI/AHAM DH-1-2008, while still maintaining the relative humidity specified by ANSI/AHAM DH-1-2008, and specifies provisions for inactive, off-cycle, and off mode testing. See sections 4.1.1 and 3.2 of appendix X1. Appendix X1 also includes instructions regarding instrumentation, condensate collection, control settings, setup, and ducting for whole-home dehumidifiers. See sections 3.1.2.2; 3.1.1.4; 3.1.1.5; 3.1.1.1; and 3.1.3 of appendix X1.

Under the current test procedure, a unit's capacity is the volume of water, in pints, the unit removes from the ambient air per day, normalized to a standard ambient temperature and relative humidity. See section 2.14 of appendix X1. The integrated energy factor (“IEF”), representing the efficiency of the unit expressed in liters per kilowatt-hour, is the ratio between the capacity and the combined amount of energy consumed by the unit in dehumidification mode and standby and/or off mode(s), adjusted for the representative number of hours per year spent in each mode. See section 5.4 of appendix X1.

Intertek recommended that the DOE test procedure reference ANSI/American Society of Heating, Refrigerating and Air-Conditioning Engineers (“ASHRAE”) 37 rather than ANSI/AMCA 210, as Intertek believes that ANSI/ASHRAE 37 is more appropriate and accurate for dehumidifiers. (Intertek, No. 13 at p. 1)

DOE has reviewed ANSI/ASHRAE 37-2009 (reaffirmed in 2019) and found it to be largely consistent with the requirements from ANSI/AMCA 210, used in appendix X1. DOE was not able to identify provisions in ANSI/ASHRAE 37 that would improve the representativeness or reproducibility of the whole-home dehumidifier test procedure, and Intertek did not identify which provisions in ANSI/ASHRAE 37 are more appropriate for the test procedure. Without additional information and given the overall general consistency between the two standards, DOE is maintaining ANSI/AMCA 210 as the test standard referenced in appendix X1 for whole-home dehumidifiers.

As discussed, the dehumidifier test procedure at appendix X1 references ANSI/AHAM DH-1-2008, an industry test procedure for dehumidifiers, with modification. While ANSI/AHAM DH- 1-2008 provides instructions for testing portable dehumidifiers, appendix X1 also references ANSI/AHAM DH-1-2008 when specifying test setup and instrumentation requirements for whole-home dehumidifiers. In 2017, AHAM published a revision to AHAM DH-1, ( i.e., AHAM DH-1-2017), which established provisions for testing dehumidifier energy use in off-cycle, inactive, and off modes, and for including energy consumption in those modes in efficiency calculations. AHAM DH-1-2017 also added guidance for instrumentation setup, multiple air-intakes, and control settings; lowered air temperature; and tightened tolerances. Specifically, AHAM DH-1-2017 lowered the standard dry-bulb temperature condition for dehumidifiers from 80 °F (as in ANSI/AHAM DH-1-2008) to 65 °F (with the required wet-bulb temperature changing accordingly to maintain the same relative humidity) and tightened the maximum allowed variation for dry-bulb and wet-bulb temperature readings from 2.0 °F to 1.0 °F and from 1.0 °F to 0.5 °F, respectively. In the June 2022 NOPR, DOE requested comment on the proposal to incorporate AHAM DH-1-2017 by reference.

DOE also noted in the June 2022 NOPR that the AHAM DH-1 task force had released a publicly available draft version of the updated standard, AHAM DH-1-2022, on March 30, 2022, but had not yet finalized the standard. DOE had reviewed the changes to AHAM DH-1-2017 made in the draft and either proposed to adopt the changes or raised them for comment in the NOPR. DOE also stated that if AHAM DH-1-2022 was finalized during the course of this rulemaking, DOE would consider adopting that updated version in the final rule to the extent it is consistent with the discussions presented in the NOPR. 87 FR 35286, 35292 ( See also Public Meeting Transcript, No. 11 at pp. 8-10).

MIAQ supported DOE's proposal to incorporate AHAM DH-1-2017 by reference. (MIAQ, No. 15 at p. 4)

AHAM recommended that DOE adopt a more recently updated version of AHAM DH-1, ( i.e., AHAM DH-1-2022), resulting from cooperation between AHAM, DOE, and efficiency advocates. AHAM noted that AHAM DH-1-2022 addresses many of the issues that DOE raised in the June 2022 NOPR and is consistent with EPCA's requirements that an amended test procedure be reasonably designed to produce test results that represent an average period of use and not unduly burdensome to conduct. (AHAM, No. 17 at pp. 1-2)

AHAM DH-1-2022 was finalized and published on December 12, 2022. DOE has reviewed AHAM DH-1-2022 and found it is reasonably designed to produce test results that represent an average period of use and not unduly burdensome to conduct, and is therefore incorporating by reference this version of the industry standard with the following exceptions: the test duration, as discussed in section III.C.5 of this document; the sampling tree requirements in section 8.4 of the standard, as discussed in section III.C.6 of this document; and the run-in period and pre-stabilization period requirements in sections 5.6 and 5.7 of the standard, discussed in the section that follows. DOE further found that the provisions it is adopting in this final rule are consistent with the 2017 edition of the standard and the discussions presented in the June 2022 NOPR. of these exceptions and DOE's amendments to the AHAM DH-1-2022 approach that are adopted in this final rule are discussed below in the relevant sections.

Section 3.1.1.6 of the current appendix X1 requires a run-in period, during which the compressor operates for a cumulative total of at least 24 hours prior to dehumidification mode testing, consistent with ANSI/AHAM DH-1-2008 and AHAM DH-1-2017. AHAM DH-1-2022 adds new requirements for the run-in period in section 5.6 of the standard, namely that the dehumidifier shall not be exposed to temperatures less than 62 °F during the run-in period, and that after the run-in period, the unit must be inactive for 4 hours before the beginning of the pre-stabilization period; a pre-stabilization period was also newly introduced in AHAM DH-1-2022. The new pre-stabilization period, discussed in section 5.7 of AHAM DH-1-2022, takes place between the time a unit is turned on in the test chamber and the start of the 30-minute stabilization period. AHAM DH-1-2022 also specifies that the dehumidifier must not be exposed to temperatures less than 62 °F during the pre-stabilization period.

While not explicitly discussed in AHAM DH-1-2022, it is DOE's understanding through participation in the process to develop AHAM DH-1-2022 that these new provisions in AHAM DH-1-2022 are intended to ensure that there is no frost build-up on the evaporator coils prior to testing, which could directly reduce performance during the test or result in periods of defrost during which a test unit may shut off the compressor, resulting in further reduction in measured efficiency and performance.

DOE has evaluated the additional test burden that would be associated with the new provisions in AHAM DH-1-2022. These new requirements in AHAM DH-1-2022 would increase the total time required to test a dehumidifier by 4 hours compared to the current testing time of approximately 30 hours. Furthermore, ensuring that the ambient temperature remains above 62 °F during the run-in period and pre-stabilization period could require that the run-in period be conducted in a different location in the laboratory that has better temperature controls and monitoring rather than the current locations within the test laboratory where they may be currently performed.

DOE has conducted an evaluation to determine whether the new requirements in AHAM DH-1-2022 would satisfy the EPCA criteria that test procedures produce test results that measure energy efficiency, energy use, or estimated annual operating cost of a covered product during a representative average use cycle or period of use, without being unduly burdensome to conduct. (42 U.S.C. 6293(b)(3)) Specifically, DOE reviewed testing that was conducted in support of this rulemaking to determine whether the addition of the pre-stabilization period and the temperature requirement for the run-in period would improve the representativeness of test results. DOE's review of its test data indicates that the 30-minute stabilization period conducted in the chamber at the test temperature of 65 °F, during which all conditions are maintained and the test unit operates in a stable manner, is sufficient to produce test results that measure the energy use of a dehumidifier during a representative average use cycle or period of use, as none of the dehumidifiers tested entered defrost operation at any time during the test. Because DOE does not expect frost to develop during testing that would necessitate a defrost operation, the additional test time and test requirements would not change the performance measured by the test procedure. Furthermore, as discussed in section III.C.5 of this document, DOE considers defrost operation in dehumidifiers to be uncharacteristic of typical dehumidifier operation at the 65 °F test condition. Based on this evaluation, DOE has determined that the new requirements in AHAM DH-1-2022 would not provide an improvement in representativeness commensurate with the additional test burden that would be imposed, and therefore would be unduly burdensome. As the new AHAM DH-1-2022 run-in and pre-stabilization requirements do not conflict with the current appendix X1 requirements, manufacturers may choose to test units in accordance with the AHAM DH-1-2022 run-in and pre-stabilization requirements and still comply with the DOE test procedure. Therefore, DOE is maintaining the current appendix X1 run-in period requirements in this final rule.

Some dehumidifiers available on the U.S. market incorporate variable-speed compressors ( i.e., “variable-speed dehumidifiers”). A variable-speed compressor can operate at a variety of speeds rather than just the single speed achievable by conventional compressors. A single-speed compressor cycles on and off during operation, which can introduce inefficiencies in performance often referred to as “cycling losses,” whereas a variable-speed compressor is able to adjust its speed up or down during operation, thereby reducing or eliminating cycling losses. Variable-speed dehumidifiers may avoid condensate re-evaporation into the ambient room air, which can occur when a dehumidifier cycles off its compressor but not its fan during off-cycle mode. The current test procedure in appendix X1 does not capture any “cycling losses” for single-speed dehumidifiers (nor, conversely, does it capture the avoidance of such losses for variable-speed dehumidifiers) because the test unit operates at full capacity throughout the test.

In the June 2022 NOPR, DOE evaluated whether the avoidance of “cycling losses” for variable-speed dehumidifiers provides significant energy savings that should be captured by the test procedure, as in the case of room air conditioners and portable air conditioners. Based on DOE's evaluation, and consistent with the points raised by commenters, DOE tentatively determined in the June 2022 NOPR that variable-speed dehumidifiers may not be able to achieve significant efficiency gains over single-speed units, given that dehumidifiers must maintain evaporator temperatures below the dew point to efficiently remove water from the air. 87 FR 35286, 35293. DOE noted, however, that there could be some efficiency gains if the variable-speed compressor is inherently more efficient. DOE requested information and data regarding any efficiency and performance benefits associated with variable-speed dehumidifiers, both generally and relative to those with single-speed dehumidifiers. Id.

DOE did not receive additional information and data regarding any efficiency and performance benefits associated with variable-speed dehumidifiers and therefore is not adopting additional test procedure provisions to address their operation.

The current test procedure specified in appendix X1 requires one test condition for each category of dehumidifier: a dry-bulb temperature of 65 °F for portable dehumidifiers and 73 °F for whole-home dehumidifiers. See section 4.1.1 of appendix X1.

In the June 2022 NOPR, in response to comments submitted by interested parties, DOE considered expanding the portable dehumidifier test to three test conditions. 87 FR 35286, 35296-35297. DOE discussed its findings through investigative testing that a three-temperature-condition approach resulted in no substantive improvement in representativeness compared to the current test procedure that uses a single temperature condition. Id. Accordingly, DOE tentatively determined that the increase in test burden associated with requiring multiple test conditions would not be justified, and DOE did not propose any new test conditions in the June 2022 NOPR. Id.

Aprilaire supported maintaining a single-temperature-condition test procedure for each dehumidifier configuration. Aprilaire stated that additional test conditions would result in unwarranted test burden in the form of lengthened product design cycles and added quality control costs. (Aprilaire, No. 14 at p. 1)

MIAQ stated that a three-temperature-condition test would be more representative of the average period of use for a dehumidifier and supported expanding the number of test conditions required. MIAQ noted that dehumidifiers can have a variety of inlet process air conditions depending on their installation configuration or placement within a home. MIAQ stated that more test conditions would provide additional information to consumers and industry stakeholders while not constituting an unnecessary test burden. (MIAQ, No. 15 at pp. 4-5)

As discussed in the June 2022 NOPR, while dehumidifiers may encounter temperatures between 55 °F and 80 °F depending on their installation and operating conditions, DOE's investigative testing showed that when additional test conditions were added and performance at these test conditions was weighted based on the operating hours DOE expected at each test condition, the resulting efficiency corresponded very closely to the measured efficiency at 65 °F using the existing test procedure. 87 FR 35286, 35296-35297. This result suggests that the current single test condition already produces a measure of efficiency that is representative of dehumidifier performance across the range of temperature conditions it may encounter. Therefore, DOE maintains its conclusion that the weighted-average performance based on additional test conditions is not substantively different than the performance represented by the current single-temperature-condition test procedure. Accordingly, DOE has determined that the additional test burden that would be associated with a three-temperature-condition test would be unduly burdensome. Therefore, in this final rule, DOE is maintaining the existing single-temperature-condition test approach in appendix X1.

Under the current test procedure, temperature and humidity conditions are held constant throughout the test ( i.e., a steady-state test). As such, the test unit operates at full capacity throughout the duration of the test.

In the July 2015 Final Rule, DOE considered a load-based test for dehumidifiers, which would capture cycling behavior in dehumidifiers with single-speed compressors or compressor speed modulation for variable-speed dehumidifiers. The load-based test would involve adding moisture to the test chamber at a fixed rate and allowing the control system of the dehumidifier to respond to changing moisture levels in the room. 80 FR 45801, 45809. DOE determined not to adopt a load-based test for the dehumidifier test procedure in the July 2015 Final Rule, due to concerns about the potential increase in test burden. Id. at 80 FR 45810.

In the June 2022 NOPR, DOE presented the results of investigative testing using a load-based approach. 87 FR 35286, 35298-35299. The testing did not show that variable-speed dehumidifiers were more efficient than single-speed dehumidifiers. This finding corresponded with the evaluation discussed above that variable-speed dehumidifiers do not have any unique efficiency benefits over single-speed dehumidifiers. In the June 2022 NOPR, DOE tentatively concluded that load-based testing was not appropriate for appendix X1 because the increases in test burden were not justified by improvements in test representativeness. Id.

Aprilaire agreed that load-based testing should not be implemented in appendix X1 due to novel testing challenges associated with load-based testing. Aprilaire stated that overcoming these challenges would represent a significant test burden and could limit competition because smaller manufacturers may not be able to conduct load-based testing. (Aprilaire, No. 14 at pp. 1-2)

MIAQ stated that it does not produce dehumidifiers with variable-speed dehumidifiers. MIAQ commented that the most efficient way to operate a dehumidifier is to operate at full capacity and that reductions in dehumidification capacity due to variable-speed operation are hard for users to perceive and have little effect on mold or mildew control. Because variable-speed dehumidifiers offer little consumer benefit, MIAQ stated that load-based testing would constitute an unnecessary test burden. (MIAQ, No. 15 at pp. 5-6)

The anonymous commenter supported load-based testing. (Anonymous, No. 12 at p. 1)

The Joint Commenters encouraged DOE to continue investigating load-based testing for dehumidifiers. While DOE did not find that load-based testing captured any unique efficiency of variable-speed dehumidifiers, the Joint Commenters noted that the discrepancy between the performance of the single-speed and variable-speed units under load-based testing suggests that the current DOE test procedure may overestimate the real-world efficiency of variable-speed units. (Joint Commenters, No. 18 at pp. 1-2; Appliance Standards Awareness Project, Public Meeting Transcript, No. 11 at pp. 25-26)

DOE's testing showed that as the moisture load ( i.e., the rate at which moisture was introduced to the test room) decreased below the full-load dehumidification capacity of the dehumidifiers tested, the efficiency of both the single-speed and variable-speed dehumidifiers decreased. As the load decreased, the efficiency of the variable-speed dehumidifier decreased by a greater amount than for the single-speed dehumidifier, contrary to any initial expectation that the variable-speed dehumidifier would operate more efficiently than the single-speed dehumidifier at reduced loads. 87 FR 35286, 35299. This result confirmed DOE's understanding that variable-speed dehumidifiers do not offer efficiency benefits relative to single-speed dehumidifiers. However, the finding that the variable-speed dehumidifier performed less efficiently than the single-speed dehumidifier at the same conditions was unexpected, given DOE's understanding that variable-speed and single-speed dehumidifiers typically operate in the same manner in real-world conditions ( i.e., cycling the compressor on and off to maintain the relative humidity setpoint). This result from testing a single variable-speed and single-speed dehumidifier suggests that future investigation may be warranted to better understand any differences between variable-speed and single-speed dehumidifier performance at such time that additional variable-speed dehumidifiers are available for testing.

AHAM requested that DOE provide test data from load-based testing on the record, along with details of the load-based test procedure used. Specifically, AHAM requested data regarding the test conditions (dry-bulb temperature, etc. ), general information about test setup including dehumidifier set point, use of manufacturer settings, type of test room, rate of moisture load change, method of moisture load control and monitoring, and whether DOE conducted a repeatability assessment. (AHAM, No. 17 at p. 4)

In response to AHAM's request, DOE describes its investigative load-based testing process. DOE conducted the investigative load-based testing for this rulemaking with the test chamber at the appendix X1 portable dehumidifier test conditions—65 °F dry-bulb and 56.6 °F wet-bulb. The dehumidifiers were set using user controls to maintain a 60-percent relative humidity in the room. The testing was conducted in a calorimeter chamber in order to achieve the precise level of moisture control necessary to conduct load-based testing, because as discussed in the June 2022 NOPR, psychrometer chambers lack the equipment and controls necessary to maintain a given moisture load ( see 87 FR 35286, 35297). DOE did not conduct tests with a dynamically variable moisture load, but instead collected performance data with the moisture introduction rate held fixed at percentages of the full-load dehumidification capacity of each tested unit. The testing was conducted in a calorimeter chamber in order to achieve the precise level of moisture control necessary to conduct load-based testing. DOE tested two dehumidifiers with comparable capacities from the same manufacturer, one with a variable-speed compressor and one with a single-speed compressor. This investigative testing effort included testing each unit once at each of the four tested moisture load conditions (100 percent, 75 percent, 50 percent, and 25 percent of the full-load dehumidification capacity for the unit under test). 87 FR 35286, 35298.

Based on DOE's finding discussed in the June 2022 NOPR that load-based testing does not improve the representativeness of the dehumidifier test procedure, concerns about the potential significant increase in test burden, and in the absence of any additional data from commenters showing the viability of load-based testing, DOE is not prescribing a load-based test in appendix X1 in this final rule.

Appendix X1 requires a test duration of 6 hours for the dehumidification mode test, after a 30-minute stabilization period. See section 5.4 of appendix X1. In the June 2022 NOPR, DOE discussed that DOE and AHAM's DH-1 working group identified an opportunity to reduce this test duration, thereby reducing test burden. 87 FR 35286, 35299-35300. To identify a potential shorter test duration that could be considered, DOE conducted investigative testing on 13 portable dehumidifiers of varying capacities, one of which was variable-speed, at the 65 °F dry-bulb temperature, in accordance with appendix X1. DOE used the gravity drain condensate collection approach in appendix X1 and recorded the weight of the condensate collected every 30 seconds. See section 3.1.1.4 of the current appendix X1. DOE was, therefore, able to calculate energy consumption and collected condensate at any of the 30-second intervals throughout the 6-hour test and did so at each hour of testing.

The results of DOE's testing indicated that capacity and efficiency vary only slightly from the 6-hour test results when using shorter test durations. This investigative testing suggested that a 6-hour dehumidification mode test duration for portable dehumidifiers may be unnecessary, as the data showed there is minimal difference in measured efficiency between the 2-hour and 6-hour test durations. DOE tentatively determined that a 2-hour test duration is appropriate for both whole-home dehumidifiers and portable dehumidifiers and would provide representative results with minimized test burden. DOE also recognized, however, that removing the requirement for a 6-hour test duration would require recertification for units previously certified under a test duration of 6 hours. Therefore, in the June 2022 NOPR, DOE proposed a dehumidification mode test duration of either 2 or 6 hours for both portable and whole-home dehumidifiers. 87 FR 35286, 35299-35300. DOE notes that AHAM DH-1-2022 contains the same provision specifying either a 2-hour or 6-hour test.

Aprilaire supported DOE's proposal to add a 2-hour test option and stated that based on its testing experience, results for both portable and whole-home dehumidifiers at this shorter test duration would not vary significantly. (Aprilaire, No. 14 at p. 2)

MIAQ stated that the variation in power use and condensate collected over the course of tests on two units running for 2, 3, 4, 5, and 6 hours was under 4 percent for all test durations. MIAQ noted that neither unit entered a defrost cycle during this testing and stated that a 4-hour or 6-hour test would be more appropriate for a unit that enters a defrost cycle. MIAQ stated that reducing the required test time to 2 hours would represent a reduction in test burden, mainly in the form of saved technician hours. The reduced test burden could allow 2-3 times more tests to be conducted per day for the same cost. (MIAQ, No. 15 at pp. 6, 9)

AHAM stated that a 2-hour test duration would result in a loss of test repeatability and reproducibility for dehumidifiers that enter defrost during the test. AHAM noted that defrost cycles are within typical use conditions and should be considered in the DOE test procedure. AHAM commented that in a 2-hour test, a defrost cycle could account for 30 minutes of the 2-hour test, or 25 percent of the total test time; whereas, in a 6-hour test, this 30-minute cycle would only account for 8 percent of the test time, resulting in a higher efficiency rating more representative of the actual percentage of time spent by dehumidifiers in defrost cycles in the field. AHAM generally favored test procedure amendments that decrease test burden but commented that in this case, the 2-hour test period is more likely to cause a failed test or force manufacturers to conservatively rate their products to avoid false findings of noncompliance. AHAM asked whether DOE would conduct enforcement testing using the test duration used in the certification test or whether the verification laboratory would be able to choose the duration used. Because of the potential impacts on measured efficiency, AHAM stated that if DOE proceeds with the proposed 2-hour test duration, DOE should require compliance with the revised test procedure when the amended energy conservation standards next come into effect. (AHAM, No. 17 at p. 3)

GEA presented data detailing the performance of how a dehumidifier entering defrost mode impacts the measured efficiency over a number of test durations, with lower impacts associated with longer test durations. GEA's data showed a decrease in variance in efficiency results of approximately 5 percent in a 2-hour test down to approximately 2 percent in a 6-hour test. According to GEA, these data show that a 2-hour test option would have an unacceptable amount of variance due to the impact of defrost cycles. GEA supported AHAM's position that the test procedure should include only a 6-hour test option, which would reduce these impacts to an appropriate level. (GEA, No. 16 at p. 1)

DOE recognizes that 30 minutes of defrost activity within a 2-hour test would be likely to impact the final measured efficiency, given that 30 minutes would represent a significant portion of a 2-hour test period. However, DOE notes that the defrost operation shown in GEA's data appears to occur roughly 5 hours and 30 minutes into the test duration, suggesting that the defrost operation would not affect the result of a 2-hour test for this GEA unit. Additionally, based on extensive testing in support of this rulemaking, DOE has not observed defrost behavior in any models at the appendix X1 test conditions. Specifically, none of the 13 units that DOE tested in support of this rulemaking entered defrost operation at any point during the test. Based on these observations, DOE concludes that defrost operation is uncharacteristic of dehumidifier operation while conducting the appendix X1 test procedure. While the data provided by GEA does show a unit entering defrost operation, it is unclear which model was tested, which test procedure was performed, and whether the model that was tested is currently on the market and certified to the currently applicable appendix X1. As discussed above, no units in DOE's sample of dehumidifiers, containing models representative of products on the market certified using the currently applicable appendix X1, entered defrost operation during the test. Therefore, DOE finds that a 2-hour test duration produces test results that are representative of dehumidifier operation by consumers.

For the reasons discussed in the June 2022 NOPR, and in consideration of comments as discussed in this section, DOE has concluded that a 2-hour test duration produces test results that are comparable to test results produced by a 6-hour test duration, that test results produced by a 2-hour test duration are representative of dehumidifier operation by consumers, and that a 2-hour test duration would reduce test burden as compared to a 6-hour test duration. As discussed above, DOE does not consider defrost operation to be characteristic of dehumidifiers at the DOE test condition, so DOE has concluded that retaining the 6-hour test option is not necessary to maintain test procedure representativeness or reproducibility nor would adopting a 2-hour test duration require re-testing of any currently certified dehumidifier, given that measured performance would be comparable under a 2-hour and 6-hour test. Retaining the option of either a 2-hour or 6-hour test duration could create ambiguity regarding which test duration should be used for certification, as noted in AHAM's comments. Accordingly, in this final rule, DOE is adopting a 2-hour test duration requirement for appendix X1. DOE is not maintaining an option to perform a 6-hour test, as was proposed in the June 2022 NOPR.

Appendix X1, through reference to section 4 “Instrumentation” of ANSI/AHAM DH-1-2008, requires dehumidifiers with a single air intake to be monitored with an aspirating-type psychrometer  6 perpendicular to, and 1 foot in front of, the unit; and, in the case of multiple air intakes, monitored with a separate sampling tree. See sections 3.1.1, 3.1.1.2, 3.1.1.3 of appendix X1.

The test procedure at appendix X1 does not currently permit the use of a sampling tree in conjunction with an aspirating psychrometer to measure relative humidity for portable dehumidifiers with a single air inlet. In the July 2015 Final Rule, DOE was unable to conclude whether using a psychrometer only or using a psychrometer in conjunction with a sampling tree would produce the most repeatable results. 80 FR 45802.

DOE is aware, however, that using a sampling tree with an aspirating psychrometer is standard practice for many test laboratories when conducting psychrometric testing. Therefore, in the June 2022 NOPR, DOE proposed to allow measurements taken using an aspirating psychrometer or relative humidity sensor with a sampling tree in appendix X1 for dehumidifiers with a single air inlet, which is required in the currently applicable test procedure for dehumidifiers with multiple air inlets. 87 FR 35286, 35302.

Aprilaire supported DOE's proposal to allow use of an aspirating psychrometer in conjunction with a sampling tree to measure humidity. Aprilaire stated that this sort of apparatus is common and familiar in the HVAC industry. (Aprilaire, No. 14 at p. 2)

MIAQ supported DOE's proposal of allowing relative humidity measurements taken using an aspirating psychrometer with sampling tree in appendix X1 for dehumidifiers with a single air inlet. (MIAQ, No. 15 at pp. 6-7)

AHAM stated that sampling trees should be required for both psychrometer testing (as was proposed) and for relative humidity sensors. AHAM claimed that use of sampling trees leads to more representative results by sampling across the entire inlet air of the dehumidifier and noted that sampling trees are already required in the test procedures for other HVAC equipment. AHAM stated that multiple measurement points are needed to produce representative results because dehumidifiers measure air temperature and humidity using air from a wider inlet area, not a single point. (AHAM, No. 17 at p. 2)

These comments support DOE's understanding that using a sampling tree with an aspirating psychrometer is already standard practice for many test laboratories when testing dehumidifiers; effectively measures the inlet operating conditions for a dehumidifier while under test, both for units with a single air inlet and for units with multiple air inlets; and facilitates the determination of representative dehumidifier performance. Therefore, for the reasons discussed in the June 2022 NOPR and summarized above, DOE is permitting the use of sampling trees in conjunction with either an aspirating psychrometer or relative humidity sensor for all dehumidifier test configurations in appendix X1. DOE is not aware of data that quantify any benefits that sampling trees may provide over a single point measurement and is thus unable to determine if requiring sampling trees for all dehumidifier tests, as AHAM suggests, would be unduly burdensome for test laboratories that currently use single-point aspirating psychrometer or relative humidity sensor measurements. Therefore, to avoid imposing an undue test burden, DOE is allowing the test procedure to be conducted with or without sampling trees in appendix X1 in this final rule, when using either an aspirating psychrometer or relative humidity sensor.

In addition to the proposal to allow sampling trees in conjunction with aspirated psychrometer testing, DOE proposed in the June 2022 NOPR to require that the sensing elements within the psychrometer box be shielded or positioned to minimize radiation effects from the fan motor; that there be line of sight separation between any fans and sensing elements within the test fixture; and that at least 3 feet of separation, along the path of airflow, be maintained between any fans and sensing elements within the test fixture. 87 FR 35286, 35302. DOE notes that AHAM subsequently adopted the same requirements for psychrometer shielding and placement in AHAM DH-1-2022.

MIAQ supported DOE's proposal to require that the psychrometer box contain shielding or be configured to minimize radiation effects on the sensing elements. (MIAQ, No. 15 at p. 7)

For the reasons discussed in the June 2022 NOPR, in this final rule, DOE is incorporating in appendix X1 the AHAM DH-1-2022 requirements for psychrometer shielding and placement. These requirements are consistent with the requirements for psychrometer shielding and placement as proposed in the June 2022 NOPR.

In the July 2015 Final Rule, DOE established a test procedure for whole-home dehumidifiers in appendix X1. 80 FR 45802, 45810-45811. Whole-home dehumidifiers differ from portable dehumidifiers, as they are installed in a ducted configuration in a home. The whole-home dehumidifier test procedure specifies a ducted test setup with instructions for measuring and maintaining the air flow through these ducts. See section 3.1.3 of appendix X1.

Section 5.2 of AHAM DH-1-2017 requires that “the air flow approaching the test unit shall be uniform in temperature, humidity and velocity. The air velocity shall not exceed 50 feet per minute (“ft/min”) (0.25 meters per second (“m/s”)) within 3 ft (0.91 m) of the dehumidifier with the unit not operating.”

In the June 2022 NOPR, DOE considered alternate air velocity specifications based on suggestions by commenters that the 50 ft/min maximum air velocity requirement in AHAM DH-1-2017 may represent an undue burden on manufacturers of large-capacity portable dehumidifiers and whole-home dehumidifiers. Although DOE did not propose changing the maximum air velocity requirement in the June 2022 NOPR, DOE discussed that it would consider raising the maximum air flow requirement by an amount appropriate to the increased air flow of the largest units on the market, e.g., to 100 ft/min. DOE stated, however, that it was not aware of any data that quantify the impact on repeatability and reproducibility of raising the maximum air velocity requirement to a less-stringent level. 87 FR 35286, 35302-35303.

MIAQ recommended that DOE continue to investigate the value of an increased air velocity. MIAQ noted that it is in the process of conducting air velocity testing and would be willing to confidentially share this data with DOE for analysis. (MIAQ, No. 15 at p. 7)

DOE notes that AHAM DH-1-2022 maintains 50 ft/min maximum air velocity requirement, indicating that there is not an industry consensus that a requirement higher than 50 ft/min would be acceptable. DOE has not received any data supporting that a 100 ft/min air velocity requirement would maintain test procedure repeatability and reproducibility. Therefore, without sufficient data to confirm that this test procedure change would allow for equally repeatable and reproduceable tests as the current requirement, in this final rule, DOE is maintaining the air velocity minimum requirement of 50 ft/min, consistent with AHAM DH-1-2022.

Section 3.1.2.2.3.2 of appendix X1 specifies measuring velocity pressures using the same pitot traverses as are used for measuring external static pressure (“ESP”), which are specified in section 3.1.2.2.3.1 of appendix X1, and calculating volumetric flow rates in each duct in accordance with section 7.3.1, “Velocity Traverse,” of ANSI/AMCA 210.

In the June 2022 NOPR, DOE summarized a comment submitted by Aprilaire asserting that there are a limited number of test facilities that still use this technology for measuring airflow. 87 FR 35286, 35303. Aprilaire suggested that DOE adopt the alternative method of using airflow nozzles to measure airflow as specified in section 7.3.2 of ANSI/AMCA 210. Aprilaire stated that most laboratories are using the nozzle method in ANSI/AMCA 210 for measuring airflow and that this method is listed by ASHRAE Standard 37 as the method to use for HVAC equipment. Id.

In the June 2022 NOPR, DOE discussed that it had inquired with a number of laboratories and is aware that a limited number of test laboratories use pitot-tube traverses when conducting testing in accordance with ANSI/AMCA 210. ( See sections 4.2.2, 4.3.1, and 7.3.1 of ANSI/AMCA 210) DOE discussed that it is aware that test laboratories typically use the alternate calibrated nozzle approach detailed in sections 4.2.3, 4.3.2 and 7.3.2 of ANSI/AMCA 210 when conducting testing in accordance with ANSI/AMCA 210 for products other than dehumidifiers, which is not currently permitted in appendix X1. Based on the industry-accepted standard ( i.e., ANSI/AMCA 210), the understanding that the two approaches are substantively similar, and feedback from test laboratories that use of the calibrated nozzle approach can reduce the test burden as compared to use of the pitot-tube traverses, DOE proposed in the June 2022 NOPR to allow calibrated nozzle testing according to the requirements of sections 4.2.3, 4.3.2, and 7.3.2 of ANSI/AMCA 210 for whole-home dehumidifiers in appendix X1. 87 FR 35286, 35303.

Aprilaire and MIAQ both supported DOE's proposal to include the calibrated nozzle approach from AMCA 210 in the appendix X1 test procedure for whole-home dehumidifiers. (Aprilaire, No. 14 at p. 2; MIAQ, No. 15 at p. 7)

DOE concludes, for the reasons discussed in the June 2022 NOPR, that the calibrated nozzle approach from ANSI/AMCA 210 produces repeatable and reproduceable results consistent with the pitot tube traverse method. Therefore, in this final rule, DOE is permitting the use of the calibrated nozzle approach in appendix X1, as proposed in the June 2022 NOPR.

Section 3.1.3 of appendix X1 requires capping and sealing any fresh-air inlet on a whole-home dehumidifier during testing. In the July 2015 Final Rule, DOE determined that, while sealing the fresh-air inlet on dehumidifiers designed to operate with the fresh-air intake open may negatively impact capacity and efficiency, those effects are not significant enough to warrant the added test burden of providing separate fresh-air inflow. 80 FR 45802, 45811. In the June 2022 NOPR, DOE summarized comments received by interested parties stating that capping the fresh-air intake should not appreciably impact the total airflow through the unit and subsequently should have little effect on the efficiency. DOE stated that is not aware of publicly available data, nor has DOE received information from commenters, regarding the prevalence of fresh-air inlet use among whole-home dehumidifier consumers. DOE further stated that comments received on this issue are consistent with DOE's prior determination that the burden of adding an additional air stream in the testing configuration to account for fresh-air inlet on those whole-home dehumidifiers equipped with such a feature would outweigh the benefits. Therefore, in the June 2022 NOPR, DOE tentatively determined to continue requiring capping and sealing the fresh-air inlet during testing of a whole-home dehumidifier in appendix X1. 87 FR 35286, 35303.

MIAQ supported DOE's tentative determination to retain the requirement to cap and seal the fresh-air inlet during testing of a whole-home dehumidifier. (MIAQ, No. 15 at p. 7)

For the reasons discussed in the June 2022 NOPR, DOE is retaining the requirement to cap and seal the fresh-air inlet during testing of a whole-home dehumidifier in appendix X1 in this final rule.

The DOE test procedure at appendix X1 requires that the ESP, the difference in process air outlet static pressure minus the process air inlet static pressure, be 0.2 inches of water column (“in. w.c.”) for the duration of the test when conducting whole-home dehumidifier testing. See section 3.1.2.2.3.1 of appendix X1.

In the June 2022 NOPR, DOE responded to comments submitted by MIAQ suggesting that DOE adopt two to different ESP conditions—one at 0 in. w.c. and the other at 0.4 in. w.c.—for testing whole-home dehumidifiers. In considering this comment, DOE noted that MIAQ did not provide support regarding the representativeness of its suggested ESP requirements. In addition, DOE discussed that it had previously considered and rejected multiple ESP requirements in a previous rulemaking based on a field study and other information. DOE explained that while DOE understands that installation configurations and environmental factors vary for whole-home dehumidifiers, DOE tentatively concluded that testing whole-home dehumidifiers twice—once with 0 in. w.c. ESP and once with 0.4 in. w.c. ESP—would not be sufficiently more representative than the current single 0.2 in. w.c. ESP requirement as to justify the increased test burden. Therefore, DOE did not propose to amend the ESP requirements for whole-home dehumidifiers in the June 2022 NOPR. 87 FR 35286, 35303.

In response to the June 2022 NOPR, Aprilaire noted that HVAC system pressures vary greatly with system design for residential applications. Aprilaire stated that a single static test pressure test point is preferrable, as a second test point would increase test burden in the form of both an extra rating test and additional quality verification testing. (Aprilaire, No. 14 at p. 2)

MIAQ stated that 0.2 in. w.c. ESP is a representative test condition for ducted dehumidifiers. MIAQ also suggested that additional research be conducted into whether higher external pressures could be representative of typical installation cases, such as when dehumidifiers are connected to furnace systems. MIAQ cited studies from the National Renewable Energy Laboratory and the California Energy Commission that observed pressures between 0.53 and 0.9 in. w.c in practice. (MIAQ, No. 15 at pp. 7-8)

For the reasons discussed in the June 2022 NOPR, and in consideration of these additional comments suggesting that 0.2 in. w.c. ESP is a representative test condition for ducted dehumidifiers and that requiring an additional test point would increase test burden, DOE continues to conclude that a single test approach for whole-home dehumidifiers is fully representative of whole-home dehumidifier performance. The studies referenced by MIAQ do not provide information specific to whole-home dehumidifiers sufficient for DOE to determine that ESP conditions between 0.53 and 0.9 in. w.c. are representative of typical whole-home dehumidifier installation. Therefore, DOE is maintaining the current test approach in appendix X1.

In response to the June 2022 NOPR, MIAQ commented that all whole-home dehumidifiers should be tested at both the whole-home dehumidifier test conditions and the portable dehumidifier test conditions. MIAQ stated that adopting this change would be more representative of actual whole-home dehumidifier operation because whole-home units can be installed in configurations where the inlet air is drawn from indoor basement air, such as in crawlspace applications or when not connected to the HVAC return air stream. (MIAQ, No. 15 at pp. 3-4)

While DOE acknowledges that whole-home dehumidifiers may be installed in situations where the unit inlet air is drawn from unconditioned spaces ( e.g., a basement or crawlspace), such a situation does not represent typical operation of these units. As indicated by the product definition, whole-home dehumidifiers are designed to be installed in a ducted configuration, typically in line with an HVAC system, and the test procedure requirements for whole-home dehumidifiers reflect this most representative installation scenario. Requiring whole-home units to be tested at an additional test condition applicable to portable dehumidifiers would add test burden without improving the representativeness of test results. Therefore, in this final rule, DOE is maintaining the single test condition for whole-home dehumidifiers. However, to the extent that a unit meets both the whole-home and portable dehumidifier definitions, it must be tested in each configuration and comply with both applicable energy conservation standards.

Many types of consumer products ( e.g., refrigerators, clothes dryers, room air conditioners) are now equipped with “network functions,” such as mobile alerts/messages, remote control, and energy information and demand response capabilities to support future smart grid interconnection. In the June 2022 NOPR, DOE noted that certain manufacturers have also incorporated some of these features, such as Wi-Fi capability, into dehumidifiers. 87 FR 35286, 35304.

Based on testing and information from interested parties regarding network functions in consumer products, DOE stated in the June 2022 NOPR that it expects the power consumption attributable to network functions to be on the order of 1 watt (“W”) or less. The impact on IEF of power consumption of network functions is expected to be no more than 1 percent, based on DOE's testing that indicated an average impact on IEF of less than 0.75 percent for the units in DOE's test sample. 87 FR 35286, 35304-35305. DOE also stated that it is aware there are dehumidifiers on the market with varying implementations of network functions. However, DOE stated that it was not aware of any data available, nor did interested parties provide any data, regarding the consumer use of network functions. Without this data, DOE stated it was unable to establish a representative test configuration to assess the energy consumption of network functions for dehumidifiers. Id.

Therefore, in the June 2022 NOPR, DOE proposed to specify that if a dehumidifier has network functions, all network functions must be disabled throughout testing using means available to the end user pursuant to instructions provided in the product's user manual. DOE further proposed to specify that if network functions cannot be disabled by the consumer or the manufacturer's user manual does not provide instruction for disabling the function, the energy consumption of the enabled network function must be included, as it is more representative than excluding the energy consumption associated with the network function. Id.

Aprilaire, MIAQ, and AHAM supported DOE's proposal to disable network functions if possible. AHAM noted that this proposal is consistent with the draft of AHAM DH-1-2022. (Aprilaire, No. 14 at p. 2; MIAQ, No. 15 at p. 8; AHAM, No. 17 at p. 3)

The anonymous commentor recommended developing test methods which can better accommodate networked models (Anonymous, No. 12 at p. 1)

The Joint Commenters requested that DOE require dehumidifiers to be tested with network functions in the factory default setting if possible, rather than disabled. The Joint Commenters stated that DOE's approach may not be representative of real-world operation, as consumers would be unlikely to disable connected functionality if a unit is shipped with connected functions enabled, and testing using the network default settings would result in a more representative energy use measurement. (Joint Commenters, No. 18 at p. 2; Appliance Standard Awareness Project, Public Meeting Transcript, No. 11 at p. 21)

As discussed in the June 2022 NOPR, DOE is not aware of any consumer usage data, nor did interested parties provide any such data, regarding the consumer use of network connectivity. Without this data, DOE is unable to establish a representative test configuration for assessing the energy consumption of network connectivity features for dehumidifiers. 87 FR 35286, 35305.

DOE similarly lacks data regarding whether consumers not using connected functions would disable such functions or leave them in the as-shipped setting. Therefore, due to a lack of data regarding consumer usage of network connectivity features and to harmonize with the industry standard, DOE maintains its June 2022 NOPR proposals and in this final rule is requiring that for dehumidifiers with network functions, follow the requirements in section 5.5 of AHAM DH-1-2022, that (1) the network functions must be disabled throughout testing if such settings can be disabled by the end-user and the product's user manual provides instructions on how to do so; and (2) if network functions cannot be disabled by the end-user, or the product's user manual does not provide instruction for disabling network functions, then the unit must be tested with the network functions in the factory default configuration for the test period.

Appendix X to subpart B of 10 CFR part 430 is no longer required for use. For dehumidifiers manufactured on or after January 27, 2016, use of appendix X1 to subpart B of 10 CFR part 430 is required for any representations of energy use or efficiency of portable and whole-home dehumidifiers, including demonstrating compliance with the currently applicable energy conservation standards. As discussed in this document, DOE is maintaining the currently applicable appendix X1, with amendments. The updated version of appendix X1 will be used for the evaluation and issuance of any updated efficiency standards, and for determining compliance with those standards. In the June 2022 NOPR, DOE proposed to remove the obsolete appendix X. 87 FR 35286, 35305.

MIAQ supported DOE's proposal to remove appendix X along with all references to appendix X in 10 CFR parts 429 and 430.

In this final rule, DOE removes appendix X to subpart B of 10 CFR part 430, along with all references to appendix X in 10 CFR part 430.

EPCA requires that test procedures proposed by DOE not be unduly burdensome to conduct. (42 U.S.C. 6293(b)(3)) DOE has determined that the amendments in this final rule are not unduly burdensome. The following sections discuss DOE's evaluation of estimated costs and savings associated with the amendments to appendix X1.

In this final rule, DOE updates the existing test procedure for dehumidifiers by amending appendix X1 to incorporate the current version of the applicable industry standard, specify the dehumidification mode rating test period to be 2 hours, permit the use of a sampling tree in conjunction with an aspirating psychrometer or relative humidity sensor for a dehumidifier with a single process air intake grille, and specify requirements for testing dehumidifiers with network functions. If the network functions can be disabled by the end-user and instructions to disable appear in the manual, test with those functions disabled; otherwise, test in the factory default setting. DOE has determined that these proposed amendments would not increase testing costs. As discussed in the following paragraphs, DOE has also determined that two amendments would likely reduce testing costs: shortening the test duration and permitting use of a sampling tree.

DOE amends appendix X1 to specify the dehumidification mode rating test period to be 2 hours for portable and whole-home dehumidifiers. As discussed in section III.C.5 of this document, DOE expects that this amendment will decrease test cost for dehumidifier manufacturers due to reduced test chamber time. Based on past experiences with conducting appendix X1 testing, DOE estimates that 6 hours in a psychrometric chamber for dehumidifier testing according to appendix X1 costs $1,100. Reducing the test period by 4 hours yields an estimated cost savings per test of $750, which is two-thirds of the estimated cost of operation of the test chamber for 6 hours.

DOE has determined that the amendments would not affect the representations of dehumidifier energy efficiency/energy use, as discussed in section III.C.5 of this document. DOE expects that manufacturers would be able to rely on data generated under the current test procedure. As such, retesting and recertification of dehumidifiers would not be required solely as a result of DOE's adoption of the amendments to the test procedure.

DOE amends appendix X1 to allow relative humidity measurements using an aspirating psychrometer or relative humidity sensor with a sampling tree for all dehumidifiers. As discussed in section III.C.6 of this document, DOE expects this would not substantively impact repeatability or reproducibility of the test procedure or the representativeness of the measured energy efficiency. The amendment would not result in a change of the measured energy efficiency of any currently certified dehumidifiers because the proposed use of a sampling tree would be an alternate test set-up to the current test set-up. The amendment would also likely reduce the test burden for certain test laboratories that would otherwise be required to change their aspirating psychrometer or relative humidity sensor configuration to remove the sampling tree and reposition the psychrometer within the test chamber. There is no cost attributable to this amendment.

DOE has determined that the amendments in this final rule would not impact the measured energy use or representations of dehumidifier energy efficiency/energy use. DOE has also determined that manufacturers would be able to rely on data generated under the current test procedure as amended. As such, DOE does not expect re-testing of any dehumidifier would be required solely as a result of DOE's adoption of these amendments to the test procedure.

DOE has determined that the amendments to incorporate the updated version of the relevant industry testing standard and to provide additional direction regarding units with network functions will not change the measured energy efficiency as compared to the current test procedure and would not change the test costs. DOE expects that manufacturers would be able to rely on data generated under the current test procedure. As such, retesting and recertification of dehumidifiers would not be required solely as a result of DOE's adoption of the amendments to the test procedure. Based on review of AHAM DH-1-2022, DOE expects that the amended test procedure for measuring IEF will not increase testing costs per unit compared to the current DOE test procedure. DOE also does not expect that the direction to disable network functions during testing will impact test cost or the measured energy efficiency, as network function does not represent a significant portion of the overall energy efficiency, as discussed previously.

While DOE does not expect that the amendments to the test procedure will require manufacturers to re-test and recertify their models, manufacturers may choose to re-test units using the new test procedure. DOE estimates that testing under the new test procedure would cost roughly $2,000 per test, based on recent testing quotes and reduced testing cost due to the shorter test duration.

The effective date for the adopted test procedure amendment will be 30 days after publication of this final rule in the Federal Register . EPCA prescribes that all representations of energy efficiency and energy use, including those made on marketing materials and product labels, must be made in accordance with an amended test procedure, beginning 180 days after publication of the final rule in the Federal Register . (42 U.S.C. 6293(c)(2))

EPCA provides an allowance for individual manufacturers to petition DOE for an extension of the 180-day period if the manufacturer may experience undue hardship in meeting the deadline. (42 U.S.C. 6293(c)(3)) To receive such an extension, petitions must be filed with DOE no later than 60 days before the end of the 180-day period and must detail how the manufacturer will experience undue hardship. Id. To the extent the modified test procedure adopted in this final rule is required only for the evaluation and issuance of updated efficiency standards, compliance with the amended test procedure does not require use of such modified test procedure provisions until the compliance date of updated standards.

Executive Order (“E.O.”)12866, “Regulatory Planning and Review,” as supplemented and reaffirmed by E.O. 13563, “Improving Regulation and Regulatory Review,” 76 FR 3821 (Jan. 21, 2011) and amended by E.O. 14094, “Modernizing Regulatory Review,” 88 FR 21879 (April 11, 2023), requires agencies, to the extent permitted by law, to (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public. DOE emphasizes as well that E.O. 13563 requires agencies to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. In its guidance, the Office of Information and Regulatory Affairs (“OIRA”) in the Office of Management and Budget (“OMB”) has emphasized that such techniques may include identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes. For the reasons stated in this preamble, this final regulatory action is consistent with these principles.

Section 6(a) of E.O. 12866 also requires agencies to submit “significant regulatory actions” to OIRA for review. OIRA has determined that this final regulatory action does not constitute a “significant regulatory action” under section 3(f) of E.O. 12866. Accordingly, this action was not submitted to OIRA for review under E.O. 12866.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires preparation of a final regulatory flexibility analysis (FRFA) for any final rule where the agency was first required by law to publish a proposed rule for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003 to ensure that the potential impacts of its rules on small entities are properly considered during the DOE rulemaking process. 68 FR 7990. DOE has made its procedures and policies available on the Office of the General Counsel's website: www.energy.gov/gc/office-general-counsel. DOE reviewed this final rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. DOE has concluded that this rule would not have a significant impact on a substantial number of small entities. The factual basis for this certification is as follows:

For manufacturers of dehumidifiers, the Small Business Administration (“SBA”) considers a business entity to be small business, if, together with its affiliates, it employs less than a threshold number of workers specified in 13 CFR part 121. DOE used SBA's small business size standards to determine whether any small entities would be subject to the requirements of the rule. These size standards and codes are established by the North American Industry Classification System (“NAICS”) and are available at www.sba.gov/document/support_table-size-standards. Manufacturing of portable dehumidifiers is classified under NAICS 335210, “Small Electrical Appliance Manufacturing,” whereas the manufacturing of whole-home dehumidifiers is classified under NAICS 333415, “Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing.” The SBA sets a threshold of 1,500 employees or fewer and 1,250 employees or fewer for an entity to be considered as a small business in these industry categories, respectively. 7 For manufacturers of both portable and whole-home dehumidifiers, DOE used the higher (or more conservative) threshold of 1,500 employees or fewer.

DOE used its Compliance Certification Database (“CCD”), 8 California Energy Commission's Modernized Appliance Efficiency Database System (“MAEDbS”), 9 and ENERGY STAR's Product Finder dataset  10 to create a list of companies that sell the products covered by this rulemaking in the United States. DOE then consulted publicly available data, such as manufacturer websites, manufacturer specifications and product literature, import/export logs, and basic model numbers, to identify original equipment manufacturers (“OEMs”) of the products covered by this rulemaking. DOE relied on public data and subscription-based market research tools ( e.g., Dun & Bradstreet reports  11 ) to determine company location, headcount, and annual revenue. DOE screened out companies that do not offer products covered by this proposed rulemaking, do not meet the SBA's definition of a “small business,” or are foreign-owned and operated.

DOE identified 16 OEMs of dehumidifiers for the U.S. market. DOE estimates that 12 are OEMs of portable dehumidifiers, three are OEMs of whole-home dehumidifiers, and one is an OEM of both portable and whole-home dehumidifiers. Of the 16 total OEMs identified, one qualifies as a “small business” and is not foreign-owned or operated.

DOE did not receive any comments that specifically addressed impacts on small businesses or that were provided in response to the initial regulatory flexibility analysis.

In this final rule, DOE updates the existing test procedure for dehumidifiers by amending appendix X1 to incorporate the current version of the applicable industry standard, specify the dehumidification mode rating test period to be 2 hours, permit the use of a sampling tree in conjunction with an aspirating psychrometer or relative humidity sensor for a dehumidifier with a single process air intake grille, and specify requirements for testing dehumidifiers with network functions. If the network functions can be disabled by the end-user and instructions to disable appear in the manual, test with those functions disabled; otherwise, test in the factory default setting. DOE has determined that these amendments would not increase testing costs. DOE has also determined that two amendments would likely reduce testing costs: shortening the test duration and permitting use of a sampling tree.

DOE has determined that the amendments in this final rule would not impact the measured energy use or representations of dehumidifier energy efficiency/energy use. DOE has also determined that manufacturers would be able to rely on data generated under the current test procedure as amended. As such, DOE does not expect retesting of any dehumidifier would be required solely as a result of DOE's adoption of these amendments to the test procedure.

Therefore, DOE concludes that the cost effects accruing from the final rule would not have a “significant economic impact on a substantial number of small entities,” and that the preparation of a FRFA is not warranted. DOE has submitted a certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the Small Business Administration for review under 5 U.S.C. 605(b).

Manufacturers of dehumidifiers must certify to DOE that their products comply with any applicable energy conservation standards. To certify compliance, manufacturers must first obtain test data for their products according to the DOE test procedures, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including dehumidifiers. ( See generally 10 CFR part 429.) The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been approved by OMB under OMB control number 1910-1400. Public reporting burden for the certification is estimated to average 35 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

DOE is not amending the certification or reporting requirements for dehumidifiers in this final rule.

Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.

In this final rule, DOE establishes test procedure amendments that it expects will be used to develop and implement future energy conservation standards for dehumidifiers. DOE has determined that this rule falls into a class of actions that are categorically excluded from review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq. ) and DOE's implementing regulations at 10 CFR part 1021. Specifically, DOE has determined that adopting test procedures for measuring energy efficiency of consumer products and industrial equipment is consistent with activities identified in 10 CFR part 1021, appendix A to subpart D, A5 and A6. Accordingly, neither an environmental assessment nor an environmental impact statement is required.

Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999), imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. The Executive order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE examined this final rule and determined that it will not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of this final rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d)) No further action is required by Executive Order 13132.

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

Title II of the Unfunded Mandates Reform Act of 1995 (“UMRA”) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104-4, sec. 201 (codified at 2 U.S.C. 1531). For a regulatory action resulting in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820; also available at www.energy.gov/gc/office-general-counsel. DOE examined this final rule according to UMRA and its statement of policy and determined that the rule contains neither an intergovernmental mandate, nor a mandate that may result in the expenditure of $100 million or more in any year, so these requirements do not apply.

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This final rule will not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.

DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (March 18, 1988), that this regulation will not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.

Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note), provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving Implementation of the Information Quality Act (April 24, 2019), DOE published updated guidelines which are available at www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has reviewed this final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.

Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant energy action. For any significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use if the regulation is implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.

This regulatory action is not a significant regulatory action under Executive Order 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as a significant energy action by the Administrator of OIRA. Therefore, it is not a significant energy action, and, accordingly, DOE has not prepared a Statement of Energy Effects.

Under section 301 of the Department of Energy Organization Act (Pub. L. 95-91; 42 U.S.C. 7101), DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977. (15 U.S.C. 788; “FEAA”) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission (“FTC”) concerning the impact of the commercial or industry standards on competition.

The modifications to the test procedure for dehumidifiers adopted in this final rule incorporates testing methods contained in certain sections of the following commercial standards: AHAM DH-1-2022, ANSI/AMCA 210, ANSI/ASHRAE 41.1, and IEC 62301. DOE has evaluated these standards and is unable to conclude whether it fully complies with the requirements of section 32(b) of the FEAA ( i.e., whether it was developed in a manner that fully provides for public participation, comment, and review.) DOE has consulted with both the Attorney General and the Chairman of the FTC about the impact on competition of using the methods contained in these standards and has received no comments objecting to their use.

As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of this rule before its effective date. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 804(2).

AHAM DH-1-2022 is an industry-accepted test procedure that measures the capacity and energy input of portable dehumidifiers under specified test conditions. AHAM DH-1-2022 includes provisions for testing dehumidifier energy use in off-cycle, inactive, and off modes, and for including energy consumption in those modes in efficiency calculations. Appendix X1 references sections of AHAM DH-1-2022 for definitions, instrumentation, and test procedure requirements. AHAM DH-1-2022 is reasonably available from AHAM at www.aham.org/AHAM/AuxStore.

The following standards appear in the amendatory text of this document and were previously approved for the locations in which they appear: ANSI/AMCA 210, ANSI/ASHRAE 41.1, and IEC 62301.

The Secretary of Energy has approved publication of this final rule.

This document of the Department of Energy was signed on July 11, 2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the Federal Register .

For the reasons stated in the preamble, DOE amends part 430 of Chapter II of Title 10, Code of Federal Regulations as set forth below:

I. Background

Under the Federal Credit Union Act (FCU Act) and standard FCU Bylaws prior to the effective date of this final rule, there were two ways a member may be expelled, namely: (1) by a two-thirds vote of the membership present at a special meeting called for that purpose, and only after the individual is provided an opportunity to be heard; and (2) for non-participation in the affairs of the credit union, as specified in a policy adopted and enforced by the board. 1 These requirements were set out in the standard FCU Bylaws in appendix A to part 701 of the NCUA's regulations. 2

The FCU Bylaws were last amended by the NCUA Board in 2019 (2019 FCU Bylaws Final Rule). 3 The 2019 FCU Bylaws Final Rule was a comprehensive update that sought to modernize, clarify, and simplify the FCU Bylaws and was the culmination of several years of engagement between the NCUA and factoring in an assessment of stakeholder input. During the 2019 FCU Bylaws Final Rule rulemaking, several commenters expressed concern that the FCU Act expulsion provisions discussed previously made it difficult to proactively limit security threats or financial harm caused by violent, belligerent, disruptive, or abusive credit union members. Specifically, commenters were concerned about the burden from requiring members to call a special meeting to seek to expel such members.

The 2019 FCU Bylaws Final Rule, however, did not modify the procedures for expelling an FCU member as the procedures for expelling a member are governed by the FCU Act. Instead, the 2019 FCU Bylaws Final Rule added a new section to the FCU Bylaws on limiting services for certain members. The 2019 FCU Bylaws Final Rule created the concept of a “member in good standing.”  4 So long as a member remains in good standing, that member retains all the rights and privileges associated with FCU membership. A member not in good standing, however, may be subject to an FCU's limitation of services policy. For example, an FCU may limit all or most credit union services, such as ATM services, credit cards, loans, share draft privileges, preauthorized transfers, and access to credit union facilities, to a member who has engaged in conduct that has caused a loss to the FCU or that threatens the safety of credit union staff, facilities, or other members in the FCU or its surrounding property.

The 2019 FCU Bylaws Final Rule was clear that certain actions warrant immediate limitation of services or access to credit union facilities, such as violence against other credit union members or credit union staff in the credit union facility or the surrounding property. The Board also stated clearly that an FCU may immediately take actions such as contacting local law enforcement, seeking a restraining order, or pursuing other lawful means to protect the credit union, credit union members, and staff. Nothing in the FCU Act or the FCU Bylaws prevents an FCU from using whatever lawful means it deems necessary to address circumstances in which a member poses a risk of harm to the FCU, its property, its members, or its staff and officials.

Even a member deemed not in good standing, however, retains fundamental rights as a credit union member. For example, a member not in good standing has the right to attend, participate in, and vote at the annual and special meetings of the members and the right to maintain a share account. 5 Those rights may be terminated only through a member's expulsion, and the Board explained in the 2019 FCU Bylaws Final Rule that it cannot amend the statutorily prescribed expulsion procedures for members.

In March 2022, however, Congress enacted the Governance Modernization Act to revise the FCU Act procedures for expelling members. 6 The legislative history of the Governance Modernization Act focused on FCUs' concerns that their ability to address violent and aggressive behaviors of certain members was inadequate. Like comments raised during the 2019 FCU Bylaws Final Rule rulemaking, the legislative history included concerns that FCUs lacked the tools to adequately protect employees and other members from violent and abusive members and included concerns that members had threatened the life of an employee or in another case physically attacked a service representative. To address these concerns, Congress modified the FCU Act to provide FCUs with an option for expelling a member for cause by a two-thirds vote of a quorum of the board of directors. The legislative history also described the need for using this authority as a rare option and focused on more extreme examples of member behavior. This statutory authority, however, is not self-executing. The legislation gave the Board 18 months following the date of enactment of the statute to develop and promulgate pursuant to a rulemaking a policy that FCUs may adopt to expel members for cause.

The Board notes that it is focused on improving access to financial services, in part, through its Advancing Communities through Credit, Education, Stability and Support (ACCESS) initiative. 7 As part of this initiative, the NCUA is working to expand the availability of credit to stimulate economic growth and improve the financial well-being of all Americans. This work also aims to ensure that the credit union system achieves its statutory mission of meeting the credit and savings needs of people, especially those of modest means. 8

The Board believes the expulsion of members is an extreme remedy that may have the effect of denying individuals access to financial services. In addition, as financial cooperatives, a credit union's expulsion of a member-owner is a particularly significant action resulting in financial exclusion. Therefore, consistent with certain statements in the legislative history, use of the authority under the Governance Modernization Act should be rare and used only for egregious member behavior.

At its September 22, 2022, meeting, the Board issued a proposed rule to amend the FCU Bylaws to adopt an expulsion policy consistent with the Governance Modernization Act. 9 The proposal provided for a 60-day comment period, which ended on December 2, 2022. The Board received 26 comments from FCUs, credit union leagues and trade associations, and a law firm. All commenters were generally supportive of increased flexibility for FCU boards of directors to expel members for cause. Almost all commenters, however, raised additional considerations for the Board, and several commenters recommended specific changes to the proposed rule. The comments are discussed in detail in the next section.

The NCUA Board is now issuing a final rule to adopt a policy by which an FCU member may be expelled for cause by a vote of two-thirds of a quorum of an FCU's board of directors. The final rule also makes conforming changes to Article II of the FCU Bylaws regarding members in good standing.

As discussed previously, the 2019 FCU Bylaws Final Rule codified the concept of a “member in good standing.” So long as a member remains in good standing, that member retains all the rights and privileges associated with FCU membership. 10 A member not in good standing, however, may be subject to an FCU's limitation of services policy. The primary reason for permitting FCUs to adopt a limitation of services policy was to provide FCUs with an alternative to holding a special meeting to address certain egregious member behavior. 11 The enactment of the Governance Modernization Act, however, has provided FCUs' boards of directors with direct authority (subject to the NCUA Board promulgating a rule, described in the legislation as a policy) to expel a member for cause.

The proposed rule retained the provisions on limitation of services. The proposed rule discussed several reasons for retaining these provisions, including additional flexibility for FCUs to address certain disruptive member behaviors through less severe restrictions, the ability of FCU boards to restrict access and services in the case of a violent or abusive member who has yet to be expelled, 12 and to provide FCUs an easier and more expeditious tool to address abusive and disruptive members. A board vote is not required under the limitation of services policy. All commenters who discussed the issue supported retaining the limitation of services policy in the FCU Bylaws. The Board agrees and continues to believe retaining the limitation of services policy provides important flexibility to FCU boards, and the final rule includes the limitation of services policy as proposed.

The proposed rule also included a few substantive changes to the limitation of services provisions. Specifically, the definition of a member not in good standing was removed. This definition included a list of behaviors that if engaged in by a member could trigger limitation of FCU services. However, the Governance Modernization Act also includes a list of behaviors that may warrant termination of membership. Instead of including two separate lists of disruptive, abusive, or violent behaviors, the proposed rule defined a member not in good standing as a member who has engaged in any of the conduct listed in the Governance Modernization Act, as implemented in Article XIV of the FCU Bylaws.

Commenters differed on whether the final rule should include the same set of “for cause” behaviors for both expulsion and limitation of services. Many commenters thought the same behaviors should be used for both actions. Other commenters recommended a more expansive list of behaviors available to trigger a limitation of services. For these commenters, expulsion is a more extreme remedy than the limitation of services and the conduct triggering each remedy should not be synonymous. The Board has not made changes in response to these commenters. The Board believes the list of “for cause” behaviors is already expansive and includes the types of actions that are reasonable grounds for limiting services or expulsion.

The proposed rule also made other technical conforming changes. For example, the proposed rule amended the requirement that the disruptive, violent, or abusive behavior have a logical relationship between the objectionable activities and the services to be suspended. This provision was removed because it is not included in the Governance Modernization Act. The Board sought comment on whether it should retain the existing language regarding a logical relationship between the “for cause” behavior and limitation of services. Many commenters recommended removing this qualification as it is not included in the Governance Modernization Act. The final rule does not include the express provision related to the nexus between the behavior and the limitation of services; however, the Board expects each FCU's board of directors to use appropriate discretion and only limit services when necessary.

The proposed rule also included a question on whether the abusive or disruptive conduct must occur at the FCU. Many commenters objected to limiting expulsion to behaviors that occur at the FCU. Some of these commenters discussed electronic communications. For example, one commenter stated in an increasingly digital world with more channels for members to interact with an FCU, abusive behavior can occur over the phone, on social media, or through other channels that may not fit this physical location definition. These communications would likely be covered under the proposed rule, which stated dangerous or abusive behavior includes conduct while on credit union premises and through the use of telephone, mail, email, or other electronic method.

Other commenters raised concerns about certain abuses that would not likely be covered under the proposed definition. Some examples of behavior that would not likely be included under the proposed rule include threats made at a location other than the credit union (such as a community event), stalking or assaulting of an employee that occurs at another location, or a violent crime committed by a member. The Board agrees with the commenters that these behaviors should be grounds for expulsion, and the final rule includes a catchall category of other behaviors related to credit union activities. Therefore, any conduct that is dangerous or abusive and related to a credit union's activities, regardless of the location of the conduct, may be grounds for limitation of services or expulsion. The catchall category would not include violent crime or dangerous or abusive behavior that is unrelated to the credit union's activities. The Board believes conduct that is unrelated to credit union activities should not be grounds for limitations of services or expulsion and is more appropriately handled through law enforcement.

Finally, a few commenters suggested the final rule should clarify that limitation of services does not require a notice or hearing. The Board is clarifying that use of the limitation of services policy does not require notice or a hearing.

Under the Governance Modernization Act, a member may be expelled for cause by a two-thirds vote of a quorum of the FCU's board of directors. An FCU may only use this process to expel a member after the NCUA Board has developed a corresponding policy for expulsion and implemented such policy through rulemaking within 18 months following the date of enactment (March 15, 2022), and the FCU has adopted the related standard Bylaw amendment. The final policy for member expulsion is discussed below.

Under the Governance Modernization Act, an FCU's directors may expel a member only if the FCU has provided, in written or electronic form, a copy of NCUA's expulsion policy to each member of the credit union. The proposed rule sought comment on whether the final rule should include a standard disclosure form of the NCUA expulsion policy outside of the language in Article XIV of the FCU Bylaws. Many commenters stated the final rule should include an optional model standard disclosure. A few commenters characterized a potential model as a safe harbor. In response to commenters' request, the Board has provided an optional standard disclosure. The disclosure is provided at the end of the standard FCU Bylaws. 13

A few commenters also requested that the Board clarify that FCUs may add the expulsion policy notice to the membership/account terms and conditions. The Board has no objection to FCUs adding the policy to membership and account terms and conditions.

One commenter stated that the final rule should specify that the requirement for “each” member to receive a copy of the expulsion policy does not permit members to avoid expulsion by an operational error as to whether another member has received a copy of the policy. However, the requirement for “each” member to receive the policy is from the Governance Modernization Act, and the Board may not modify the requirement.

The proposed rule also sought comment on whether FCUs should be required to get NCUA approval for all bylaw amendments related to expulsion procedures. Specifically, should certain modifications be considered fill-in-the-blank type provisions and therefore not require NCUA approval. Most commenters who discussed this issue believed the final rule should include some fill-in-the-blank type options for FCUs to customize their expulsion procedures without receiving NCUA approval. For example, a few commenters stated that if an FCU decides to allow an in-person hearing, NCUA approval should not be required.

The final rule does not require NCUA approval to require an in-person hearing. Additionally, as discussed subsequently, the NCUA will not consider hearing procedures such as the order of speakers or the length of the hearing as amendments to an expulsion policy. Therefore, hearing procedures do not require NCUA approval, provided the procedures are not inconsistent with the terms of NCUA's expulsion policy. Any variation to the express terms of NCUA's expulsion policy, or Article XIV, constitutes a bylaw amendment and is subject to NCUA approval.

Finally, the Board sought comment on whether it should require both mail and electronic delivery of notices, even if the member has elected to receive electronic communications. No commenters who discussed this issue supported both mail and electronic delivery of notices, and the final rule does not require both mail and electronic delivery of notices for those members electing to receive electronic communications.

The Governance Modernization Act provides that an FCU's board of directors may vote to expel a member for cause by a two-thirds vote of a quorum of the directors of the credit union. If a member will be subject to expulsion, the member shall be notified of the pending expulsion, along with the reason for such expulsion. The Board sought comment on how prescriptive the final rule should be regarding the content of the pending expulsion notice. A few commenters stated the proposed requirements are too prescriptive or vague and may lead to conflict with examiners, and a few commenters requested the Board provide a standard disclosure for the notice of pending expulsion. One commenter stated that the Board should outline the categories of information required to be included in a pending expulsion notice and do so by a published form document.

The Board does not believe a standard disclosure is appropriate for the notice of pending expulsion as the Board expects each notice to be tailored to the specific member and their pending expulsion. In response to commenters, however, the final rule does include additional clarifying information on what is expected in the notice. Specifically, the final rule provides that relevant dates, sufficient detail for the member to understand the grounds for expulsion, how to request a hearing, the procedures related to the hearing and, if applicable, a general statement on the effect of expulsion related to the member's accounts or loans at the credit union must be included in the pending expulsion notice.

The proposed rule required that the reason for the pending expulsion be specific and not just include conclusory statements. For example, a general statement saying the member's behavior has been deemed abusive and the member is being subject to expulsion procedures is insufficient as an explanation. Instead, the FCU should include the date(s) of the interaction(s) and specific information describing the interaction(s), including a description of the member's conduct. Likewise, a notice stating the member violated the membership agreement also is insufficient as an explanation for the pending expulsion.

One commenter stated that the pending expulsion notice should not require the identification of any specific FCU employee and instead generic terms such as “loan officer” should be sufficient. The Board agrees and is clarifying that FCUs do not need to identify any employee by name or branch location and generic terms such as “customer service representative,” “loan officer,” or “teller” are sufficient.

The notice should, however, include specific information about how the member violated the agreement or engaged in dangerous or abusive behavior and include other relevant information as appropriate. The member is relying on the provided notice if a hearing is requested. As such, the notice must include sufficient detail for the member to understand why he or she is being subject to expulsion so that the member has a meaningful opportunity to present their case against expulsion and an opportunity to respond to the FCU's concerns in a requested hearing.

The notice must also tell the member that any complaints related to their potential expulsion should be submitted to NCUA's website if the complaint cannot be resolved directly by the credit union. 14 Several commenters expressed concerns with this proposed requirement. One commenter questioned how this process would align with the general process to forward certain complaints to the Consumer Financial Protection Bureau, or CFPB. One commenter questioned the NCUA's authority for this requirement. One commenter requested specific timelines for when the NCUA receives the complaint compared to the hearing date and whether the NCUA would share the complaint with the FCU. One commenter asked that the NCUA only accept complaints after the hearing.

The Board has made two changes in response to these comments. The final rule provides that complaints should be raised with the NCUA only if the member has first tried to resolve the complaint directly with the credit union and clarified complaints should be sent to NCUA's Consumer Assistance Center. The Board believes credit unions should have an opportunity to address members' complaints first. However, the Board believes contacting the NCUA is an appropriate avenue for members' concerns or complaints. Therefore, the Board has not removed the requirement to notify the members of their right to complain to the NCUA. Additionally, the Board notes that notifying members of their right to complain is not providing members any new rights, and the notice is intended solely to remind members of their existing rights.

Additionally, the Board does not believe notification of the right to file complaints is novel when considering routine FCU activity. For example, loan denial notices also include similar language regarding member complaints. The Board also does not believe including the statement on complaints presents a burden to FCUs. Finally, the NCUA generally has the right to remedy violations of laws, rules, or regulations, which would include the Governance Modernization Act and this rule, under 12 U.S.C. 1786.

Under the Governance Modernization Act, a member has 60 calendar days from the date of receipt of a notification of pending expulsion to request a hearing from the board of directors of the FCU. The proposed rule discussed that the member has 60 calendar days from the date of receipt, not the date the FCU provides the notice. Further, the proposed rule stated that the member has 60 calendar days to provide the FCU with a request for a hearing. Therefore, the member may mail the notice 60 days after receiving the notice. As such, the FCU may not receive the notice within 60 calendar days, and the Board recommended that FCUs provide sufficient time for both the member's receipt and the FCU's receipt before expelling a member.

Many commenters had concerns about these provisions and requested that the Board incorporate a presumption of receipt by the member. Suggestions for this presumption ranged from three to five business days after the FCU mailed the expulsion letter to the address on file. One FCU expressed concerns about situations in which the FCU does not have a current address on file. Another commenter raised concerns if the member denied receipt of a mailing, and another recommended that a Certificate of Mailing should satisfy this requirement.

The Board has not amended the final rule to add a presumption of receipt. A member who objects to an expulsion due to the lack of receipt of a notice may either file a complaint with the NCUA or pursue a private right of action in court. 15 The NCUA would consider a letter that was properly addressed and mailed as received by its intended recipient absent conclusive evidence it was not received, but local jurisdictions may have their own procedures regarding presumptions of receipt. These are evidentiary issues related to due process that the Board encourages FCUs to consider in developing their procedures, to reasonably ensure they withstand potential legal challenges. 16

Another commenter objected to the proposed policy to provide the member 60 days to mail a hearing request, instead of 60 days for the FCU to receive a hearing request. This commenter recommended the final rule provide that the deadline for requesting a hearing is past if the FCU has not received the notice within 60 days after the member's receipt of the notice. The Board has not made any changes to the final rule in response to this comment.

While rules in each jurisdiction may vary, often items postmarked by deadlines are considered timely. Further, any formal appeal by the member would likely be in the form of a private right of action and not to the NCUA, as the Governance Modernization Act does not include appeal rights to the NCUA. The Board suggests FCUs consider consulting with local counsel regarding the requirements in their jurisdiction regarding receipt and timeliness of mailings.

Other commenters generally objected to the Governance Modernization Act's requirement that a member has 60 days to request a hearing. A few commenters recommended this period be reduced. Some commenters recommended 30 days. Other commenters recommended the Board allow FCUs to expel certain members immediately. Another commenter recommended the Board interpret the Governance Modernization Act to allow for an immediate expulsion and then a 60-day period after expulsion to request a hearing.

The Governance Modernization Act provides that the FCU must provide “Notification of pending expulsion.” The statute also uses the term “in advance of the expulsion” and then provides for expulsion after 60 days if the member does not request a hearing. Therefore, the Board finds no authority in the statute to permit immediate expulsions or to allow a shorter timeframe than 60 days to request a hearing.

The proposed rule provided that the FCU must maintain a copy of the notice provided for its records. The Board sought comment on whether this requirement is burdensome. In response, two credit unions stated that this requirement is not a burden, one commenter stated state law should determine this requirement, and one commenter generally stated if the notice is not retained, then the FCU should maintain a written record of the facts. The Board has not made any changes to the final rule in response to commenters as it believes the requirement represents only a small burden to credit unions and would assist examiners in any review of an FCU's expulsions. It also ensures an FCU has records available in the event of legal disputes over an expulsion.

Under the Governance Modernization Act, if a member does not request a hearing, the member is automatically expelled after the end of the 60-day period. If a member requests a hearing, the board of directors must provide the member with a hearing. The statute is silent on whether the hearing must be in person, and the proposed rule permitted in-person or virtual hearings and permitted members an option to offer only written testimony. The Board sought comments on whether fairness, other principles, or other laws may call for an in-person hearing or other hearing procedures. No commenter expressed support for mandatory in-person hearings.

Commenters had wide ranging suggestions on the form of the hearing. Several commenters stated the final rule should permit FCUs to choose between in-person, virtual, and hearings conducted solely through written submissions (referred to as on-the-paper hearing), especially in cases of a violent or abusive member. Some commenters stated that there should be no hearing, just a written response if the member is dangerous or abusive. A few commenters recommended permitting telephonic hearings. For example, if a violent member does not have access to a computer to conduct a videoconference hearing, then the FCU should offer a telephonic hearing. One commenter recommended requiring members to appear virtually (and not permitting only written testimony as is permitted under the proposed rule). Another commenter, however, recommended requiring written testimony in addition to any oral testimony.

In response to commenters, the final rule does not require in-person hearings, as the Board continues to believe it is not necessary and may be problematic in cases of expulsion due to violence or threatened violence. Further, the Board agrees with commenters that a telephonic hearing would be appropriate if a member cannot participate by videoconference. 17 Therefore, the final rule has been amended to permit the option of a telephonic hearing if the member cannot participate through a virtual hearing.

The Board continues to believe that telephonic hearings and written hearings should not be the primary means of conducting hearings and are more appropriate forums for a hearing only if a virtual or in-person hearing is not a viable option. Therefore, the Board is not amending the rule to permit FCUs to offer members only telephonic hearings or written hearings. Members who are potentially subject to expulsion should have the option of orally presenting their case through a virtual hearing, or in-person if there are no safety concerns.

The proposed rule did not include many prescriptive requirements related to the structure and procedure for the hearing and included only general principles related to the fairness of the hearing, such as the FCU could not raise any reason or rationale for expulsion that is not explicitly included in the notice to the member. The proposed rule did not, for example, include provisions for the order of testimony at the hearing, time limits for members, or whether the member or board members may ask questions.

Several commenters stated that the Board has provided sufficient guidance in the proposal regarding the structure and procedure of an expulsion hearing, and no further guidance is necessary. Other commenters objected to the proposed requirements not found in the Governance Modernization Act and characterized these elements as turning the expulsion process into something closer to the due process afforded a student facing expulsion at a public university than the termination of a consumer finance relationship. One commenter requested that the Board clarify that hearings do not need to follow the parliamentary procedure noted in Article IV, section 4(k) of the FCU Bylaws. One commenter suggested that the final rule include time limits for members at the hearing, such as 15 minutes. This commenter also requested that the final rule state FCU boards have no evidentiary burden.

The Board agrees with the commenters who stated the proposed rule included sufficient guidance regarding the structure and procedure of an expulsion hearing and no further guidance is necessary. The Board believes that each FCU should have the flexibility to conduct a hearing as it deems appropriate and standard procedures across all FCUs are unnecessary. As requested by a commenter, the Board is clarifying that the hearings do not need to follow the same procedures as meetings of the members.

To simplify the requirements for the hearing, the Board has also removed the proposed requirement that subsequent conduct cannot be raised at the hearings. Commenters discussed that subsequent conduct is relevant to the hearing, this requirement is not part of the Governance Modernization Act, and the hearing is not a criminal trial. Therefore, subsequent conduct could be discussed at an expulsion hearing; however, the subsequent conduct must be related to the conduct outlined in the notice for fairness reasons. For example, if the original conduct and rationale for proposed expulsion was abusive personal conduct, and the person repeated abusive conduct after the notice was sent that could be discussed at the hearing.

But, at the hearing the credit union should not raise a violation of the membership agreement related to a loan loss as that is a new unrelated rationale for the expulsion and the member would not be on notice of the new rationale. A member should not be expected to address new rationales not discussed in the notice of pending expulsion. In adopting their own hearing procedures, FCUs should do their best to ensure they adopt procedures they reasonably expect are defensible under any applicable law and are consistent with the intent of the Governance Modernization Act.

Additionally, the Board is clarifying that hearing procedures are not considered amendments to NCUA's expulsion policy and do not require Board approval. For example, procedures related to the order, amount of time members have to speak, or whether questions will be asked are not governed by NCUA's expulsion policy. Each credit union may determine its own hearing procedures.

The final rule generally only requires that hearings provide members a meaningful opportunity to present their case to the FCU's board orally. The Board expects hearings to be held in a fair, reasonable, and consistent manner that provides members a reasonable opportunity to present their case, but the final rule does not include prescriptive procedures. These general principles are intended to guide credit unions and ensure members are given a fair opportunity to present their case against expulsion and an opportunity to respond to the FCU's concerns without limiting FCU boards from determining the structure of their own hearings. Finally, the Board notes that members can file complaints with the NCUA if the complaint cannot be resolved directly with the credit union or consider the possibility of independent legal action if the FCU does not provide fair and reasonable hearing procedures. 18

One commenter also requested that if a member does not attend a hearing, the final rule should state the FCU may proceed with the expulsion vote. The Board agrees. If a member requests a hearing and does not attend, the FCU board may proceed with the expulsion vote.

The Board also sought comment on whether the final rule should include an appeal right for members. No commenters expressed support for an appeal right, and several stated that a request for reinstatement is a form of an appeal. A few commenters also explicitly stated that the final rule should not require supervisory committees to review records related to expulsion, but it would make sense for the FCU to review expulsions as part of an internal audit. A few commenters mentioned that there may be a private right of action related to expulsion, and therefore, formal appeal rights are unnecessary.

The Board has not adopted formal appeal rights in the final rule. As discussed previously, a member's concern about fairness can be addressed through complaints to the NCUA or consideration of private rights of action. The Board encourages FCUs to discuss the potential of private rights of action with local counsel, particularly when they are inclined to adopt more restrictive hearing procedures.

After the hearing, the FCU board of directors must hold a vote in a timely manner on expelling the member. The proposed rule defined a timely manner as within 30 calendar days. A few commenters stated that this timeline was reasonable, several thought the final rule should provide discretion to boards of directors, and two commenters thought 90 days is a more appropriate timeline.

The final rule provides 30 calendar days for the Board vote. The Board believes 30 days represents a reasonable time to hold a vote and that 90 days would be too long to provide the member with a resolution to the notice of pending expulsion. In addition, a three-month delay in an expulsion vote may undermine the board of director's position on the severity of the member's activity that the Board expects as justification for the potential expulsion.

Under the proposed rule, once a member is expelled the FCU must provide notice to the member. The notice should state the reason for the member's expulsion, and if a hearing was conducted or written testimony provided, the FCU should provide a response to the member's statements. The notice must also provide information on the effect of the expulsion, including information related to account access and any deductions related to amounts due.

One commenter recommended the Board provide model language for the expulsion notice. The Board is declining to provide model language covering these aspects of an expulsion. The Board believes each termination notice should be tailored to the specific member subject to expulsion. For example, the effect of expulsion may depend on the accounts held by the member at the FCU and the contract terms of those accounts. Additionally, without a standard form it is more likely FCUs would be intentional about articulating the grounds for expulsion in a manner that best protects the credit union and provides appropriate rights and notice to the member. Therefore, the Board does not believe this type of disclosure is appropriate for a standard form.

Under the final rule, if a member is expelled, either after the board votes to expel the member following a hearing or 60 days after receipt of the notice if no hearing is requested, the FCU must provide written notice of the expulsion. The notice must provide information on the effect of the expulsion, including information related to account access and any withdrawals by the FCU related to amounts due.

Specifically, the notice should include pertinent information to the member, including that expulsion does not relieve a member of any liability to the FCU and that the FCU will pay all the member's shares upon their expulsion less any amounts due. The notice should include a line-by-line accounting of any deductions related to amounts due. The notice should also include when and how the member will receive any money in their accounts. The written notice must be provided to the member in person, by mail to the member's address, or electronically if the member has elected to receive electronic communications from the credit union.

The proposed rule explicitly asked whether the final rule should include a minimum amount of time before an FCU is permitted to call an existing obligation or offset amounts owed. Many commenters stated that the final rule should leave the option to call the member's outstanding loans or other obligations to the FCU. Commenters generally stated that an option to freeze any available funds would prevent the member from withdrawing funds and leaving the FCU with a potential loss. One commenter stated that FCUs should call closed-end secured credit (such as an auto loan) and offset any available funds, assuming the contract permitted such an action. The final rule does not include any restrictions on calling or offsetting existing obligations. Instead, the Board believes this is a matter that should be left to state contract law, consumer protection laws, and FCU boards' discretion.

Under the Governance Modernization Act, an FCU's board may expel a member for cause, which means the following: (a) a substantial or repeated violation of the membership agreement of the credit union; (b) a substantial or repeated disruption, including dangerous or abusive behavior (as defined by the NCUA Board pursuant to a rulemaking), to the operations of a credit union; or (c) fraud, attempted fraud, or other illegal conduct that a member has been convicted of in relation to the credit union, including in connection with the credit union's employees conducting business on behalf of the credit union.

For repeated violations of the membership agreement that are non-substantial, the proposed rule required prior notice to the member. A few commenters disagreed on the need for repeated notice for non-substantial violations. One commenter stated that members have already received the expulsion policy and a member can raise exculpatory information at the hearing. The same commenter also stated that the Governance Modernization Act does not specify that the same provision of the membership agreement needs to be repeatedly violated to trigger expulsion. Therefore, the Board should permit an FCU to expel a member who violates any provision or combination of provisions of the membership agreement repeatedly.

The Board has not made changes in response to these comments, and the final rule requires notice for repeated non-substantial violations of the membership agreement. First, FCU boards have considerable discretion to determine what violation is non-substantial, and an initial notice is only required for non-substantial violations. If an FCU board determines a violation is non-substantial, then it is likely the member would be unaware the conduct could result in expulsion. Second, the Board believes an initial notice is necessary to ensure members are aware that they may be expelled for repeated, non-substantial violations of the membership agreement.

The warning notice before the notice of expulsion is only for potential expulsions related to repeated violations that are deemed non-substantial. The FCU's board may act to expel a member immediately for substantial violations of the membership agreement and does not need to provide a warning notice for substantial violations of the membership agreement. The Board does not believe the added burden or time required by an extra notice is outweighed by the potential benefit to members who may be unaware that their conduct is grounds for expulsion.

The Board also specifically sought comment on whether the final rule should limit the time between the FCU's notice of a violation and the repeated behavior. Many commenters stated any repeated behavior should be grounds for expulsion regardless of the time between the events. One commenter favored a maximum amount of time for non-substantial repeated violations to qualify as grounds for expulsion. The commenter noted, however, the FCU should retain the flexibility to limit services prior to that time. The Board agrees, and the final rule includes a two-year limit on the amount of time that may occur between non-substantial repeated violations to qualify as grounds for expulsion. The Board believes that non-substantial conduct that occurs less frequently than every two years does not present sufficient disruptions to the FCU's operations to warrant expulsion.

The Board also solicited comments on typical violations of a membership agreement that cause concern for FCUs and whether FCUs consider causing a loss to be a substantial violation of the membership agreement. One commenter recommended examples of substantial violations of the membership agreement. FCUs provided many examples of potential grounds for expulsion related to violating the membership agreement, including red flags for money laundering, participation in restricted activities (for example, personal share draft accounts being used for business transactions), causing property damage or engaging in fraudulent activities, causing physical or mental harm to an employee, members sharing account access devices with unauthorized individuals, account service abuse, engaging in conduct that would give rise to a bond or insurance claim, and causing a financial loss to the credit union (or conduct that would have caused a loss but for the FCU's loss prevention).

A few FCUs raised examples of concerns that the Board does not universally agree should be grounds for expulsion. The Board is commenting on these examples to provide guidance to FCUs in how the agency will interpret and administer the final rule. One credit union stated failing to keep accounts secure (for example, keeping the PIN with the debit card) should be grounds for expulsion. In such a case, the Board recommends limiting services and access to debit cards if the credit union believes access should be limited. The Board has intentionally kept the limitation of services policy for credit unions to have a variety of remedies available for problematic conduct. One FCU stated that a member filing bankruptcy should be considered per se or automatic material loss, and another commenter stated that the final rule should permit FCUs to expel people who could target credits unions after being forced out of a bank. 19 The Board disagrees.

The Board considers both examples to be sources of potential harm to the FCU and, without more, not actual disruptions or violations. Additionally, the Board is concerned a policy that states filing bankruptcy is a per se loss might unfairly impact members who have prioritized loan payments to the FCU. For example, a member who has prioritized paying an auto loan should not be subject to expulsion due to filing bankruptcy from overwhelming medical debt.

The final rule, however, provides FCU boards discretion to determine what behaviors constitute substantial violations of the membership agreement or dangerous or abusive behaviors. The Board believes such a determination would be dependent on the particular facts and would be difficult to determine through a universal policy applicable to all FCUs. Therefore, the final rule does not define or otherwise limit an FCU's discretion to determine what behavior or violation of the membership agreement is substantial.

One commenter also discussed that not all FCUs have a document called a “membership agreement,” and many read the term as a combination of several documents. The Board believes the term should generally be defined as any documents customarily provided to the member at account opening that include terms and conditions of FCU membership and terms and conditions of the account being opened.

Under the proposed rule, a member may also be expelled by an FCU board for a substantial or repeated disruption, including dangerous or abusive behavior, to the operations of a credit union. The proposed rule defined dangerous or abusive behavior as follows: (1) violence, intimidation, physical threats, harassment, or physical or verbal abuse of officials or employees of the credit union, members, or agents of the credit union (this includes actions while on FCU premises, through use of telephone, mail, email, or other electronic method, or otherwise related to the credit union's activities); (2) behavior that causes or threatens damage to FCU property; or (3) unauthorized use or access of FCU property.

The proposed rule generally relied on the current definition of a member not in good standing to define dangerous or abusive behavior. The proposed rule also stated that expressions of frustration with the FCU or its employees through elevated volume and tone or repeated interactions with employees are insufficient to constitute dangerous or abusive behavior. One trade association urged the Board to remove this statement. The commenter stated that depending upon the facts and circumstances, these behaviors may well constitute harassment or verbal abuse and a valid basis for restricting services as harassment.

The Board wants to be clear that racist, sexist, personally insulting, or otherwise offensive language is grounds for limiting access to FCU employees or expulsion. However, the Board also wants to be clear that members who are upset, frustrated, or otherwise agitated with an FCU should not be expelled on that basis alone. The Board believes this determination is likely dependent on the context and should be considered on a case-by-case basis. Deciding which side of the line a member is on is not a simple matter insofar as it requires the credit union to balance the need to preserve the safety of individual staff, other members, and the integrity of the workplace with the rights of the affected member.

As with repeated violations of the membership agreement, if the FCU's board acts to expel a member for repeated disruptions that are non-substantial, the FCU must have first provided written notice to the member after an instance of such disruption. In contrast, substantial disruptions, including any conduct that would constitute dangerous or abusive behavior, may be grounds for immediate action and termination of membership.

This distinction and requirement to put a member on notice of conduct that, if repeated, may lead to expulsion, stem from the Governance Modernization Act, which defines “cause” in part as “a substantial or repeated disruption.” Additionally, as discussed previously in connection with limitation of services policies, an FCU may immediately take actions such as limiting services, contacting local law enforcement, seeking a restraining order, or pursuing other lawful means to protect the credit union, its property, credit union members, staff and officials, and nothing in the FCU Act or the FCU Bylaws prevents an FCU from using whatever lawful means it deems necessary to address circumstances in which a member poses a risk of harm to the FCU, its members, or its staff.

A member may also be expelled for cause if the member has engaged in fraud, attempted fraud, or been convicted of other illegal conduct in relation to the credit union, including in connection with the credit union's employees conducting business on behalf of the credit union. The Board solicited comments on whether it should define fraud or attempted fraud. Many commenters stated the Board does not need to define the term fraud. The final rule does not include a definition of fraud or attempted fraud. One commenter suggested clarifying in the regulatory text that a conviction is not necessary for fraud or attempted fraud. The Board agrees and has made this clarification.

Under the Governance Modernization Act, a member expelled by a two-thirds vote of an FCU's board of directors must be given an opportunity to request reinstatement of membership. The member may be reinstated by either a majority vote of a quorum of the directors of the FCU or a majority vote of the members of the FCU present at a meeting, which the proposed rule said must be a special meeting. Two commenters recommended the Board clarify how the determination is made between the two options. These commenters recommended that the decision be at the sole discretion of the FCU. The Board agrees and is clarifying that FCU boards have discretion to choose between the two options.

One commenter stated that if an FCU opts for a member vote the final rule should permit the vote to occur at an annual meeting. The Board agrees. Under the final rule, the FCU may act on a reinstatement request through a majority vote of a quorum of the directors of the credit union, a majority vote of the members of the credit union present at a special meeting, or majority vote of members at an annual meeting provided that the annual meeting occurs within 90 days of the member's reinstatement request.

The final rule requires that if the FCU addresses the reinstatement request through an annual meeting, this meeting must occur within 90 days of the reinstatement request. The Board believes a previously expelled member should not have to wait up to one year (which may be necessary if an annual meeting occurs just before the member requests reinstatement) for a resolution to their reinstatement request. Finally, the rule clarifies that an in-person vote is not required if the FCU holds a meeting of the members to vote on the reinstatement request.

The proposed rule also specified that an FCU is required to hold a board vote or special meeting in response to a reinstatement request only once. Many commenters agreed that FCU boards should not have to vote on reinstatement more than once. Some commenters suggested the final rule provide a minimum amount of time before an FCU must act on a reinstatement request (for example, one year after expulsion). The final rule does not include a minimum amount of time for a reinstatement request. Members are only entitled to one reinstatement request, and the Board believes each member should be able to make that request based on that member's own circumstances.

Finally, the Board solicited comments on whether a member convicted of other illegal conduct should be automatically reinstated if the conviction is later overturned. No commenters who discussed this issue were in favor of automatic reinstatement. The final rule does not include automatic reinstatement if the conviction is overturned. Each FCU board could take this into consideration if a member requests reinstatement. The overturning of a conviction might cause the FCU to reconsider its expulsion decision, but the underlying conduct that led to expulsion may still be relevant. In this area, the Board believes that FCUs should exercise sound judgment and consult with counsel if they need further guidance.

Under the Governance Modernization Act, an expulsion of a member by an FCU's board of directors must be done on an individual, case-by-case basis. Further, neither the NCUA Board nor any FCU may expel a class of members. The proposed rule stated that a class of members included a class of members that have caused a loss. One commenter was opposed to this interpretation. The Governance Modernization Act, however, is clear that expulsion must be done individually on a case-by-case basis. 20

Further, all anti-discrimination laws and regulations remain applicable, and expulsions of a class of members based on any class or characteristic such as, but not limited to, race, color, religion, national origin, gender, sexual orientation, gender identity, age, familial status, or disability status, are strictly prohibited. An FCU may have liability if it exercises its discretion in a manner that has a discriminatory purpose or effect or disparate impact under anti-discrimination laws. In addition, members cannot be expelled due to or in retaliation for their complaints to the NCUA or any other regulatory agency or law enforcement, such as the CFPB, and members who are employees or former employees of the FCU cannot be expelled for any protected whistleblower activities. 21

The proposed rule also sought comment on whether the possibility of FCUs expelling some members but not others for engaging in certain behavior is a cause for concern. A few FCUs stated this concern would likely be addressed through adoption of policies on expulsions. Another commenter, however, stated FCUs should not be required to adopt any policy on expulsion. One commenter generally thought this would not likely be an issue because FCUs are focused on growing membership and would not arbitrarily expel members. One commenter thought private rights of actions would address this concern.

FCUs should be aware of the potential for discrimination, including disparate impacts on and arbitrary treatment of members. An FCU must ensure that its implementation of the authority to expel members for cause is done consistently and does not violate anti-discrimination laws or regulations. The Board recommends each FCU consider adopting a policy related to when its board should expel members, especially if the FCU intends to expel members for violations of the membership agreement. Each FCU should periodically review its past expulsions to ensure there is not a disparate impact created from its expulsion policy.

To enable NCUA examiners to review relevant information related to expulsions, the proposed rule required FCUs to maintain records relating to expelled members for five years. Commenters provided a variety of responses to this proposed requirement. One stated any record retention policy should align with other member documents that must be retained after account closing. One commenter suggested setting the requirement at seven years as that should meet or exceed most statutes of limitation. One stated the proposed five-year retention period is reasonable and not a compliance burden. This commenter recommended FCUs retain evidence of the member behavior leading up to the expulsion decision, all formal written communications to the member related to the behavior and the expulsion decision, and documents used or introduced in the hearing. One commenter recommended that the retention of clear copies (and not originals) is sufficient.

The final rule has increased the retention period to six years. The Board agrees with the commenter who recommended aligning the retention period with state statute of limitation laws. The Board believes that six years is likely the most common statute of limitations for contracts under state law. The Board also wants FCUs to retain records over a sufficient period so examiners can review the records and have the necessary data to ensure expulsions do not have a disparate impact on a protected class. 22

The rule does not specify necessary documents for the record or the format for retention, but the Board expects a record to include general documents related to the member, such as the member's last known contact information, membership agreement, loan files, and specific documents related to the cause of the member's expulsion, including written communications from the credit union regarding the expulsion, the board's decision to expel the member, any written response from the member, and information or minutes relating to any hearing, should one occur.

The proposed rule discussed whether FCUs may only expel members for conduct that occurs after a certain date, such as when notice of the policy is provided to members, when the FCU board adopts a bylaw amendment, or when the Governance Modernization Act was enacted. A few commenters stated that the final rule should provide the option of reviewing past behavior of the member. Many offered the date the Governance Modernization Act was signed into law.

The final rule does not prescribe a date after which member conduct must occur for the conduct to serve as grounds for expulsion. The Board agrees there are some reasonable examples of past conduct that could serve as grounds for expulsion and does not want to remove the option for FCUs to expel these members. The Board, however, recommends that FCUs consider fairness issues and litigation risk when considering past conduct as grounds for expulsion. For example, expelling a member who currently is subject to a limitation of services for a violent action would be more reasonable than expelling someone for past conduct that has not led to a limitation in services.

More broadly, while Congress did not specifically constrain an FCU's reliance on past conduct, the legislation requires each FCU to provide a copy of its expulsion policy to each member before an FCU may implement it. Relying on conduct that occurred before an FCU provides the policy to each member may raise legal risks for the FCU.

A few commenters raised issues with aspects of the proposal that were from the Governance Modernization Act and outside of the Board's discretion. One commenter stated that FCU management, and not FCU boards of directors, should make the member expulsion decision. One FCU recommended that the expulsion procedures mirror or be significantly similar to that of state-chartered credit unions.

One commenter requested that the Board provide a flow chart to help FCUs understand the expulsion process. The Board does not believe the rule is sufficiently complex that a flow chart is warranted as part of this final rule.

One commenter stated that there should be no private right of action under the Governance Modernization Act. The Board notes that the Act does not include an express private right of action. The Board neither intends to establish a private right of action with this final rule nor preclude a private right of action that may be available under existing law. FCUs should consider legal risks when establishing their policies.

Finally, one commenter discussed whether FCUs could take steps to address delinquencies without invoking the limitation of services policy. The commenter asked that Article II provide either of the following: (a) the standard is not “significantly delinquent” but rather the old standard of “loss,” or (b) the concept of limitation of services for members not in good standing does not prohibit day-to-day collections activities, actions resulting from the creditworthiness of members, or targeted responses to abuse in a single account or communications channel. The Board is clarifying in this preamble that the limitation of services policy is not intended to limit day-to-day collections activities, actions resulting from the creditworthiness of members, or targeted responses to abuse in a single account or communications channel.

After the effective date of this final rule, FCUs have the option to amend their bylaws to provide their boards of directors with authority to expel members for cause. FCUs seeking to adopt these authorities must amend their bylaws through a two-thirds vote of their boards of directors. Such FCUs do not need to submit the amendment to the NCUA for its approval provided the amendment is identical to the language included in this final rule or only includes additional language on hearing procedures as discussed in the preceding paragraphs. FCUs may adopt amendments immediately after the effective date of the final rule or at any point in the future. However, the amendment included in this final rule is optional, and FCUs do not need to amend their bylaws or take any other action in response to this final rule. Those FCUs electing not to act in response to this final rule, however, could expel a member solely through a special meeting of the members or on the basis of a violation of a nonparticipation policy.

The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency creates a new or amends existing information collection requirements. 23 For purposes of the PRA, an information collection requirement may take the form of a reporting, recordkeeping, or a third-party disclosure requirement. The NCUA may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a valid Office of Management and Budget (OMB) control number. The current information collection requirements for FCU Bylaws are approved under OMB control number 3133-0052. The proposed rule included an estimated burden of 5,227 hours associated with the rulemaking. The Board received and considered comments on the estimated burden.

Under the final rule, the notice requirements to be provided to the member are as follows: (1) the notice of potential expulsion for cause, (2) the notice of expulsion, and (3) the notice of expulsion due to repeated, non-substantial violations of the membership agreement or repeated disruptions for non-substantial conduct. These notices will be provided to the member by the FCU as prescribed by proposed sections 2 and 3 of Article XIV of appendix A to part 701. The information collection requirements associated with these disclosure notices vary depending on the number of respondents. An estimated total of 5,227 responses will be generated, taking an hour per response, for a total of 5,227 burden hours associated with the notice requirements. Additionally, FCUs are required to retain and maintain all records associated with the expulsion policy, and it is estimated to average 30 minutes per FCU for a total annual burden of 1,230 hours. Therefore, there is a total burden of 6,457 hours associated with this rulemaking.

The total burden associated with OMB Control Number: 3133-0052 is as follows:

OMB Control Number: 3133-0052.

Title of information collection: Federal Credit Union Bylaws, Appendix A to Part 701.

Estimated number of respondents: 3,076.

Estimated number of responses per respondent: 347.

Estimated total annual responses: 1,067,833.

Estimated total annual burden hours per response: 0.35.

Estimated total annual burden hours: 377,263.

The total annual burden hours increased due to the disclosure requirements.

The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a proposed rule or a final rule pursuant to the Administrative Procedure Act or another law, the agency must prepare a regulatory flexibility analysis that meets the requirements of the RFA and publish such analysis in the Federal Register . Specifically, the RFA normally requires agencies to describe the impact of a rulemaking on small entities by providing a regulatory impact analysis. For purposes of the RFA, the Board considers credit unions with assets less than $100 million to be small entities. 24 A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities and publishes its certification and a short, explanatory statement in the Federal Register together with the rule.

The Board does not believe the final rule results in any burden or other significant economic impact to small entities. First, adoption of the flexibilities included in the rule is optional, and FCUs are not required to amend their bylaws. Additionally, even if FCUs revise their bylaws in response to the rule, it is within FCUs' discretion to exercise the authority provided in the final rule to expel a member. The Board also believes that expulsion will continue to be rare, and thus, any impact from the rule will be limited. Further, the final rule includes no affirmative requirements for small credit unions and will not affect the competitive balance between small and large credit unions. Therefore, the Board certifies that the final rule does not have a significant economic impact on a substantial number of small entities.

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. The NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the Executive order to adhere to fundamental federalism principles.

This final rule applies to FCUs only and does not have substantial direct effects on the states, on the relationship between the National Government and the states, or on the distribution of power and responsibilities among the various levels of government. Any effect the final rule might have on state-chartered credit unions or development of state law on expulsion would be purely speculative and attenuated. The NCUA has therefore determined that this rule does not constitute a policy that has federalism implications for purposes of the Executive order.

The NCUA has determined that this final rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998). In particular, the NCUA has reviewed the criteria specified in section 654(c)(1) of that act, by evaluating whether this rule (1) impacts the stability or safety of the family, particularly in terms of marital commitment, (2) impacts the authority of parents in the education, nurture, and supervision of their children, (3) helps the family perform its functions, (4) affects disposable income or poverty of families and children, (5) only financially impacts families, if at all, to the extent such impacts are justified; (6) may be carried out by State or local government or by the family, or (7) establishes a policy concerning the relationship between the behavior and personal responsibility of youth and the norms of society. Under this statute, if the agency determines the rule may negatively affect family well-being, then the agency must provide an adequate rationale for its implementation.

The NCUA has determined that the implementation of this proposed rule would not affect family well-being within the meaning of the statute. Of the seven factors in the statute, the factors on disposable income and financial impact appear most relevant. Removing access to financial services at an FCU may negatively affect a member and their family. These actions, however, would be unlikely to affect disposable income or poverty directly, so the NCUA finds that the rule does not have a negative effect as described in the statute. Moreover, the final rule implements a statutory mandate, and the NCUA cannot decline to implement the legislation. The NCUA has taken potentially adverse effects on members into account in designing the rule.

The Congressional Review chapter of the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) generally provides for congressional review of agency rules. 25 A reporting requirement is triggered in instances where the NCUA issues a final rule as defined in the Administrative Procedure Act. 26 Besides being subject to congressional oversight, an agency rule may also be subject to a delayed effective date if it is a “major rule.” The NCUA does not believe this rule is a “major rule” within the meaning of the relevant sections of the statute. As required by the statute, the NCUA will submit this final rule OMB for it to determine if this final rule is a “major rule” for purposes of the statute. The NCUA also will file appropriate reports with Congress and the Government Accountability Office so this rule may be reviewed.

For the reasons discussed in the preamble, the Board amends 12 CFR part 701 as follows:

Comments Invited

The FAA invites you to send any written relevant data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2023-1500; Project Identifier MCAI-2023-00642-T” at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

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

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Deep Gaurav, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; email: deep.gaurav@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.

Transport Canada, which is the aviation authority for Canada, has issued Transport Canada AD CF-2023-26, dated May 3, 2023 (Transport Canada AD CF-2023-26) (referred to after this as the MCAI), to correct an unsafe condition on certain Bombardier, Inc., Model BD-100-1A10 airplanes. The MCAI states that during several in-service events, the crew experienced an unexpected pitch upset upon autopilot disconnect. Investigations of these events identified that the airplane gained altitude via manual command of the elevator control surface without the use of the horizontal stabilizer pitch trim, even though the manual pitch trim was fully functional. The autopilot was then engaged while the airplane was in an out-of-trim condition. Subsequent disengagement of the autopilot when the horizontal stabilizer is not correctly trimmed can lead to high control column forces and difficulties in controlling the airplane.

The FAA is issuing this AD to address the unsafe condition on these products. You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2023-1500.

Bombardier has issued the following AFM procedures, which include a Caution to the Auto Flight Non-Normal Procedures, to instruct crews to minimize changes to airspeed and configuration when using the autopilot disconnect switch in an out-of-trim situation.

• Section 05-14, Auto Flight, of Chapter 05, Non-Normal Procedures, of the Bombardier Challenger 300 (Imperial Version) Airplane Flight Manual, Publication No. CSP 100-1, Revision 68, dated June 14, 2022. (For obtaining the procedures for Bombardier Challenger 300 (Imperial Version) Airplane Flight Manual, Publication No. CSP 100-1, use Document Identification No. CH 300 AFM-I.)

• Section 05-14, Auto Flight, of Chapter 05, Non-Normal Procedures, of the Bombardier Challenger 350 Airplane Flight Manual, Publication No. CH 350 AFM, Revision 34, dated June 14, 2022. (For obtaining the procedures for Bombardier Challenger 350 AFM, Publication No. CH 350 AFM, use Document Identification No. CH 350 AFM.)

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in 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 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 AD after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.

This AD requires accomplishing the actions specified in the service information described previously.

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

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies forgoing notice and comment prior to adoption of this rule because several events have occurred where the crew experienced an unexpected pitch upset upon autopilot disconnect. Such a result is hazardous as it could lead to high control column forces and difficulties in controlling the airplane. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b)(3)(B).

In addition, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days, for the same reasons the FAA found good cause to forgo notice and comment.

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

The FAA estimates that this AD affects 338 airplanes of U.S. registry. The FAA estimates the following costs to comply with this 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.

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

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

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

(2) Will not affect intrastate aviation in Alaska.

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

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would expand the availability of RNAV in the eastern United States and improve the efficient flow of air traffic within the NAS by lessening the dependency on ground-based navigation.

The FAA published a notice of proposed rulemaking for Docket No. FAA-2023-1020 in the Federal Register (88 FR 29559; May 8, 2023), proposing to amend one and establish three low-altitude RNAV routes in support of transitioning the NAS from a ground-based to a satellite-based navigation. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

In the NPRM's description of RNAV route T-452, the FAA incorrectly listed the VINSE, PA; BADDI, PA; JOANE, PA; and GEERI, PA route points as waypoints (WP). The route points are actually identified as Fixes in the National Airspace System Resource (NASR) database and charted as Fixes accordingly. This action corrects the error and changes the route points to be listed as Fixes.

Additionally, in the NPRM's description of RNAV route T-456, the FAA incorrectly listed the DELRO, PA, route point as a WP instead of Fix. This action also corrects the DELRO, PA, route point to be listed as a Fix.

United States Area Navigation Routes are published in paragraph 6011 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, which is incorporated by reference in 14 CFR 71.1 on an annual basis. This document amends the current version of that order, FAA Order JO 7400.11G, dated August 19, 2022, and effective September 15, 2022. FAA Order JO 7400.11G is publicly available as listed in the ADDRESSES section of this document. These amendments will be published in the next update to FAA Order JO 7400.11.

FAA Order JO 7400.11G lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This action amends 14 CFR part 71 by amending one and establishing three low altitude RNAV T-routes in the northeast United States in support of transitioning from ground-based navigation aids to satellite-based navigation. The routes are described below.

T-299: Prior to this final rule, T-299 extended from the UCREK, VA, WP to the SCAPE, PA, WP. This action extends T-299 to the southwest from the Montebello, VA (MOL), Very High Frequency (VHF) Omnidirectional Range/Distance Measuring Equipment (VOR/DME) 279° radial at 5.5 nautical miles (OBEPE, VA, Fix) to the UCREK, VA, WP, and to the northeast to the intersection of the Harrisburg, PA (HAR), VOR/Tactical Air Navigation (VORTAC) 235° radial and the Westminster, MD (EMI), VORTAC 324° radial (SCAPE, PA, Fix) to the Albany, NY (ALB), VORTAC. The route overlays VOR Federal airway V-377 from the SCAPE, PA, Fix to the Harrisburg, PA (HAR), VORTAC; VOR Federal airway V-162 from the Harrisburg, PA (HAR), VORTAC to the Huguenot, NY (HUO), VOR/DME; and VOR Federal airway V-489 from the Huguenot, NY (HOU), VOR/DME to the Albany, NY (ALB), VORTAC.

T-452: T-452 is a new route that extends from the VINSE, PA, Fix to the REESY, PA, WP. The route is replacing VOR Federal airway V-469 from the St. Thomas, VA (THS), VORTAC to the JOANE, PA, Fix. The VINSE, PA, WP is being used to replace the St. Thomas, VA (THS), VORTAC.

T-456: T-456 is a new route that extends from the VINSE, PA, Fix to the Modena, PA (MXE), VORTAC. The route overlays VOR Federal airway V-474 from the AMISH, PA, Fix to the Modena, PA (MXE), VORTAC.

T-477: T-477 is a new route that extends from the CPTAL, MD, WP to the Philipsburg, PA (PSB), VORTAC. The route overlays VOR Federal Airway V-501 from the Hagerstown, MD (HGR), VOR to the Philipsburg, PA (PSB), VORTAC.

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

The FAA has determined that this action of establishing RNAV routes T-452, T-456, and T-477, and the amendment of T-299 in the eastern United States to provide additional RNAV routing within the NAS in support of transitioning it from ground-based to satellite-based navigation, qualifies for categorical exclusion under the National Environmental Policy Act (42 U.S.C. 4321 et seq. ) and its implementing regulations at 40 CFR part 1500, and in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5.a, which categorically excludes from further environmental impact review rulemaking actions that designate or modify classes of airspace areas, airways, routes, and reporting points (see 14 CFR part 71, Designation of Class A, B, C, D, and E Airspace Areas; Air Traffic Service Routes; and Reporting Points); and paragraph 5-6.5b, which categorically excludes from further environmental impact review “Actions regarding establishment of jet routes and Federal airways (see 14 CFR 71.15, Designation of jet routes and VOR Federal airways ). . .”. As such, this airspace action is not expected to cause any potentially significant environmental impacts. In accordance with FAA Order 1050.1F, paragraph 5-2 regarding Extraordinary Circumstances, the FAA has reviewed this action for factors and circumstances in which a normally categorically excluded action may have a significant environmental impact requiring further analysis. The FAA has determined that no extraordinary circumstances exist that warrant preparation of an environmental assessment or environmental impact study.

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

Table of Contents I. Executive Summary II. Authority for This Rulemaking III. Background A. Statement of the Problem B. The Notice of Proposed Rulemaking IV. Discussion of the Final Rule and Comments A. Certification of Air Carrier and Operator Definitions B. Requirements and Applicability of Part 119 C. Commercial Air Tours and Flights for the Benefit of Charitable, Nonprofit, or Community Events V. Regulatory Notices and Analyses A. Regulatory Evaluation B. Regulatory Flexibility Act C. International Trade Impact Assessment D. Unfunded Mandates Assessment E. Paperwork Reduction Act F. International Compatibility G. Environmental Analysis VI. Executive Order Determinations A. Executive Order 13132, Federalism B. Executive Order 13175, Consultation and Coordination With Indian Tribal Governments C. Executive Order 13211, Regulations That Significantly Affect Energy Supply, Distribution, or Use D. Executive Order 13609, Promoting International Regulatory Cooperation VII. Additional Information A. Electronic Access and Filing B. Small Business Regulatory Enforcement Fairness Act I. Executive Summary

The FAA is adopting the regulatory amendments proposed in the notice of proposed rulemaking (NPRM), Update to Air Carrier Definitions. 1 The Update to Air Carrier Definitions NPRM proposed adding powered-lift to the definitions of five kinds of air carrier operations—commuter, domestic, flag, on-demand, and supplemental. This final rule will adopt those items proposed in the Update to Air Carrier Definitions NPRM without change.

In this final rule, the FAA adds powered-lift to the definitions in § 110.2 of title 14 of the Code of Federal Regulations (14 CFR) to enable air carrier operations with powered-lift. This rule also extends the applicability of certain operating rules to powered-lift, such as the rules that apply to certain noncommon carriage operations involving larger aircraft and rules that apply to commercial air tours.

In addition, this rule updates various provisions within 14 CFR part 119 (Certification: Air Carriers and Commercial Operators) to address air carriers' operations of powered-lift; amends certain aircraft-specific provisions in § 119.1, which outline the applicability of and exceptions from part 119; and adds sight-seeing flights in gliders to the exclusions from part 119. Furthermore, this rule amends the experience requirements for personnel in certain management positions for air carriers to ensure they have appropriate experience in powered-lift operations. This rule also makes various technical amendments to part 119 for clarity and to reflect current FAA practices pertaining to the information included in operations specifications.

Lastly, this rule amends part 136 by applying it to rotorcraft and powered-lift, making limited changes to “suitable landing area” and § 136.11(a)(2), and recodifying appendix A to subpart D as a technical amendment.

The FAA's authority to issue rules on aviation safety is codified throughout Title 49 of the United States Code. The FAA issues this final rule under the authority in section 106. Section 106(f) establishes that the Administrator may promulgate regulations and rules. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. Furthermore, section 44701(a)(5) requires the Administrator to promote safe flight of civil aircraft in air commerce by prescribing regulations and setting minimum standards for other practices, methods, and procedures necessary for safety in air commerce and national security. Section 44702 provides express authority to the Administrator to issue certificates under and oversee aviation safety. In addition, section 44701(d)(1)(A) specifically states the Administrator, when prescribing safety regulations, must consider “the duty of an air carrier to provide service with the highest possible degree of safety in the public interest.”

The FAA also issues this rule in accordance with sections 44711 and 44713. Section 44711(a)(4) prohibits a person from operating as an air carrier without an air carrier operating certificate or in violation of a term of the certificate. Similarly, section 44711(a)(5) prohibits a person from operating aircraft in air commerce in violation of a regulation prescribed or a certificate that the FAA issues under section 44701(a) or (b) or under sections 44702-44716. In addition, section 44713 requires air carriers to make, or cause to be made, inspections, repairs, or maintenance of equipment used in air transportation as required by part A of subtitle VII of Title 49 of the United States Code or regulations prescribed or orders issued by the FAA.

At present, various manufacturers are developing powered-lift for civilian use. These aircraft vary in size and passenger-seating configurations and employ both new and traditional kinds of propulsion systems. The operations conceptualized include vertical takeoff and landing capability, transition from low airspeed to high-speed horizontal flight, and sustained level forward flight.

Powered-lift is defined in 14 CFR 1.1 as “a heavier-than-air aircraft capable of vertical takeoff, vertical landing, and low speed flight that depends principally on engine-driven lift devices or engine thrust for lift during these flight regimes and on nonrotating airfoil(s) for lift during horizontal flight.”

Operations with powered-lift could offer many benefits over traditional rotorcraft. For example, some powered-lift may be capable of transporting heavier loads at higher altitudes and faster cruise speeds than a rotorcraft, while maintaining vertical takeoff and landing capability. Such capability may increase efficiency in transporting crew and material to remote locations such as offshore oil rigs.

Operators may also seek to use certain powered-lift for transporting passengers point-to-point; for example, such transportation could occur from a heliport and proceed at turboprop airspeeds and ranges. Other opportunities may also exist in concentrated urban environments, where short point-to-point distances coupled with vertical takeoff and landing capability may allow for more efficient transportation of passengers or cargo than existing ground transportation methods. Application of the appropriate set of rules for powered-lift in a range of certificate holders' operations serves as both a risk mitigation measure and a framework for FAA oversight, as necessary to achieve the requisite level of safety.

The FAA is engaging in a multi-step process of updating the regulations that apply to aircraft that traditionally have not operated under these parts. Overall, the FAA maintains a risk-based approach to the integration of new entrant aircraft into the national airspace system. When operations present a higher level of risk, based on volume of passengers carried and frequency of operation, the FAA will subject such operations to a regulatory framework designed to mitigate those risks.

In addition to this rulemaking, the FAA is proposing a Special Federal Aviation Regulation (SFAR), “Integration of Powered-Lift: Pilot Certification and Operations; Miscellaneous Amendments Related to Rotorcraft and Airplanes” (RIN 2120-AL72) (88 FR 38946, June 14, 2023), to establish temporary operating and airman certification regulations for powered-lift. The FAA plans to use the information gathered in this interim process to update its regulations to address powered-lift operations broadly.

Currently, part 119 and the corresponding definitions in § 110.2 only allow airplanes or rotorcraft to be used in air carrier or commercial service operations. The primary purpose of this rulemaking is to amend the language of § 110.2, Definitions, and part 119, Certification: Air Carriers and Commercial Operators, to allow powered-lift to operate for compensation or hire. The rule will enable an air carrier or commercial operator to operate powered-lift in air commerce. Without this rule, air carriers and commercial operators are not allowed to operate powered-lift in air commerce.

On December 7, 2022, the FAA published a NPRM titled “Update to Air Carrier Definitions.”  2 In the NPRM, the FAA proposed adding “powered-lift” to certain part 91 regulations, to the air carrier and commercial operator certification parts (parts 110 and 119), as well as to the applicability for certain commercial operations. The FAA also proposed amendments that would reference “rotorcraft” instead of “helicopter” to be more consistent with other existing regulations. Adding references to “powered-lift” in these parts will enable the FAA to certificate operators for certain commercial operations and will serve as the first step for powered-lift entering commercial service.

The NPRM provided a 60-day comment period, which ended on February 6, 2023. The FAA received nine comments from industry (Airlines for America (A4A), Air Line Pilots Association, Int'l (ALPA), General Aviation Manufacturers Association (GAMA), Helicopter Association International (HAI), Jack Harter Helicopters, Inc., Joby Aviation (Joby), Wisk Aero, and two anonymous comments).

The FAA received four comments in general support of the NPRM, four comments proposing revisions to the rule, and one anonymous comment in general opposition.

Title 14 CFR 110.2 provides definitions that pertain to the certification of air carriers and operators for compensation or hire. Specifically, it defines commuter operation, domestic operation, flag operation, on-demand operation, and supplemental operation. In the NPRM, the FAA proposed to amend those definitions to include powered-lift. Therefore, the rules and applicability sections in 14 CFR chapter 1, subchapter G, would include use of powered-lift in those kinds of operations. Amending these definitions along with other provisions of part 119 enables powered-lift to engage in operations consistent with the applicable statutory framework that applies to air carrier and commercial operations. The FAA received four comments in general support of the revision of existing regulations to address powered-lift. None of the commenters raised concerns or commented directly on the revision of these definitions.

For the foregoing reasons, the FAA adopts as final § 110.2 that incorporates “powered-lift” into the following definitions: commuter operation, domestic operation, flag operation, on-demand operation, and supplemental operation.

Part 119 contains basic requirements that apply to each person that operates or intends to operate a civil aircraft as an air carrier or commercial operator in air commerce. Part 119 also details the process for obtaining and maintaining an operating certificate.

The FAA proposed revising § 119.1(a)(2) to apply part 119 to each person operating or intending to operate, when common carriage is not involved, airplanes or powered-lift with a passenger-seat configuration of 20 or more seats and a payload capacity of 6,000 pounds or more. The FAA also proposed to add § 119.1(a)(3) for consistency with § 119.23 which was omitted during the creation of part 119. This new paragraph applies part 119 to each person operating or intending to operate airplanes or powered-lift for noncommon carriage or private carriage operations for compensation or hire with a passenger-seat configuration of less than 20 seats and a payload capacity of less than 6,000 pounds.

Similarly, the FAA proposed amending § 119.5(c) to include powered-lift operations in the description of which persons will be issued an operating certificate for operations when common carriage is not involved. The FAA also proposed amending §§ 119.21 and 119.23 to apply appropriate requirements to powered-lift operations of commercial operators engaged in intrastate common carriage, direct air carriers, or when common carriage is not involved.

Many operations are subject to exclusion from part 119. Some of the exclusions in § 119.1(e) do not specify the type of aircraft; however, some exclusions apply only to helicopters or only to airplanes and helicopters. Using the term “rotorcraft” throughout § 119.1 ensures consistency with other applicability provisions of part 119.

The FAA proposed replacing “helicopter” with “rotorcraft” and adding “powered-lift” to the exclusion described at § 119.1(e)(4)(v) for aerial work operations. The FAA anticipates powered-lift would perform functions in aerial work in much the same manner as rotorcraft currently do. Allowing powered-lift to operate under this exception poses low risk to the general public. The FAA also proposed a technical amendment in the NPRM regulatory text to clarify that the exception under § 119.1(e)(4)(v) does not apply to transportation to and from the site of construction or repair work operations. The FAA did not receive comments on this proposed amendment and adopts language clarifying the exception as final.

The FAA also proposed broadening the exclusion in § 119.1(e)(7) for helicopter flights conducted within a 25 statute mile radius of the airport of takeoff meeting specific conditions  3 to permit those flights to occur using powered-lift or rotorcraft, rather than only helicopters. Expanding this exclusion to rotorcraft and powered-lift ensures consistency with other applicability provisions of part 119.

In addition, the FAA proposed adding operations conducted in gliders to the exception that applies to sightseeing flights. The addition of gliders to this exception ensures the regulatory text of § 119.1(e)(5) reflects the FAA's current practices of permitting glider operations under this exception from part 119 and is consistent with the level of risk mitigation necessary for such operations.

Lastly, the FAA proposed adding powered-lift to § 119.1(e)(2), which currently excludes certain nonstop commercial air tour flights conducted in either an airplane or helicopter from the applicability of part 119. The FAA also proposed amending “helicopter” to “rotorcraft”. The FAA did not receive any comments on the aforementioned amendments. Consequently, the FAA adopts these changes as final.

The existing text of § 119.49(a)(12), (b)(12), and (c)(11) requires operations specifications to contain “[a]ny authorized deviation and exemption” issued under 14 CFR chapter 1. The FAA determined this requirement as written is too broad, as it obligates certificate holders to ensure their operations specifications contain exemptions and deviations that also apply to the aircraft the certificate holder uses. The FAA proposed narrowing the current requirements in § 119.49 by requiring that operations specifications contain only exemptions and deviations the FAA has issued that apply to the certificate holder.

Similar to this rule's amendments to § 119.49(a)(12), (b)(12), and (c)(11), the FAA proposed revising § 91.1015(a)(9) in a similar manner. Section 91.1015(a)(9) applies to management specifications that persons who participate in a fractional ownership program under part 91, subpart K, maintain. Requiring a listing or copies of exemptions that apply to the aircraft rather than the operator is unnecessary for the FAA's oversight of participants' operations under part 91, subpart K. The FAA did not receive comments regarding these proposed changes. As a result, the FAA adopts them as final.

Sections 119.65 through 119.71 set forth management personnel requirements that certificate holders must comply with to ensure the highest degree of safety in their operations. The FAA proposed amending the experience requirements for operations conducted under part 121 by making these requirements applicable to aircraft as opposed to only airplanes. The FAA also proposed requiring at least one Chief Pilot for each category of aircraft that each certificate holder uses, when the certificate holder uses both airplanes and powered-lift. To enable eventual powered-lift operations in part 121, the FAA proposed amending these management personnel requirements to ensure these operations maintain the highest degree of safety.

The FAA received a comment from the Air Line Pilots Association (ALPA) indicating that they did not support proposed rules which lower the qualification and experience requirements for Directors of Operations, Chief Pilots, Directors of Maintenance, and Chief Inspectors for certificate holders. ALPA stated that the FAA is modifying §§ 119.65, 119.67, 119.69, and 119.71, which is not entirely correct. The FAA did not propose to change § 119.69 or § 119.71 because those sections already use the term “aircraft” rather than “airplane” and are therefore not specific to any particular category of aircraft. However, for §§ 119.65 and 119.67—the part 121 requirements—the term “airplane” is used, and therefore the FAA proposed changes to those sections to accommodate powered-lift. In addition, the FAA proposed in § 119.65 to have a chief pilot for each category of aircraft used. This would extend the level of safety currently provided in the regulation to powered-lift operations. The change proposed to § 119.67 is limited to changing “airplane” to “aircraft” and rewording the experience requirements for clarity.

The FAA disagrees with ALPA's comment that indicates it believes the FAA is lowering the qualification and experience requirements for Directors of Operations, Chief Pilots, Directors of Maintenance, and Chief Inspectors for certificate holders. The FAA is not lowering the qualification nor the experience requirements for any of the part 119 required management positions. Rather, the FAA is applying the same qualification and experience requirements to powered-lift as currently required for airplanes. Consequently, the FAA adopts the proposed amendments as final without changes.

The FAA also proposed removing the FAA internal routing codes from the regulatory text of § 119.67(e), as the FAA no longer uses such codes in its regulations. The FAA did not receive comments on this proposed change and adopts it as final.

Currently, § 119.67(a)(2) (Management personnel: Qualifications for operations conducted under part 121 of this chapter) requires Directors of Operations to have experience in large “airplanes.” To broaden this section to cover Directors of Operations for certificate holders that use powered-lift, the FAA proposed using the general term large “aircraft” in that paragraph. Under the proposal, for certificate holders that conduct operations under part 121, the Director of Operations is required to have at least 3 years of supervisory or managerial experience within the last 6 years in a position that exercised operational control over any operations conducted with large aircraft under part 121 or part 135. In the alternative, if the certificate holder uses only small aircraft in its operations, then the Director of Operations may obtain this experience in large or small aircraft.

Existing § 119.67(a)(3) outlines the requirements for anyone who serves for the first time in a Director of Operations role for a certificate holder that conducts operations under part 121. The FAA proposed under this rule that a person who serves as Director of Operations needs to have experience as pilot-in-command in at least one of the categories of aircraft the certificate holder uses in its operations. In using the term “category” in this context, this rule means the broad classification of aircraft regarding the certification, ratings, privileges, and limitations of airmen. The FAA did not receive comments regarding the aforementioned proposed changes and adopts them as final.

To be qualified to serve as a Chief Pilot, a person must meet the qualification requirements of § 119.67(b). The FAA proposed requiring the Chief Pilot for powered-lift to hold an airline transport pilot (ATP) certificate and be appropriately rated in at least one of the powered-lift the certificate holder uses. This requirement is important because the Chief Pilot must maintain a detailed level of understanding of the particular aircraft the certificate holder operates to communicate effectively with the pilots who serve in a certificate holder's operations while performing his or her oversight duties.

Under § 119.67(b), the FAA also proposed clarifying that the ATP certificate with appropriate ratings must be for an aircraft the certificate holder uses in operations “under part 121”. This clarification ensures certificate holders who may hold authority to conduct operations under both part 121 and part 135 know that they must have a Chief Pilot who holds an ATP certificate with appropriate ratings for an aircraft used in their part 121 operations. In addition, as with the Director of Operations qualifications discussed previously, the FAA proposed amending “large airplane[s]” and “small airplane[s]” to “large aircraft” and “small aircraft” under § 119.67(b).

The FAA also proposed requiring the Chief Pilot to have pilot-in-command experience in the category of aircraft for which he or she will exercise responsibility. In addition, the FAA proposed that the three years of experience as pilot-in-command must have occurred under either part 121 or part 135 and must have occurred within the past six years if the Chief Pilot candidate has not previously served as a Chief Pilot.

Finally, the FAA proposed amending § 119.65(a)(3) to require one Chief Pilot for each category of aircraft because the Chief Pilot must have a detailed understanding of the particular aircraft the certificate holder operates. The agency has long emphasized that it adopted the Chief Pilot experience requirements to ensure familiarity with operations of a certificate holder, and that such familiarity is critical to attain prior to assuming the responsibilities of Chief Pilot. 4

In amending part 119 to apply to operations of powered-lift, the FAA has also remained mindful of the discretion that § 119.65(b) provides, which allows the FAA to approve positions or numbers of positions other than those listed in § 119.65(a). The FAA did not receive comments on the aforementioned proposed changes to the Chief Pilot requirements, and therefore adopts them as final. In making these amendments, the FAA ensures each certificate holder has sufficient qualified management personnel to ensure the highest degree of safety and address the risks that each category of aircraft may present.

Section 119.65 requires each certificate holder that conducts operations under part 121 to have a Director of Maintenance, and § 119.67(c) describes the qualifications that must be met to serve as Director of Maintenance. The FAA proposed replacing the term “airplane” in § 119.67(c) with “aircraft” for the reasons previously articulated.

The FAA also proposed requiring the minimum one year of supervisory experience with either maintaining or repairing at least one of the aircraft in the same category and class of aircraft the certificate holder uses. 5 The Director of Maintenance needs to have accumulated three years of experience within the past six years in maintaining or repairing aircraft in the same category and class of aircraft the certificate holder uses. These experience and qualification requirements within § 119.67(c) are key components of ensuring the Director of Maintenance is adequately qualified to serve in the role of overseeing other mechanics and personnel performing maintenance. The FAA believes experience with aircraft of the same category and class of aircraft the certificate holder uses would achieve the FAA's objective of ensuring the Director of Maintenance has appropriate experience with adhering to procedures and ensuring compliance with rules and programs relevant to maintenance. The FAA did not receive comments on these proposed changes and therefore adopts them as final.

Section 119.67(d) outlines the requirements for a person to serve as a Chief Inspector for operations conducted under part 121. Chief Inspectors have direct authority and responsibility over people performing the requisite inspections for the certificate holder. The FAA proposed amending the rule to permit the three years of maintenance experience to occur on different types of large aircraft with 10 or more passenger seats, rather than only large airplanes. This amendment is consistent with the other changes in this rule that assist in incorporating powered-lift into the framework of part 121. As with the Director of Maintenance qualifications, this retention of the 10-seat threshold ensures the Chief Inspector will have experience with an air carrier maintenance program  6 or a certificated repair station. The FAA did not receive comments on this proposed amendment and adopts it as final.

Part 121 currently applies to any turbojet-powered airplane with one or more passenger seats used for scheduled operations. Scheduled operations under part 135 that are generally “commuter” operations are limited to 9 seats or fewer and cannot occur in turbojet airplanes. To ensure safety of passengers carried in those kinds of operations, the provisions of part 121 apply to scheduled operations of turbojet airplanes. The FAA proposed to include turbojet-powered powered-lift alongside the term “turbojet powered airplane” to ensure consistency in applying the appropriate risk mitigation measures for operations of turbojet-powered aircraft.

The FAA received an anonymous comment requesting that the FAA enable single-engine turbojet airplanes to conduct part 135 commuter operations. Specifically, the commenter requested that the FAA permit use of the Cirrus SF-50 single-engine jet in part 135 commuter operations. The commenter asserted that, due to the Cirrus SF-50's limited capacity—it has six seats—this aircraft should be permitted to conduct part 135 commuter operations. The commenter stated that if the Cirrus SF-50 was allowed to operate in commuter operations, the pilot in command would be required to hold an ATP certificate and a type rating since it is a turbojet airplane. Conversely, the pilot in command of a single-engine reciprocating airplane in commuter operations is only required to hold a commercial certificate. The FAA determined that this comment is not within the scope of this rulemaking. Although the FAA considered general changes pertaining to the definition of commuter operations to enable powered-lift operations, it did not specifically contemplate whether single-engine turbo-jet airplanes should be able to conduct part 135 commuter operations. As a result, the comment is not within the scope of this rule, and the FAA declines to make the requested change.

Section 121.1 establishes the applicability of part 121, which prescribes the rules governing air carrier operations conducted under domestic, flag, or supplemental operations. Section 121.1(g) is the only paragraph in § 121.1 that currently uses the term “airplane.” The FAA proposed revising this paragraph to apply to “aircraft” instead of “airplane.” This change in § 121.1 is necessary to correspond to the changes in parts 110 and 119 to extend the applicability of these parts to eventual powered-lift operations. The FAA also proposed a technical correction to § 121.1(c) by removing “SFAR No. 58” and replacing it with “subpart Y” which was codified on September 16, 2005. 7 The FAA did not receive any comments on these proposed changes. As a result, the FAA adopts as final § 121.9(g) to apply to “aircraft” and § 121.1(c) to state “subpart Y”.

Regarding flight time limitations and rest requirements, the FAA proposed amending §§ 121.470, 121.480, and 121.500 to replace the word “airplanes” with the term “aircraft.” Permitting this option for powered-lift that conduct operations in aircraft with a seat configuration of 30 seats or fewer (excluding each crewmember seat) and a payload capacity of 7,500 pounds or less is appropriate because the FAA has previously determined that specific flight time limitations and rest requirements of §§ 135.261 through 135.273 adequately address the risk associated with lack of rest in such operations. 8

In addition, § 121.470 contains an exception for operations conducted entirely within Alaska or Hawaii with certain airplanes. Permitting this option for powered-lift that conduct such operations entirely within the States of Alaska or Hawaii is appropriate for the same reasons the FAA permits this exception for similarly sized airplanes. For such operations, the specific flight time limitations and rest requirements of subpart R adequately address the risk associated with lack of rest. 9 The FAA did not receive any comments on these proposed revisions. As a result, the FAA adopts them as final.

Part 125 applies to certain air carrier operations referenced in 14 CFR 125.1. The FAA proposed to amend § 125.1 such that those provisions would include powered-lift. Specifically, the FAA proposed to amend paragraphs (a), (b), (c), and (e) of § 125.1, to add the term “powered-lift” or, where appropriate, “aircraft.”

Large powered-lift, due to their size, weight, and passenger capacity, present a level of risk that part 125 mitigates. Extending these requirements and standards to applicable operations of large powered-lift aircraft is consistent with the FAA's strategy for mitigating risks. The FAA's amendments to §§ 119.23 and 125.1 clarify that operators that conduct operations when common carriage is not involved in powered-lift would do so under the rules of part 125, provided they fall within the scope outlined in § 119.23(a).

In addition, the FAA proposed changing the “airplane” to “aircraft” in the title of part 125 and amending § 125.23 to change the word “airplane” to “aircraft,” as § 125.23 generally addresses applicability of certain rules and standards concerning operations subject to part 125. The FAA did not receive any comments on these proposed changes. Therefore, the FAA adopts them as final.

Commercial air tours are currently limited to flights conducted for compensation or hire in an airplane or helicopter in which the purpose of the flight is sightseeing. 10 Passenger-carrying flights may also be conducted without compensation or hire for certain charitable, nonprofit, and community events. As discussed in more detail below, the FAA proposed incorporating powered-lift for commercial air tours and flights for the benefit of charitable, nonprofit or community events, and revising the necessary provisions to address “rotorcraft” instead of “helicopter”. These proposals ensure consistency with the changes made to the definition of commercial air tour in part 110, as well as the change made to nonstop commercial air tours within § 119.1.

Section 91.147 and the requirements of part 136, subpart A, are currently limited in applicability to airplanes and helicopters. The FAA proposed replacing “helicopter” with the term “rotorcraft” and adding “powered-lift” to the relevant applicability provisions of § 91.147 to ensure the appropriate safety risk mitigations apply to all commercial air tours. The FAA did not receive comments on this proposed change, and therefore adopts it as final.

In addition, as discussed in more detail below, the FAA proposed changing the term “helicopter” to “rotorcraft” throughout part 136 to ensure the safety standards of part 136 apply to all rotorcraft and not only helicopters. Applying the requirements of part 136 to airplanes, powered-lift, and rotorcraft that conduct commercial air tours is an appropriate step in ensuring safe integration of new types of aircraft.

The current definition of “suitable landing area for helicopters” in § 136.1(d) states such an area is one that provides the operator reasonable capability to land without damage to equipment or injury to persons. It further provides that such areas must be site-specific, designated by the operator, and accepted by the FAA. The FAA proposed broadening the applicability to incorporate rotorcraft to ensure they are subject to the safety standards of part 136. The FAA did not receive specific comments on broadening the applicability to incorporate rotorcraft, and therefore adopts that change as final.

The FAA also proposed removing the phrase “damage to equipment” from the definition of “suitable landing area,” and adding “serious” before “injury.” The FAA intends to clarify that a suitable landing area is one that provides a reasonable capability for rotorcraft to land without causing serious injury to persons.

In addition, the FAA proposed removing the last sentence of the definition that states the purpose of the definition is to provide an emergency landing area for helicopters that would not have the capability to reach a safe landing area after an engine power loss. The FAA determined this sentence is too narrow. The proposed definition includes the phrase “in an emergency” to describe the context for which the operator would designate landing areas for rotorcraft.

The FAA received two comments that agreed the current definition of “suitable landing area for helicopters” needed to be changed. Jack Harter Helicopters wanted the FAA to eliminate the definition entirely, and Helicopter Association International (HAI) wanted the FAA to remove the “injury” element. The FAA has determined that there is not a safety case to entirely remove this definition, agreeing with HAI in that the purpose of this definition is to ensure operators designate potential landing areas in advance of the operation so that the pilot in command is aware of these potential sites in case of an emergency landing. Furthermore, the FAA is already modifying the current definition from “injury” to “serious injury” which is relieving. The FAA has determined that in the interest of safety, the injury element should not be entirely eliminated and changing “injury” to “serious injury” strikes the appropriate balance.

Finally, both commenters expressed a concern with the policy of having FAA-accepted suitable landing areas. The concern is that the current requirement for operators to establish FAA-accepted suitable landing areas for helicopters does not mirror real-world operations. The FAA disagrees with these comments. In the air tour industry, those suitable landing areas should be designated in advance and the FAA should be involved in that determination. The FAA has concluded that removing the requirement to have those designated sites accepted by the FAA would then allow these operators to choose new sites that may have negative safety and environmental consequences for the surrounding communities. Allowing operators to determine their own landing areas without FAA acceptance could lead to some operators creating new routes that have not been vetted by the FAA. This could result in increased noise in the surrounding community and could impact the safety of the air tour and individuals on the ground. Therefore, the FAA is adopting the proposed changes as final with no further amendment.

The FAA also proposed in the NPRM regulatory text amending § 136.9. Section 136.9 outlines requirements for life preservers for operations over water. 11 The FAA proposed amending the text in § 136.9(b)(3) to require operators to base performance plans on information derived from the “approved aircraft flight manual for that aircraft”. Using this term is consistent with the reference to aircraft flight manual in § 135.81. The FAA also proposed a technical amendment to § 136.9 by adding the term “or” after § 136.9(b)(2). The FAA did not receive comments on these proposed changes and therefore adopts them as final.

Section 136.11 outlines requirements for helicopter floats for over water operations. The FAA proposed extending the § 136.11 requirements to rotorcraft operations that occur under part 136 to help mitigate the risks associated with emergency water landings.

Additionally, § 136.11(b)(2) does not include a reference to “beyond the shoreline”. The FAA proposed adding this reference to clarify the requirement to have the flotation system armed when the aircraft is over water beyond the shoreline. 12 The FAA did not receive comments on the aforementioned proposed amendments and therefore adopts them as final.

Section 136.13(a) currently requires commercial air tour operators to complete helicopter performance plans before each operation that will occur under part 136. 13 The FAA proposed amending § 136.13(a) by changing the term “helicopter” to “rotorcraft” for the reasons already cited. The FAA also proposed amending the text in § 136.13(a) to require operators to base performance plans on information derived from the “approved aircraft flight manual for that aircraft” for the reasons cited in § 136.9(b)(2). The FAA did not receive comments on these proposed changes and therefore adopts them as final.

Appendix A to part 136 applies to airplane and helicopter tours in Hawaii. The appendix A requirements are equally important for air tour operations in aircraft other than helicopters.

Section 1 of appendix A outlines the applicability for air tour operations conducted in Hawaii. Based on the uses of terms “airplane” and “helicopter,” the appendix does not apply to other types of aircraft, such as powered-lift and rotorcraft that are not helicopters. The FAA proposed amending the applicability of appendix A to incorporate powered-lift and rotorcraft to apply the minimum flight altitude limitations to other categories of aircraft seeking to conduct air tours in Hawaii.

The FAA also proposed amending the references to “Rotorcraft Flight Manual (RFM)” currently throughout part 136 to “aircraft flight manual”. As with the amendment to § 136.13, described above in section III.C.4 of this preamble, using this term is consistent with the reference to Aircraft Flight Manual in § 135.81. The FAA did not receive comments on these proposed changes, and therefore adopts them as final.

Finally, the FAA proposed amending part 136 by recodifying appendix A as a new subpart and applying the requirements to operations of powered-lift and rotorcraft. Jack Harter Helicopters objected to the continuation of the appendix A requirements and recodifying them into subpart D, stating this was originally SFAR 71 before it was brought into appendix A for part 136 and that the FAA previously stated it would reconsider whether appendix A should be removed at some point in the future. This commenter also stated that they wanted various changes to part 136 and objected that the FAA had failed to notify industry and the public that the FAA was “opening” part 136 for changes. This commenter also wanted an extension of the comment period. In response, the FAA notes that it is only making a limited change by applying part 136 rules to rotorcraft and incorporating powered-lift. The FAA is not opening part 136 for extensive changes at this time. The FAA is also making limited changes to part 136 which includes amending the definition of “suitable landing area”, adding “beyond the shoreline” to § 136.11(a)(2), and recodifying appendix A to subpart D—which is a technical amendment. These limited changes help clarify part 136 and align part 136 with other changes made throughout this rule. The FAA disagrees that the remainder of part 136 should be modified at this time. As a result, the FAA is adopting the proposed changes as final with no further amendment.

Operators that conduct passenger-carrying flights for certain charitable, nonprofit, and community events must comply with § 91.146. The FAA proposed replacing “helicopter” with the term “rotorcraft” and adding “powered-lift” to the relevant applicability provisions of § 91.146 for the benefit of a charitable, nonprofit, or community event. The FAA did not receive comments on these proposed changes. As such, the FAA adopts them as final.

Federal agencies consider impacts of regulatory actions under a variety of executive orders and other requirements. First, Executive Order 12866 and Executive Order 13563 direct that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify the costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate that may result in the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. The current threshold after adjustment for inflation is $177 million using the most current (2022) Implicit Price Deflator for the Gross Domestic Product. This portion of the preamble summarizes the FAA's analysis of the economic impacts of this rule.

In conducting these analyses, the FAA has determined that this rule: will result in benefits that justify costs; is not an economically “significant regulatory action” as defined in section 3(f) of Executive Order 12866; is not “significant” as defined in DOT's Regulatory Policies and Procedures; will not have a significant economic impact on a substantial number of small entities; will not create unnecessary obstacles to the foreign commerce of the United States; and will not impose an unfunded mandate on State, local, or Tribal governments, or on the private sector by exceeding the threshold identified above.

This rule enables operations of powered-lift to occur in accordance with 49 U.S.C. 44701(d), 44705, and 44711. Currently, the FAA's rules governing certificate holders' operations only apply to airplanes and rotorcraft, and do not mention powered-lift. The rule amends the definitions for the five kinds of operations codified at § 110.2—commuter, domestic, flag, on-demand, and supplemental—to ensure the operations occur in accordance with the statutory mandates, and to apply the appropriate set of operating rules to operations in powered-lift. The rule also amends the appropriate applicability of sections within part 119 to enable powered-lift, subject to applicable exemptions, to conduct air carrier and certain other commercial operations, commercial air tours, and noncommon carriage operations.

The rule also amends certain aircraft-specific exceptions from the applicability of part 119. Furthermore, this rule alters the requirements for management personnel in certain certificate holder management positions to ensure personnel have appropriate experience. This rule extends the applicability of certain operating rules that apply to commercial air tours such that they apply to operators that conduct flights in powered-lift and rotorcraft. Finally, this rule makes various additional amendments in the interest of ensuring clarity. By including powered-lift in the existing operational framework, the rule does not result in a reduction in safety because it maintains the risk-based approach to safety. When operations present a higher level of risk, based on volume and frequency, the FAA subjects such operations to a regulatory framework that mitigates those risks.

The current parameters for determining whether a certificate holder is conducting operations under part 121, 125, or 135 will be identical for certificate holders using powered-lift in their operations under this rule. These parameters are shown below.

The table below lists the amendments adopted by this rule. The first column identifies the affected 14 CFR part and section; the second column describes the change from existing regulations; the third column provides the economic impact as a result of the change.

This rule enables air carrier and other commercial operations of powered-lift by extending applicability of the appropriate set of operating rules that would serve as both a risk mitigation measure and a framework for FAA oversight, as necessary to ensure the requisite level of safety.

Powered-lift operations could offer many benefits. For example, some powered-lift may be capable of transporting heavier loads at higher altitudes and faster cruise speeds than helicopters, while maintaining the capability of taking off and landing vertically. The faster cruise speeds could improve response times by as much as 50 percent for search and rescue operations and allow a higher level of life-saving care during transport because of a smoother flight profile compared to helicopters. 14 In addition, powered-lift operations could increase the efficiency of crew transport to oil rigs as they move further from land, or other locations with smaller landing areas. Certificate holders may also seek to use powered-lift for transporting passengers point-to-point; for example, transportation could occur from a heliport and proceed at turbo-prop airspeeds and ranges. Using powered-lift for transport of passengers could increase the capacity of the NAS and reduce delays without requiring additional infrastructure. 15

Powered-lift projects exist that are either in certification, design, proof of concept, or prototype phases of design refinement. One project underway is a 9-passenger tilt-rotor turboshaft design. This manufacturer is also in the conceptual design phase of a 20-passenger powered-lift. Another powered-lift project underway is seeking to become the first certificated electric Vertical Takeoff and Landing (eVTOL) operator under part 119 to carry passengers in the United States.

The FAA amends provisions in §§ 119.49(a)(12), (b)(12), and (c)(11) and 91.1015(b)(9) as the FAA has determined they are broad and unduly burdensome. Currently, these provisions require a certificate holder's operations specifications to contain a list of exemptions and deviations issued under 14 CFR chapter 1 that are applicable to the aircraft, the operator, and airmen. The rule requires only exemptions and deviations that apply to the certificate holder (rather than to the aircraft) to be retained in operations specifications. Although the amendment to these provisions is relieving, the costs savings are minimal because the operations specifications are maintained electronically.

This rulemaking expands the part 119 certificate holder requirements for the part 121 management position of Chief Pilot (§ 119.65). As amended, the certificate holder is required to have a Chief Pilot for each category of aircraft used by the certificate holder to conduct operations. Currently, the Chief Pilot is required to have an ATP certificate, with appropriate ratings, for at least one of the airplanes used in the certificate holder's operations. While one person could meet the requirements of the Chief Pilot, this person would have to be dual qualified in airplanes and powered-lift. Consequently, a certificate holder conducting operations with airplanes and powered-lift may have an increase in costs if more than one Chief Pilot is hired to meet the qualification requirements.

Should a certificate holder operating under part 121 choose to conduct operations with airplanes and powered-lift, the incremental cost to meet the Chief Pilot qualification requirements would be minimal because the individual(s) acting in this position could also serve as a line pilot. The FAA determines that certificate holders operating under part 121 that choose to conduct operations with powered-lift would do so only if the benefits of conducting the operations exceeded its costs.

The Regulatory Flexibility Act (RFA) of 1980, (5 U.S.C. 601-612), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) and the Small Business Jobs Act of 2010 (Pub. L. 111-240), requires Federal agencies to consider the effects of the regulatory action on small business and other small entities and to minimize any significant economic impact. The term “small entities” comprises small businesses and 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 FAA published an Initial Regulatory Flexibility Analysis (IRFA) in the proposed rule and determined that the proposal would not result in a significant economic impact on a substantial number of small entities. The FAA requested public comment regarding this determination. The FAA did not receive comments from the public regarding this determination, nor were comments to the proposed rule filed by Chief Counsel for Advocacy of the Small Business Administration (SBA).

The final rule may impact small entities but will have a minimal economic impact as the final rule is enabling while imposing minimal costs. First and foremost, the final rule changes definitions contained in § 110.2 and the appropriate applicability of sections within part 119 to enable powered-lift to conduct air carrier and other certain commercial operations, commercial air tours and operations not involving common carriage. Absent this final rule, an air carrier desiring to conduct operations using powered-lift would not be able to comply with the requirements of 49 U.S.C. 44701(d) or 44705. Such operations, therefore, would be prohibited in the absence of this final rule.

Secondly, the final rule removes the requirement for a certificate holder to maintain a list of exemptions and deviations related to aircraft in its fleet as required by §§ 119.49(a)(12), (b)(12), and (c)(11) and 91.1015(a)(9). The impact could provide minimal relief for certificate holders by reducing the volume of records certificate holders must retain in their operations specifications.

Lastly, due to a change in the definitions contained in 14 CFR 110.2, this final rule enables part 121 certificate holders to conduct operations using powered-lift. As a result, the final rule revises part 121 certificate holder management qualifications for the Chief Pilot. Current regulations require Chief Pilots to have an ATP certificate for at least one of the airplanes used in a certificate holder's operations. The regulations will require the certificate holder to have a Chief Pilot qualified for each category of aircraft that the certificate holder uses.

As stated in the proposed rule, the FAA determines that the expansion of the qualifications for the position of Chief Pilot resulting from enabling additional aircraft categories to conduct part 121 operations imposes a minimal economic impact for part 121 certificate holders. Considering that this rulemaking is enabling, a part 121 certificate holder will voluntarily choose to operate a fleet of more than one aircraft category only if the expected benefits of doing so exceed the costs.

If an agency determines that a rulemaking would not result in a significant economic impact on a substantial number of small entities, the head of the agency may so certify under section 605(b) of the Regulatory Flexibility Act. Therefore, as provided in section 605(b), the head of the FAA certifies that this rulemaking would not result in a significant economic impact on a substantial number of small entities.

The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards.

The FAA has analyzed this rule in conjunction with the requirements of the Trade Agreements Act of 1979, as amended by the Uruguay Round Agreements Act. The FAA has determined the rule does not present any obstacle to foreign commerce of the United States. In addition, the rule is not contrary to international standards.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) governs the issuance of Federal regulations that require unfunded mandates. An unfunded mandate is a regulation that requires a State, local, or Tribal government or the private sector to incur direct costs without the Federal Government having first provided the funds to pay those costs. The FAA determined that this final rule will not result in the expenditure of $177 million or more by State, local, or Tribal governments, in the aggregate, or the private sector, in any one year.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires that the FAA consider the impact of paperwork and other information collection burdens imposed on the public. According to the 1995 amendments to the Paperwork Reduction Act (5 CFR 1320.8(b)(2)(vi)), an agency may not collect or sponsor the collection of information, nor may it impose an information collection requirement unless it displays a currently valid Office of Management and Budget (OMB) control number.

The Office of Management and Budget previously approved the FAA's collection of information affiliated with this rule. 16 None of the information collection instruments will change due to this rule, however, the number of respondents to whom the information collection requirements apply may increase. The FAA will continue to collect the necessary information in the same manner as described in its prior notices concerning the information collections.

Each section below identifies the information collections affected by this rule. The FAA has estimated the increase in the existing burden based on four-part 119 certificate holders beginning part 135 operations with powered-lift by the end of the third year following publication of the final rule. 17 While this rule allows part 119 certificate holders to conduct operations under part 121, the FAA does not believe that any such certificate holders would do so in the first three years following adoption of the rule. Therefore, the FAA has not estimated any burden increase for existing information collection 2120-0008 (Part 121 Operating Requirements: Domestic, Flag, and Supplemental Operations). Further, the FAA does not believe that any such certificate holders would conduct operations under part 125 in the first three years following adoption of this rule. Therefore, the FAA has not estimated any burden increase for existing information collection 2120-0085 (Certification and Operations: Airplanes Having a Seating Capacity of 20 or More Passengers or a Maximum Payload Capacity of 6,000 Pounds or More).

Summary: This rule would extend the requirements of part 119 to certificate holders that conduct operations with powered-lift.

Public Comment: There were no comments submitted to the notice of proposed rulemaking concerning this information collection.

Use: Organizations that desire to become or remain certified as air carriers or commercial operators are mandated to report information to the FAA. The information collected reflects requirements necessary under parts 135, 121, and 125 to conform to 14 CFR part 119—Certification: Air Carriers and Commercial Operators. The FAA will use the information it collects and reviews to ensure compliance and adherence to regulations and, if applicable, to take enforcement action on violators of the regulations.

The FAA has estimated the increase in the existing burden based on four certificate holders beginning powered-lift operations by the end of the third year following adoption of this rule. 19 Note that not all information collection requirements are expected to increase as a result of the revision to this information collection.

Summary: With the exception of Form 8060-14 and -15, an operator utilizes the various 8060 forms to report a request for the applicable records of all applicants for the position of pilot with their company as needed under the Pilot Records Improvement Act (PRIA).

Public Comment: There were no comments submitted to the notice of proposed rulemaking concerning this information collection.

Use: The information collected on these forms will be used only to facilitate search and retrieval of the requested records, and submission is mandatory until PRIA sunsets. Operators then “may use such records only to assess the qualification of the individual in deciding whether or not to hire the individual as a pilot.” (49 U.S.C. 44703(h)(11)). For purposes of this incremental information collection the FAA expects pilots to access the pilot records database web-based application to release records to operators for review and to update employment history. In turn, the hiring operator uses the information to help them perform a comprehensive assessment of the pilot prior to making a hiring decision, as required by the Act.

The FAA has estimated the increase in the existing burden for this collection based on four part 119 certificate holders employing 129 commercial pilots holding an airmen's certificate in the powered-lift category by the end of the third year following adoption of this rule. Note that not all information collection requirements are expected to increase as a result of the revision to this information collection.

I. Overview of the Commission's Review of the Guides

The Commission began a review of the Guides pursuant to the agency's ongoing regulatory review of all current rules and guides. In February 2020, the Commission published a Federal Register document seeking comment on the overall costs, benefits, and regulatory and economic impact of the Guides. 85 FR 10104 (Feb. 21, 2020). Given the disruption caused by the COVID-19 pandemic, the Commission extended the comment period for two months. 85 FR 19709 (Apr. 8, 2020). One hundred eight unique substantive comments were filed in response to the Commission's February 2020 publication.

In July 2022, the Commission published a Federal Register document, 87 FR 44288 (July 26, 2022), that discussed the comments it had received in 2020, proposed certain revisions to the Guides, and requested comment on those revisions. Thirty unique substantive comments were filed. 1 After reviewing those comments, the Commission is now making additional changes to the Guides and adopting the resulting revised Guides as final. 2

Many of the comments received by the Commission were generally supportive of the proposed revisions. 3 One comment urged the FTC not to backtrack in response to complaints from certain commenters. 4 One comment said the Commission should avoid making changes beyond updating examples and providing minor clarifications, 5 but the commenter only raised concerns about a few specific issues. 6 Another comment said the Commission should not use the Guides to communicate the policy interests of the Commission  7 and disagreed with many of the proposed changes. 8 Other commenters supported or opposed discrete revisions or asked for additional changes, guidance, or enforcement, but did not comment upon the proposed changes generally. 9

What follows is a section-by-section discussion of comments received, the Commission's reactions to the comments, and any resulting changes to the Guides. The discussion also notes additional changes not prompted by the comments but does not flag non-substantive edits intended merely to improve the readability of the examples.

One commenter assumed significance when an example did not address other possible issues that might arise from the facts described. 10 The Commission is adding a statement to § 255.0(a) noting that the examples in each section of the Guides apply the principles of that section to particular factual scenarios, but they do not address every possible issue the facts or principles might implicate.

The Commission proposed revising the definition of an “endorsement” to make clear that tags in social media posts can be endorsements. One comment stated addressing tags is beneficial  11 and two comments asserted, correctly, that not all tags are endorsements, 12 with one of them saying the proposed language communicates otherwise. 13 The Commission is therefore revising the language of the definition to clarify that tags and certain other types of communications “can be” endorsements. Another commenter assumed the list was exhaustive and if a type of message was not on the list, the Commission did not consider it to be an endorsement. 14 To the contrary, the list is illustrative and not exhaustive.

The Commission proposed revising the definition of an “endorser” to include what “appear[s] to be an individual, group, or institution.” Two commenters said the proposed revised definition addressing fabricated endorsers is beneficial. 15 A third commenter asked that the Commission make clear using express language or examples that the revised definition applies to virtual endorsers or fabricated endorsers. 16 A fourth commenter said the new language was ambiguous and, if the Commission simply intended to address virtual influencers, then it should use language to specifically address that concept. 17 The Commission does not agree that the new definitional language is ambiguous or addresses only virtual influencers; rather, the new language is intended to also encompass the writers of fake reviews and non-existent entities that purport to give endorsements. The Commission is adding a sentence to Example 12 stating that fake positive reviews used to promote a product are “endorsements.” The Commission is also deleting “or service” from “product or service,” because the term “product” includes a “service.”  18

The Commission proposed including a “brand” within the definition of a “product.” Two commenters supported the inclusion of “brands”  19 and another commenter raised concerns its inclusion would complicate whether a third-party review platform should consider a review to be a product review or a service review. 20 The addition of the word “brand” to the definition of “product” is not intended to address or impact how review platforms categorize reviews of brands.

The Commission proposed adding a definition of “clear and conspicuous” to describe the characteristics necessary to make disclosures effective. A number of commenters supported the definition, 21 with one of them asking for flexibility in how the definition is applied. 22 One commenter asserted that requiring online disclosures to be unavoidable is unlikely to benefit consumers, 23 and another one opposed the definition, arguing for greater flexibility. 24 Some commenters asked for specific guidance about compliant or non-compliant disclosures, 25 and one supported addressing general principles in the Guides and providing more detailed guidance in staff business guidance. 26 The Commission is adopting the proposed definition, which it believes is both useful and flexible. For online disclosures to be effective, they must be unavoidable. The Commission further believes its current approach to endorsement-related guidance makes sense, with the Guides focused on general principles and examples, and the more informal (and more frequently updated) staff guidance focused on specific questions and issues, such as the use, language, and placement of disclosures of material connections on particular platforms.

The first example of § 255.0 involves a film producer excerpting a film critic's review and placing it in an advertisement. One commenter asserted the excerpted statement is not an endorsement because there is no material connection between the critic and the endorser. 27 The Commission disagrees: a statement can be an endorsement even absent a material connection with the advertiser. The Commission is modifying the example to clarify that, while the critic's review itself is not an endorsement, the excerpt used in the advertisement is an endorsement.

Example 3 concerns a spokesperson who does not purport to speak on the basis of their own opinions and therefore is not considered an endorser. Although no commenters addressed this example, the Commission is clarifying that the spokesperson also does not purport to speak from personal experience.

Example 4 discusses an ad for automobile tires featuring a well-known professional automobile racing driver. Given the driver's expertise in automotive products, the Commission believes many consumers would likely think what the driver says about the positive attributes of the tires reflects the driver's personal views based on having personal knowledge about the tires. One commenter took issue with the Commission's revised language that consumers would likely think the driver's statement was based upon personal knowledge or experience. 28 The Commission disagrees with the commenter. Many consumers would likely think a professional racer would not speak for a product within their field of expertise without actually believing in those statements. The Commission is, however, further editing the example to make it internally consistent.

The Commission proposed adding an alternative scenario to Example 5 involving a golfer who was “hired” to post a video to social media of them driving a particular brand of golf ball. One commenter said the example was helpful in demonstrating that images can be endorsements. 29 Another commenter said not every social media post by a golfer showing golf balls is an endorsement and the Commission should make it clearer that it is an endorsement because the golfer was hired. 30 Although the Commission believes the example was clear as written, it is making it even clearer by describing the social media post as a “paid post.”

Example 6 is about an actor who says a home fitness system is “the most effective and easy-to-use home exercise machine that I have ever tried.” One commenter asserted this would only be deceptive if the actor had not used the machine. 31 The example is intended to illustrate why this statement is an endorsement and is not intended to address all the ways the statement could be deceptive or who could be liable for any such deception. The Commission notes, however, there are multiple ways in which the statement could be deceptive, including not representing the actor's actual opinions or misleading consumers as to the machine's effectiveness or ease of use.

Example 7 illustrates several scenarios in which a consumer's expressed views of a brand of dog food would or would not be considered an endorsement. In the first scenario, a consumer with no connection to the manufacturer decides to buy the product and post about it or review it online. The proposed revised example said certain statements by the consumer are not an endorsement. One commenter suggested the Commission clarify that the consumer purchased the product with the consumer's own money, and the example now does so. 32 Another commenter asked whether the consumer's review would be an endorsement if the manufacturer highlighted the review on its homepage. 33 The Commission is adding a sentence to the example stating that a featured review would be considered an endorsement. The Commission is also deleting a statement about whether the consumer's review would otherwise be an endorsement if posted on a manufacturer's or retailer's website. Such a conclusion may depend on specific legal and factual issues.

Example 7 includes an alternative scenario in which the consumer participates in a marketing program in which participants agree to periodically receive free products from various manufacturers and can write reviews if they want to do so. One commenter supported the example, 34 and two others questioned whether the reviews are endorsements given that they are entirely optional. 35 To clarify this issue, the Commission is making two changes. First, it is modifying the example to state the participants had agreed to write reviews of the free products and the reviews were therefore endorsements. Second, the Commission is adding a second alternative scenario in which an influencer receives a valuable, unsolicited product and is asked, but not required, to endorse the product. The Commission believes any resulting posts would be endorsements even though the influencer could have chosen not to endorse the product.

One commenter indicated support for proposed new Examples 8 through 11. 36

Proposed Example 8 explains a video game influencer who is paid to play and live stream a game is implicitly endorsing the game by appearing to enjoy playing it. One commenter could not understand why the player's enjoyment is relevant. 37 The Commission is modifying the example to clarify that the player's apparent enjoyment is implicitly a recommendation.

To illustrate disclosures that are not clear and conspicuous, the Commission proposed adding Example 9, which contains several paragraphs. Paragraph (ii) involves an influencer disclosing their connection to a manufacturer in social media posts written such that consumers have to click on a link labeled “more” in order to see the disclosure. The example is based on the Commission's case against Teami, LLC, and its owners. 38 Two commenters supported the example  39 and a third asked the Commission to explain why the disclosure is unlikely to be noticed, read, or understood. 40 The Commission is clarifying the example by stating that, if the endorsement is visible without having to click on the link labeled “more,” but the disclosure is not visible without the viewer doing so, then the disclosure is not unavoidable and thus is not clear and conspicuous.

Proposed Example 10 posits that, when an ad is targeted to older consumers, whether the disclosure is clear and conspicuous will be evaluated from the perspective of older consumers, including those with diminished auditory, visual, or cognitive processing abilities. One commenter, asserting the example is premised on unfair, insulting, and prejudicial assumptions about older adults and their abilities to understand ads, asked that the example be withdrawn. 41 The example does not assume older adults necessarily have diminished capacities, but it is reasonable to assume that population includes such individuals. The Commission's Deception Policy Statement recognizes that when “representations . . . are targeted to a specific audience . . . the Commission determines the effect of the practice on a reasonable member of that group.”  42

Proposed Example 11 is intended to show how the definition of “clear and conspicuous” could apply to an advertisement microtargeted to a very discrete population. It imagines an advertisement for a cholesterol-lowering product that requires a disclosure because it contains testimonials about results that greatly exceed those generally experienced by the product's users. Based on online data collection, the ad is microtargeted to Spanish-speaking individuals who have high cholesterol levels and are unable to understand English. While the ad is in Spanish, the disclosure is only in English. One commenter expressed the view that the example was offensive and premised on inaccurate assumptions that a Spanish-speaking audience might be likely to have high cholesterol. 43 The example is not based upon such an assumption but is instead an illustration of when a disclosure is needed and how that disclosure must be in a language the target audience will understand. The example referenced Spanish speakers because Spanish is the second-most spoken language in the United States. The Commission is revising the example to make it more generically about speakers of a “particular language . . . who are unable to understand English.” The Commission is also adding a statement that the disclosure must be in the same language as the ad.

Proposed Example 12 addresses fake negative reviews of a competitor's product. Three commenters supported the example, 44 with one asking the Commission to state that commissioning a fake positive review is an unfair trade practice. 45 As discussed above, the Commission is adding a statement that fake positive reviews used to promote a product are endorsements. The Commission is also adding a cross-reference to an example in § 255.2 involving a manufacturer deceptively procuring a fake positive consumer review for its own product and having it published on a third-party review website.

Proposed Example 13 says it is a deceptive practice for users of social media platforms to purchase or create indicators of social media influence and then use the indicators to misrepresent such influence for a commercial purpose. One commenter indicated support for the example. 46 Another commenter asserted the purchase or creation of fake followers is inherently a misrepresentation and should be prohibited per se. 47 Although the use of fake followers may be inherently “misleading” as that term is colloquially used, the Commission's jurisdiction is limited to commercial speech and does not reach the use of fake followers for vanity or other non-commercial purposes. A third commenter was concerned the example suggested that the Commission would hold ad agencies liable when they recommend an influencer who, unbeknownst to the agencies, happens to be using fake indicators of social media influence. 48 Nothing in the Guides addresses holding ad agencies liable for merely recommending such an influencer.

As revised, proposed § 255.1(b) stated that an advertisement need not present an endorser's message in the exact words of the endorser unless the ad presents the endorsement as a quotation. One commenter said the reference to a “quotation” is confusing. 49 The Commission is modifying the example to say an ad must use an endorser's exact words only when the ad represents that it is presenting the endorser's exact words, such as by using quotation marks.

Section 255.1.(d) addresses the potential liability of advertisers. Among other things, the proposed revised subsection stated advertisers are subject to liability for misleading or unsubstantiated statements made through endorsements when there is a connection between the advertiser and the endorser. 50 Two commenters said they supported the proposed revised subsection. 51 Another commenter stated the reference to “when there is a connection between the advertiser and the endorser” is unnecessary because there has to be a sponsoring advertiser for there to be an endorsement. 52 The Commission is deleting that language because, as defined, an endorsement has to be an advertising, marketing, or promotional message. It is not correct, however, that a connection is needed for an advertiser to be liable for an endorsement. If, for example, an advertiser retweets a positive statement by an unrelated third party or republishes in an advertisement a positive review by an unrelated third party, that statement or review becomes an endorsement for which an advertiser is liable, despite the lack of any such connection.

One commenter asserted it is unreasonable to hold an advertiser liable for what endorsers say unless the endorsers had a contractual relationship to the advertiser and the advertiser either: (1) failed to properly instruct endorsers and take action when it became aware of failures to comply or (2) instructed the endorsers to make a false claim. 53 Another commenter said expecting advertisers to monitor their endorsers is unreasonable and unnecessary. 54 The Commission disagrees with both commenters and expects advertisers to be responsible for and monitor the actions of their endorsers. A different commenter asked the Commission to continue to allow flexibility in monitoring such as FTC staff business guidance currently provides, 55 and yet another commenter asked for more detailed guidance on effective oversight mechanisms. 56 Such detailed guidance is beyond the scope of these Guides but may be addressed in staff business guidance. The Commission is also changing a statement in the subsection that an advertiser may be liable “for an endorser's deceptive statement” even when the endorser is not liable. The Commission is clarifying that the advertiser's liability may extend to “deceptive endorsements” and not just the narrower issue of whether an endorser's statement is true. For example, the advertiser could be held liable for disseminating a television ad including an endorser making a truthful statement that reflects atypical results of using the product.

Proposed new § 255.1.(e) addresses the liability of endorsers. Three commenters were supportive of this paragraph, 57 with one of them suggesting that it address the liability of reviewers who represent falsely that they personally used a product or experienced a service. 58 The Commission is adopting that suggestion.

Proposed new § 255.1.(f) addresses the liability of intermediaries generally and listed several types of intermediaries. Four commenters supported the proposed paragraph as written, 59 and another commenter suggested specifically identifying review brokers as potentially liable. 60 A different commenter stated that the undefined term “intermediaries” could sweep in entities for which there is no agency relationship, privity, or participation in the misconduct. 61 To address this concern, the Commission is changing the language of the provision to refer to the specific entities that it intends to address ( i.e., advertising agencies, public relations firms, review brokers, reputation management companies, and “other similar intermediaries”). The Commission is also revising the paragraph to state that such entities may also be liable for their roles in “creating” ads containing endorsements that they know or should know are deceptive. Another comment said that the Commission should not seek to hold liable “an entity [that] merely provides production services but is not involved in developing content for an advertisement and does not have direct knowledge about the accuracy of statements in an endorsement or testimonial.”  62 The Commission does not believe that entities that merely provide such production services are “other similar intermediaries” as described in the revised language.

Proposed new § 255.1.(g) says that the use of an endorsement with the image or likeness of a person other than the actual endorser is deceptive if it misrepresents an attribute of the endorser that would be material to consumers in the context of the endorsement, e.g., an endorser's complexion in the context of an ad for an acne treatment. Three commenters supported this new paragraph. 63

Example 1 of § 255.1 addresses whether an endorsement is still valid after a product has been reformulated. The Commission is making minor modifications to clarify the first subpart of the example. A proposed new second subpart addressed an endorsement in a social media post. It said that even if an endorser would no longer use or recommend a reformulated product, there is no obligation for the endorser to modify or delete a historic post as long as the date of the post is clear and conspicuous to viewers. One commenter supported the example  64 and another said that it is not clear from the example whether the advertiser, as opposed to the endorser, needs to change or delete historical posts. 65 The Commission is modifying the example to clarify that the advertiser is not under any more obligation to do so than the endorser. The proposed new subpart also addressed sharing or reposting of the original post after the product's reformulation. The Commission is clarifying the example and adding that, under such circumstances, the advertiser would need to confirm that the endorser holds the views expressed in the original post about the reformulated product.

Proposed new Example 2 involves an ad featuring a well-known DJ who implicitly communicates owning and regularly using an advertised coffee maker, but who only used it during a demonstration by the product's manufacturer. One commenter said that the example described was not clearly an ad. 66 The Commission is modifying the example to clarify that the DJ is speaking during a radio advertisement played during commercial breaks. Another commenter asked the Commission to consider clarifying that the DJ could have used the coffeemaker every weekday at the studio and that the endorsement could have made the context of such use clear and understandable. 67 The commenter is correct in that the DJ might have used the coffee maker regularly without owning it. The Commission is simplifying the example, focusing on the implied claim of regular use, and deleting the reference to ownership.

Example 5 addresses the potential liability of an influencer for making an unsubstantiated health claim, as well as the advertiser's potential liability for the influencer's endorsement. The Commission disagrees with a commenter who asserted the proposed revised example is too complicated and should not address potential liability. 68

Proposed new Example 6 addresses two alternative scenarios in which the pictures accompanying endorsements featured on a marketer's website are not of the actual endorsers and misrepresent material attributes of the endorsers. Two commenters supported the example. 69 The Commission is clarifying in the first alternative that the pictures accompanying acne treatment testimonials were “stock photos . . . purchased” by the advertiser. The second alternative involves a testimonialist who says they lost 50 pounds using a weight-loss product. The subpart explains the testimonial on the marketer's website was accompanied by an “after” picture of a person who appears to weigh 100 pounds but the testimonial was from someone who weighed 250 pounds after the weight loss. One commenter sought to correct a statement about the endorser appearing to have lost “one-third of their original body weight,” thinking the Commission had made a mathematical error. 70 The example was correct as written, but the Commission is adding a parenthetical to the example explaining its calculation.

Section 255.2(a) says an advertiser must possess and rely upon adequate substantiation, including, when appropriate, competent and reliable scientific evidence, to support claims made through endorsements in the same manner the advertiser would be required to do if it had made the representation directly. The Commission proposed clarifying this principle applies to both express and implied claims. One commenter said this clarification is helpful. 71

Currently, § 255.2(b) says that, if an advertiser does not have substantiation that an endorser's experience is representative of what consumers will generally achieve, the advertisement should clearly and conspicuously disclose the generally expected performance in the depicted circumstances, and that the advertiser must possess and rely on adequate substantiation for the representation in such disclosure. One commenter supported this principle. 72 The Commission proposed adding a sentence that the disclosure of the generally expected performance should be presented in a manner that does not itself misrepresent what consumers can expect. One commenter supported that position. 73 The Commission is also adding a sentence to the paragraph explaining that, to be effective, a disclosure must alter the net impression of an advertisement so it is not misleading.

The Commission proposed adding a new § 255.2(d) addressing advertisers procuring, suppressing, boosting, organizing, or editing consumer reviews of their products or services in a way that distorts or otherwise misrepresents what consumers think of their products. One commenter asked whether this guidance covered upvoting, publishing, or selectively publishing reviews. 74 The Commission is clarifying the new subsection by adding publishing, upvoting, downvoting, and reporting.

Four commenters supported the new paragraph. 75 A different commenter said the Commission was using the Guides in lieu of proper rulemaking in seeking to regulate the entire industry's use of customer reviews. 76 In the context of four subsequent examples illustrating the new principle, the same commenter stated the Commission was unnecessarily wading into an analysis of how moderation of user-generated reviews may negate immunity otherwise granted pursuant to section 230 of the Communications Decency Act (the “CDA”), 47 U.S.C. 230, and the Commission's guidance may lead to inconsistencies with “ongoing” legal principles. 77 The commenter did not identify any actual or purported inconsistencies between the Commission's guidance and the CDA or other laws, and the Commission sees none. The Commission reiterates that the Guides are not regulations; as stated in § 255.0(a), the Guides are simply “administrative interpretations of . . . section 5 of the FTC Act” in order to “provide the basis for voluntary compliance.” The Commission need not engage in rulemaking to offer such guidance.

Example 2 of § 255.2 involves an ad for a heat pump featuring three testimonials about monetary savings that will likely be interpreted as conveying such savings are representative of what buyers can generally expect. The Commission proposed expanding the example to illustrate how disclosures of generally expected results could themselves be misleading if they apply only in limited circumstances not described in the advertisement. Two commenters supported the inclusion of the additional guidance. 78

Example 4 addresses when an ad for a weight-loss product  79 requires and does not require a disclosure of generally expected results and what such a disclosure should say. The Commission proposed revising the example and expanding it from three to six subparts.

Paragraph (ii) of Example 4 said that if a woman says, “I lost 50 pounds in 6 months with WeightAway,” a disclosure such as “Average weight loss is 1-2 pounds per week” is inadequate and likely deceptive. Although no commenters addressed this subpart, the Commission is modifying this statement to better explain why such a disclosure is inadequate and likely deceptive.

Paragraph (iii) of Example 4 said a disclosure such as “most women who use WeightAway lose between 10 and 50 pounds” is inadequate because the range specified is so broad it does not sufficiently communicate what users can generally expect. One commenter asked the Commission to state the disclosure would be acceptable if the top of the range ( e.g., 50 pounds) had an appreciable number of incidences. 80 The Commission believes that, even if some appreciable number of consumers lost 50 pounds, the range would still not adequately communicate what users can generally expect. A marketer could instead disclose the generally expected result and also state what percentage of customers lose 50 pounds or more.

Paragraph (iv) of Example 4 illustrates how a disclosure of mean weight loss could be deceptive when the mean is substantially affected by outliers. One commenter said the new guidance was helpful. 81 Another commenter said it supports “the allowance of `mean computation' ”;  82 the Commission interprets that comment to refer to the fact that disclosures could use mean weight loss in a non-deceptive way.

Paragraph (v) of Example 4 says that, if a manufacturer procures a fake review that is published on a third-party review website, the review is a deceptive endorsement because it was not written by a bona fide user of the product. The subpart cross-references § 255.1(c). Two commenters supported the inclusion of this paragraph. 83 The Commission is adding that the review would also be deceptive because it does not reflect the honest opinions, findings, beliefs, or experience of the endorser, with a cross-reference to § 255.1(a).

Paragraph (vi) of Example 4 said the disclosure “The typical weight loss of WeightAway users who stick with the program for 6 months is 35 pounds” is inadequate if only one-fifth of those who start the weight-loss program stick with it for six months. One commenter supported the guidance  84 while another asserted the disclosure was, in fact, adequate. 85 The Commission continues to believe, as explained in the example, the disclosure is inadequate because it does not communicate what the typical outcome is for users who start the program.

One commenter suggested the Guides specifically state that selectively posting bona fide positive testimonials to third-party review sites would constitute a deceptive practice. 86 The Commission is adding a paragraph (vii) to Example 4, saying that if a manufacturer forwards only favorable reviews for its product to a third-party review website or omits unfavorable reviews, it is engaging in a misleading practice.

Proposed new Example 8 addresses an online retailer that suppresses negative reviews on its website, stating that the resulting product pages would be misleading. The example also addresses fact patterns in which the retailer blocks reviews containing profanity or complaining about the owner's policy positions. Based upon the Consumer Review Fairness Act (the “CRFA”), 15 U.S.C. 45b, the example says sellers are not required to display customer reviews that contain unlawful, harassing, abusive, obscene, vulgar, or sexually explicit content; content that is inappropriate with respect to race, gender, sexuality, or ethnicity; or reviews that the seller reasonably believes are fake, so long as a seller's criteria for not displaying such reviews are applied uniformly to all reviews submitted. The Commission also said sellers are not required to display reviews that are unrelated to their products or services, but customer service is related to the seller's products and services. One commenter suggested the Commission expand the exceptions listed to include other information that should not be published, such as sensitive personal information. 87 The CRFA also includes exceptions for reviews that “contain[] the personal information or likeness of another person, or [are] libelous,”  88 content “that is clearly false or misleading,”  89 or “trade secrets or privileged or confidential commercial or financial information,”  90 and the Commission is adding that language to the example. Another commenter said product reviews that are just about customer service should not be displayed when they are about the customer service of a different seller. 91 The Commission agrees and is modifying the example so it refers to “a particular seller's customer service.” One commenter took the view that all product reviews including those just about customer services should be displayed to allow consumers reading the reviews to decide for themselves how to interpret them, 92 while another one said product reviews about services should not need to be published when there are other mechanisms for customer service feedback. 93 The Commission responds that the purpose of publishing such reviews about customer service is to protect and inform potential purchasers of the products, rather than simply to provide a means for feedback. One commenter agreed with the example, saying that sellers should be able to elect not to display reviews that contain objectionable content, as long as the content moderation is done without improper consideration as to whether the review is negative, neutral, or positive. 94 The commenter also asked that the right of third-party review platforms to block similar content be noted. 95 The Commission agrees that third-party review platforms should be able to similarly block such content, but it does not see the need to address the rights of third-party review platforms in the Guides at this time.

In proposed new Example 10, a manufacturer uses unfair threats of legal action or physical threats to coerce consumers into deleting negative reviews of its products which the consumers had posted on third-party review websites. One commenter supports the example and would expand it beyond violence or litigation to other less drastic coercive measures. 96 The Commission is expanding the example to add threats to disclose embarrassing information. The Commission also notes the listed threats are intended as illustrative and not exhaustive. Another commenter expressed concerns that simply sending a letter attempting to correct false statements could be considered threatening. 97 The Commission would not consider simply notifying a reviewer of inaccuracies to be threatening. The Commission is also modifying the example to describe the circumstances in which threatened legal action would be considered unfair or deceptive. A third commenter suggested the Commission is improperly trying to expand the CRFA through a Guide-refreshing process when it should ask Congress to do so and said the Commission has not placed into the record any evidence that advertisers are frequently threatening reviewers. 98 The Commission is not attempting to expand the CRFA. It is interpreting section 5 of the FTC Act. Any enforcement actions based upon conduct inconsistent with the Guides would have to establish that the conduct violated section 5. The Commission need not establish that an action is prevalent in order to give guidance that it believes the action is unfair. The example is based upon Commission cases against Roca Labs and World Patent Marketing. 99 Finally, the Commission is clarifying how the use of such threats can be deceptive or unfair.

Although it was not addressed by the commenters, the Commission is adding an alternative scenario to Example 10 based upon the facts of a recent Commission case. 100 The new scenario involves a business abusing a third-party review platform's mechanism for reporting suspected fake reviews. A manufacturer routinely flags negative reviews of its products as fake without a reasonable basis for believing they are fake, which results in many truthful reviews being removed from the website. Such conduct is an unfair or deceptive practice.

Proposed new Example 11 addresses a marketer engaging in review gating, which involves asking past purchasers to provide feedback on a product and then inviting only those who give positive feedback to post online reviews on one or more websites. The example notes that the practice “may be unfair or deceptive if it results in the posted reviews being substantially more positive than if the marketer had not engaged in the practice.” Two commenters said that the example was helpful, 101 another suggested expanding it to address upvoting, downvoting, and selective publication, 102 and a third said that the Commission is unlawfully prohibiting advertisers from exercising their commercial speech rights by encouraging a happy customer to write a review. 103 The Commission added publishing, upvoting, downvoting, and reporting to the general principle expressed in § 255.2(d) and does not believe it needs to add them to this example. The Commission is not saying or suggesting that businesses cannot ask happy customers for reviews. As the example expressly states, the marketer could have simply invited all recent purchasers to post reviews, even if it had expressed its hope that the reviews would be positive. The example also states clearly that deception or unfairness occurs not in the selective asking of customers for reviews but only when the posted reviews are substantially more positive as a result.

The proposed revision of § 255.3(b) said that an expert endorsement must be supported by an actual exercise of the expertise in evaluating product features or characteristics “with respect to which the endorser has expertise.” In the context of Example 6 of § 255.3, two commenters suggested more clearly addressing an expert's purported expertise—that is, the level of expertise that an endorser is represented as possessing. 104 The Commission is modifying § 255.3(b) to make clear that the endorser must have exercised the expertise that they are “represented” as possessing. 105

Example 2 of § 255.3 describes an endorser of a hearing aid who is simply referred to as a “doctor” during an ad. The example says the ad likely implies the endorser is a medical doctor with substantial experience in the area of hearing. As revised, the proposed example would have said a non-medical “doctor” ( e.g., an individual with a Ph.D. in audiology) or a physician without substantial experience in the area of hearing might be able to endorse the product, but at a minimum, the advertisement must make clear the nature and limits of the endorser's expertise. Two comments supported the proposed revised example, 106 two comments asked the Commission to clarify it is acceptable to describe an audiologist with a doctorate as “Doctor of Audiology,” “Au.D., Audiologist” or “Ph.D., Audiologist,”  107 and one comment asked why a doctor who clearly and conspicuously discloses the nature and limits of their expertise might not be able to endorse a product. 108 On reflection, the Commission recognizes that, in the absence of a white coat, a stethoscope, or other indicia of an endorser being a physician, consumers are likely to believe an endorser identified as a doctor has expertise in the area of hearing but might not expect the doctor to be a medical doctor. The Commission is revising the example such that either a medical doctor with substantial experience in audiology or a non-medical doctor with a Ph.D. or Au.D. in audiology could endorse the hearing aid as a “doctor” without any disclosure. Finally, the example will say a doctor without substantial experience in the area of hearing might be able to endorse the product if the ad clearly and conspicuously discloses the nature and limits of the endorser's expertise. Given the revision to the example, it is no longer necessary to address how a person with a doctorate in audiology should be identified. The example continues to say the doctor without substantial experience in the area of hearing might be able to endorse the product as a doctor if the advertisement clearly and conspicuously discloses the nature and limits of the endorser's expertise.

Example 3 refers to testing an automobile part's “efficacy,” which the Commission is changing to testing the part's “performance.”

Section 255.4 addresses endorsements by organizations. The Commission proposed adding two new examples to this section.

Proposed new Example 2 describes a trampoline manufacturer that sets up and operates what appears to be an independent trampoline review website that reviews the manufacturer's trampolines, as well as those of competing manufacturers. The example says the claim of independence is false. Three commenters supported the example. 109 One commenter asked why the example is in the “organizations” section of the Guides, rather than the material connections section. 110 The Commission is rewording the example so the operator of the website appears to be an independent trampoline institute.

Proposed new Example 3 involves a review website operator that accepts money from manufacturers in exchange for higher rankings of their products. The example says a manufacturer who pays for a higher ranking on the website may be held liable for deception. Two commenters supported the example. 111 One of them suggested the Commission clarify that both the manufacturer who pays for a higher ranking and the site operator can be liable for misleading consumers and the Commission say that using a ranking methodology that results in higher rankings for products or services with a relationship to the rating site is misleading. 112 The Commission is making both of those changes. One commenter said it was unclear how the example related to the Guides. 113 The example belongs in the Guides because the review website is endorsing the products it is reviewing.

Section 255.5 addresses the need to disclose unexpected material connections between the endorser and seller of an advertised product. To be material, a connection must affect the weight or credibility the audience gives to the endorsement. The revised section gives examples of possible material connections. One commenter agreed with the general principle, as well as the specific examples described, 114 while another supported the broad scope of possible material connections addressed in the section. 115 Another commenter asked the Commission to add more examples of benefits to an endorser that are or could be material. 116 The examples of possible material connections listed in § 255.5 are meant to be illustrative rather than exhaustive, and the Commission does not believe it is necessary to expand the list.

As proposed, the revised section would also acknowledge some connections may be immaterial because they are too insignificant to affect the weight or credibility the audience gives to endorsements. Two commenters asked for examples of connections that are immaterial. Whether a connection is too insignificant to be material is such a fact-specific question that it is difficult to devise a useful example of a necessarily immaterial connection.

The most recent version of the Guides describes the type of connection that must be disclosed as one that “is not reasonably expected by the audience.” The Commission proposed restating this as “material connections do not need to be disclosed when they are understood or expected by all but an insignificant portion of the audience for an endorsement.” The Commission is now rewording the statement in the Guides to say a “material connection needs to be disclosed when a significant minority of the audience for an endorsement does not understand or expect the connection.”

One commenter asserted this guidance was ambiguous and asked that the Commission give concrete examples or delete the new language. 117 Two other commenters similarly asked for examples. 118 It may be that certain, well-known influencers have become so closely identified with a particular brand that almost everyone knows of their connection. It may also be that followers of some well-known influencers have all come to expect that the influencers endorse products only when paid. The Commission is reluctant to identify real-world influencers who might fit these descriptions. Whether any particular connection is or is not expected by an audience is a factual question that might require empirical testing, and that testing might only be relevant to a particular endorser or to a narrow set of circumstances. 119

Another commenter stated consumers are more likely to understand and expect that influencers have received some sort of incentive when the influencers are reviewing or showcasing certain types of products. 120 The commenter gave the example of video game influencers and asserted many video game players are aware influencers have access to games before those titles are made available to the public. The Commission recognizes this assertion may be true, but an audience knowing generally about such early access is not the same as knowing what a given influencer may have received—whether it's merely early access or a large monetary payment—in connection with a given game.

Two commenters were opposed to the proposed reworded principle. 121 One said all connections should always be disclosed and the Commission was weakening the Guides. 122 The Commission disagrees. As discussed above, the Guides already say the only connections that must be disclosed are ones not reasonably expected by the audience. If the audience does reasonably expect a connection, then it is not deceived by the lack of disclosure. Consistent with section 5 of the FTC Act, the Commission thus cannot require that every connection be disclosed. This position is also consistent with existing Example 2 of § 255.5, which says that, if a film star endorses a particular food product in a television commercial, a disclosure is unnecessary because it is ordinarily expected that celebrities are paid for such appearances.

The other commenter who opposed the revised guidance asked how one determines that a connection is understood by all but an insignificant portion of the audience. 123 As discussed above, the Commission has reworded its guidance in terms of a significant minority of the audience not understanding or expecting the connection. Again, the question of whether any particular connection is or is not expected by an audience is highly fact-specific and in some cases its resolution might require empirical testing. The Guides do contain multiple examples with scenarios in which the Commission is comfortable saying at least a significant minority of the audience does not or is unlikely to understand or expect the connection.

One commenter asked the Commission to require marketers to substantiate that a material connection need not be disclosed because it is understood or expected by the audience. 124 In a section 5 case, the Commission has the burden of proving a connection is material and is not able to shift the burden of proof to the marketer.

The Commission proposed stating a disclosure of a material connection does not require the complete details of the connection but must clearly communicate the nature of the connection sufficiently for consumers to evaluate its significance.

One commenter said disclosures of material connections should not require the dollar amount of any payment  125 and another supported not having to disclose the details of a connection. 126 Another commenter said influencers should disclose how much they are being paid because the “large scope and range of differing pay might impact what products influencers are pushing to their audience.”  127 The Commission is not convinced consumers are generally misled by not knowing how much influencers are paid.

A different commenter asked if the new statement in the Guides meant a disclosure like “#Ad” is now insufficient. 128 That is not the Commission's intention. The Commission is adding a new example, drawn from staff business guidance, to illustrate when a disclosure does not adequately communicate the nature of the material connection. In new Example 13, an app developer gives a consumer a 99-cent game app for free in order to review it. A disclosure that the consumer was given the app for free suggests the consumer did not receive anything else for the review, which would be deceptive if the app developer also gave the consumer $50 for the review.

Example 3 of § 255.5 involves a professional tennis player who has a contractual relationship with a laser vision correction clinic. The contract provides for payment to the athlete for speaking publicly about their vision correction surgery at the clinic. One commenter suggested noting that, if the surgery had been performed for free, and if consumers would not have expected that to have been the case, the free surgery is a material connection that would require disclosure. 130 The receipt of free surgery is already addressed in what the Commission proposed as subpart 2 of the example.

As proposed, new paragraph (ii) of Example 3 began by stating the player “also” touts the results of the surgery “in a social media post.” It said the relationship should be disclosed even if the relationship involves no payments but only the tennis player getting the laser correction surgery for free or at “a reduced cost.” One commenter raised three concerns with this subpart of the example. It said the use of “also” rather than “instead” might indicate the FTC intends that the hypothetical facts only in the aggregate produce the stated outcome. 131 The Commission will change “also” to “instead.”  132 The commenter also asked the Commission to articulate more clearly why the use of the tennis player's endorsement on the clinic's social media page would not reasonably be expected by the audience. 133 The example is intended to address a post by the tennis player and not by the clinic, so the Commission is changing “in a social media post” to “in the player's social media post.” An endorsement disseminated from the clinic's social media account is addressed in the example's third subpart. Finally, the commenter asked whether receipt of discounted products or services is always material or whether there is a threshold level of discount that makes it material. 134 A discount is not necessarily material, but there is not a clear line between a material discount and a non-material one. The Commission is changing the example so it refers to receiving the surgery at “a significantly reduced cost.”

As proposed, new paragraph (iii) of Example 3 varies the example so that the clinic disseminates the tennis player's endorsement from its own social media account. One commenter asserted that, if the tennis player's post already has a disclosure, the clinic should not have to add a disclosure. 135 Another commenter stated the Commission failed to articulate why the audience would not reasonably expect the tennis player's endorsement on the clinic's social media page was compensated. 136 The commenter continued that, in many instances, an advertiser's use of a celebrity endorser on its own social media should not need a disclosure because one would expect that the celebrity was paid to provide the endorsement. 137 The commenter suggested (a) the example clarify that the clinic is reposting or sharing the tennis player's social media endorsement from the prior paragraph to the clinic's social media, (b) the advertiser needs to disclose the relationship because the tennis player did not clearly and conspicuously disclose it in the first place, and (c) given the nature of the endorsement ( i.e., a personally created statement from the tennis player versus a television commercial with an endorsement), and in the context of the clinic's social media, the viewing audience would likely not reasonably expect the tennis player is being compensated. 138 The Commission is adopting most of these commenters' suggestions and clarifying that the clinic's post is a repost. As modified, the example makes clear the original post either did not have a clear and conspicuous disclosure or had a disclosure that is not clear and conspicuous in the repost.

Example 5 involves a restaurant whose patrons are informed they will be interviewed by the advertiser as part of a television promotion of its new “meat-alternative” burger. The example said the advertisement should clearly and conspicuously inform viewers the patrons on screen knew in advance they might appear in a television advertisement “if they gave the burger a good review.” One commenter said the Commission should remove the language regarding appearance in a television advertisement “if they gave the burger a good review.”  139 The Commission agrees. The disclosure need not mention giving the burger a good review; it is implicit someone would know they would appear on television only if they gave the product a good review.

A new paragraph (ii) of Example 6 addresses incentivized reviews and says any review that fails to clearly and conspicuously disclose incentives provided to that reviewer is likely deceptive. Three commenters supported this guidance. 140 The example continues, noting that, even if adequate disclosures appear in each incentivized review, the practice could still be deceptive if the solicited reviews contain star ratings that are included in an average star rating for the product and if that inclusion materially increases that average star rating. One commenter did not disagree with the Commission's position but noted that, in its experience, including incentivized ratings generally does not materially affect a product's average star rating; it did acknowledge possible exceptions (for example, if the product has few reviews other than incentivized ones). 141 A second commenter said the Commission should not prohibit including incentivized reviews in the average star ratings and argued the Commission did not have evidence of a difference between aggregate star ratings containing and not containing incentivized reviews. 142 The Commission is not saying incentivized reviews materially inflate average star ratings; just that, if they do, then they could be deceptive. A third commenter suggested allowing the website operator to make a blanket disclosure regarding incentivized reviews. 143 A fourth commenter said prohibiting the inclusion of incentivized reviews (when incentives are provided fairly and are clearly and conspicuously disclosed) in aggregate star ratings could hurt competition and, as a practical matter, it may be infeasible for many advertisers to discern and calculate the average star rating without incentivized reviews. 144 The Commission is adding a statement to the example, stating that, if such a material increase occurs, the marketer likely would need to provide a clear and conspicuous disclosure to people who see the average star rating.

As rewritten, Example 7 discusses a woodworking influencer who received an expensive, full-size lathe from its manufacturer in the hope the influencer would post about it. The influencer posts videos containing favorable comments about the lathe. The example said, if a significant proportion of viewers are likely unaware the influencer received the lathe free of charge, the woodworker should clearly and conspicuously disclose receiving it for free. One commenter supported the guidance. 145 A different commenter said ad agencies are contracted to monitor compliance for a contracted period of time and should not be expected to conduct “indefinite monitoring for decades.”  146 A third commenter said the Commission missed an opportunity in the example to provide guidance on how long the woodworker might need to continue to make a disclosure. 147 The Commission recognizes a connection probably becomes less material over time but is not prepared to set a time frame that divides material from immaterial, a distinction that likely varies depending upon the scenario. The Commission agrees an ad agency should not have to monitor an influencer for decades based upon a single gift. A fourth commenter objected to the rewritten example, saying it had been weakened by adding language that a disclosure was necessary only if a significant proportion of viewers are likely unaware that the influencer received the lathe free of charge. 148 The Commission disagrees it is weakening the example. The additional language is a clarification consistent with the law and the Commission is changing a “significant proportion” to a “significant minority,” which is the language in the Commission's Deception Statement. 149

New Example 8 addresses endorsements by employees. It says the employer described in the example can limit its own liability for such endorsements by engaging in appropriate training of employees and, if the employer has directed such endorsements or otherwise has reason to know about them, by monitoring them and taking other steps to ensure compliance. One commenter asked whether the guidance regarding employees applies to all employers, including large retailers who don't manufacture the products they sell, and said it would be unreasonable to expect an employer to review posts by thousands or millions of employees. 150 The Commission notes the connection between a retailer and its employees may be relevant to readers of the employees' reviews even when the reviews are of products the retailer sells but did not manufacture. As explained in the example, an employer would not have to monitor the reviews or other endorsements of employees unless the employer solicits the endorsements or otherwise has reason to know about them. Another commenter asked the Commission to rewrite the last sentence of the example to demonstrate the disclosure requirement does not change depending on the platform. 151 The Commission is adopting the commenter's proposed language.

New Example 10 says the use of an environmental seal of approval from a non-profit, third-party association that charges manufacturers a reasonable fee for the evaluation of their products does not necessitate a disclosure regarding the fee. One commenter asked about the relevance of the third party being a “non-profit.”  152 The fact the certifying entity is a non-profit might make it less likely the decision to award the seal of certification was impacted by payment. Three other commenters appeared to support the example, 153 and one of them suggested additional examples involving third-party seals or awards. 154 The Commission is adding new Example 14 illustrating a scenario in which a testing company has a relationship with the company that commissions an analysis, such that a disclosure of the relationship is necessary.

In new Example 11, the Commission discusses a blogger who writes product reviews and receives “a small portion of the sale” through paid affiliate links. The example says the reviews should clearly and conspicuously disclose the compensation. Two commenters supported the example  155 and a third commenter said the Commission should not state that the blogger receives a “small” portion of the sale unless it clarifies whether it is trying to communicate something about the nature or quantity of the compensation for purposes of finding “materiality.”  156 The Commission is striking the word “small” from the example. One of the commenters supporting the example asked the Commission to distinguish paid affiliate links from a display ad for a product appearing on the same page as an article reviewing the product. 157 Although the Commission does not consider a display ad appearing on the same page as a review to be inherently deceptive, it does not consider the issue sufficiently related to the example to add it to the Guides.

New Example 12 involves a podcast host beginning a podcast by reading what is obviously a commercial. The example states the host need not make a disclosure because, even without a statement identifying the advertiser as a sponsor, listeners would likely still expect the podcaster was compensated. Five commenters supported the example. 158 The example continues by stating the ad might communicate the host is expressing their own views, in which case the host would need to hold the views expressed.

Example 12 also states that, if the host mentions the product in a social media post, the fact no disclosure was required in the podcast is not relevant to whether one is needed in the post. One commenter said whether a material connection disclosure is required is a fact-specific analysis; the Commission agrees. 159

New § 255.6 says endorsements in advertisements directed to children may be of special concern because of the character of the audience; practices that would not ordinarily be questioned in ads directed to adults might be questioned when directed to children. Three comments supported this new section, 160 with one of them suggesting the section be supplemented with specific examples. 161 One commenter said the section was inadequate, 162 while another urged the Commission to issue guidance that addresses in greater detail which techniques and practices are impermissible, 163 and yet another asked the Commission to ban targeted and influencer advertising to children and teens. 164 A different commenter was concerned that “any new standards for children may impose duplicative material disclosure requirements for ads” and suggested the Commission defer to the Better Business Bureau's Children's Advertising Review Unit (“CARU”). 165 Finally, a commenter said the new section does not add any incremental benefit within the context of the Guides and, when appropriate, the Commission can provide additional guidance to marketers through other avenues, such as a report and other business guidance. 166

The Commission continues to believe new § 255.6 is helpful in establishing a general principle and does not impose duplicative requirements on marketers. The types of specific guidance that appear to be desired involve the wording, appearance, and placement of disclosures of material connection in various contexts. As discussed above, the Commission does not believe that specifics of disclosures of material connections should be addressed in the Guides themselves. Research on children's cognitive development suggests disclosures will not work for younger children. Commission staff recently held an event to learn more about advertising to children in digital media, including endorsements directed to children, and is exploring next steps.

The Drug Enforcement Administration (DEA) issues a temporary scheduling order  1 (in the form of a temporary amendment) to add the following five substances, including their salts, isomers, and salts of isomers, whenever the existence of such salts, isomers, and salts of isomers is possible, to schedule I under the Controlled Substances Act (CSA):

• 4-(2-chlorophenyl)-2-ethyl-9-methyl-6 H -thieno[3,2- f ][1,2,4]triazolo[4,3- a ][1,4]diazepine (commonly known as etizolam),

• 8-chloro-6-(2-fluorophenyl)-1-methyl-4 H -benzo[ f ][1,2,4]triazolo[4,3- a ][1,4]diazepine (commonly known as flualprazolam),

• 6-(2-chlorophenyl)-1-methyl-8-nitro-4 H -benzo[ f ][1,2,4]triazolo[4,3- a ][1,4]diazepine (commonly known as clonazolam),

• 8-bromo-6-(2-fluorophenyl)-1-methyl-4 H -benzo[ f ][1,2,4]triazolo[4,3- a ][1,4]diazepine (alternate chemical name: 8-bromo-6-(2-fluorophenyl)-1-methyl-4 H -[1,2,4]triazolo[4,3- a ][1,4]benzodiazepine and commonly known as, flubromazolam), and

• 7-chloro-5-(2-chlorophenyl)-1-methyl-1,3-dihydro-2 H -benzo[ e ][1,4]diazepin-2-one (commonly known as diclazepam).

The CSA provides the Attorney General, as delegated to the Administrator of DEA (Administrator) pursuant to 28 CFR 0.100, with the authority to temporarily place a substance in schedule I of the CSA for two years without regard to the requirements of 21 U.S.C. 811(b), if the Administrator finds that such action is necessary to avoid an imminent hazard to public safety. 21 U.S.C. 811(h)(1). In addition, if proceedings to control a substance are initiated under 21 U.S.C. 811(a)(1) while the substance is temporarily controlled under section 811(h), the Administrator may extend the temporary scheduling for up to one year. 21 U.S.C. 811(h)(2).

Where the necessary findings are made, a substance may be temporarily scheduled if it is not listed in any other schedule under 21 U.S.C. 812, and if there is no exemption or approval in effect for the substance under section 505 of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. 355. 21 U.S.C. 811(h)(1); 21 CFR part 1308.

The CSA requires the Administrator to notify the Secretary of the Department of Health and Human Services (HHS) of an intent to place a substance in schedule I of the CSA temporarily ( i.e., to issue a temporary scheduling order). 21 U.S.C. 811(h)(4). The Administrator transmitted the required notice to the Assistant Secretary for Health of HHS (Assistant Secretary), 2 by letter dated October 27, 2021, regarding etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam. The Assistant Secretary responded to this notice by letter dated January 3, 2022, and advised that, based on a review by the Food and Drug Administration (FDA), there are currently no investigational new drug applications (INDs) or approved new drug applications (NDA) for etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam. The Assistant Secretary also stated that HHS had no objection to the temporary placement of these substances in schedule I.

DEA has taken into consideration the Assistant Secretary's comments as required by subsection 811(h)(4). DEA has found that the control of these five benzodiazepines in schedule I on a temporary basis is necessary to avoid an imminent hazard to the public safety. Etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam currently are not listed in any schedule under the CSA, and no exemptions or approvals under 21 U.S.C. 355 are in effect for these five benzodiazepine substances.

As required by 21 U.S.C. 811(h)(1)(A), DEA published a notice of intent (NOI) to temporarily schedule etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam on December 23, 2022. 87 FR 78887. That NOI discussed findings from DEA's three-factor analysis dated October 2022, which DEA made available on www.regulations.gov.

To find that temporarily placing a substance in schedule I of the CSA is necessary to avoid an imminent hazard to the public safety, the Administrator must consider three of the eight factors set forth in 21 U.S.C. 811(c): The substance's history and current pattern of abuse; the scope, duration and significance of abuse; and what, if any, risk there is to the public health. 21 U.S.C. 811(h)(3). Consideration of these factors includes any information indicating actual abuse, diversion from legitimate channels, and clandestine importation, manufacture, or distribution of these substances. 21 U.S.C. 811(h)(3).

Substances meeting the statutory requirements for temporary scheduling may only be placed in schedule I. 21 U.S.C. 811(h)(1). Substances in schedule I are those that have high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. 21 U.S.C. 812(b)(1).

DEA's October 2022 three-factor analysis and the Assistant Secretary's January 3, 2022 letter are available in their entirety under the tab “Supporting Documents” of the public docket of this action at www.regulations.gov.

The dramatic increase in trafficking and abuse associated with novel psychoactive substances (NPS) of the benzodiazepine class, also known as designer benzodiazepines, in the United States has become a national public health concern in recent years. The availability of NPS benzodiazepine substances in the illicit drug market continues to pose an imminent hazard to the public safety. The Centers for Disease Control and Prevention (CDC) highlights this issue in their Morbidity and Mortality Weekly Report (MMWR) published on August 27, 2021. 3 CDC indicated that from April 2019 to June 2020 prescription and illicit benzodiazepine-involved overdose deaths increased by 21.8 percent and 519.6 percent respectively. Additionally, benzodiazepines were involved in nearly 7,000 overdose deaths in 23 states from January 2019 to June 2020, accounting for 17 percent of all drug overdose deaths. Adverse health effects associated with the abuse of such substances, their continued evolution, and increased popularity of these substances have been a serious concern in recent years.

The increase in the co-use of opioids with designer benzodiazepines has become a particular concern as the United States continues to experience an unprecedented epidemic of opioid misuse and abuse. 4 CDC's 2021 MMWR further states that between January and June 2020, 92.7 percent of benzodiazepine-involved deaths also involved opioids and 66.7 percent involved illicitly manufactured fentanyl. The combination of benzodiazepines with opioids substantially enhances the potential for lethality. Etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam are benzodiazepine substances recently identified on the illicit drug market in the United States.

The abuse of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam has been associated with fatalities in recent years in the United States. The positive identification of these five substances in post-mortem cases is a serious concern to the public safety. Additionally, law enforcement data indicate that the substances at issue here have significant presence in the illicit drug market found in the United States. In light of the law enforcement encounters and fatalities associated with the abuse of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam, these substances pose an imminent hazard to public safety.

Available data and information for etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam, summarized below, indicate that these substances have high potential for abuse, no currently accepted medical use in treatment in the United States, and lack of accepted safety for use under medical supervision. DEA's three-factor analysis is available in its entirety under “Supporting and Related Material” of the public docket for this action at www.regulations.gov under Docket Number DEA-989.

The chemical synthesis of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam was previously reported in the scientific literature; however, the research did not lead to any medically approved products in the United States. Since 2012, synthetic drugs belonging to the benzodiazepine class have begun to emerge in the illicit drug market as evidenced by the identification of these drugs in forensic drug exhibits reported to the National Forensic Laboratory Information System (NFLIS-Drug)  5 and toxicology samples. Beginning in 2012, etizolam emerged on the illicit synthetic drug market as evidenced by its identification in drug seizures in the United States.

In recent years, there has been a rise in the recreational use of etizolam. As evidenced by their identification in NFLIS-Drug, diclazepam emerged in the United States' illicit drug market in 2014, flubromazolam and clonazolam in 2015, and flualprazolam in 2017. While these substances are not approved for medical use in the United States, etizolam is approved for medical use in Italy, India, and Japan. 6 In a letter dated January 3, 2022, the Assistant Secretary informed DEA that there are no INDs or FDA-approved NDAs for etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam in the United States. Hence, there are no legitimate channels for these substances as marketed drug products in the United States. These five benzodiazepine substances are likely to be abused in the same manner as other sedative hypnotics. They have been identified in tablet form, as white to beige powders, or in liquid forms, typically of unknown purity or concentration.

Based on data from NFLIS-Drug, law enforcement often encounters etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam in counterfeit pills, liquid, or powder form. Substances often found in combination with some of these benzodiazepines include substances of abuse such as heroin (schedule I), fentanyl (schedule II), substances structurally related to fentanyl, other benzodiazepines (both FDA-approved schedule IV benzodiazepines and other novel non-controlled benzodiazepines), and tramadol (schedule IV). Evidence suggests that individuals are using these substances to obtain “legal highs”  7 or to self-medicate. Information gathered from case histories and autopsy findings shows that deaths involving etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam were predominantly associated with poly-drug use.

Etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam are novel benzodiazepines and evidence suggests they are abused for their sedative effects (see Factor 6). In death investigations involving polysubstance use, the co-appearance of benzodiazepines and opioids in toxicological analysis was common. Between August 2019 and January 2020, flualprazolam and etizolam were identified in seven and six postmortem blood specimens, respectively, out of 18 deaths associated with the abuse of isotonitazene, a schedule I opioid that was recently controlled. 8 These cases corresponded to four states—Illinois (9), Indiana (7), Minnesota (1), and Wisconsin (1). Most (12) of the decedents were male. The ages ranged from 24 to 66 years old with an average age of 41 years. 9

In another recent publication, 20 forensic postmortem cases were reviewed and analyzed for the presence of metonitazine, NPS benzodiazepines, and opioids. Clonazolam was positively identified in four cases, etizolam in two cases, flualprazolam in two cases, and pyrazolam in one case. 10 Law enforcement encounters of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam as reported to NFLIS-Drug include 34,781 drug reports since 2014 (queried 01/13/2022). NFLIS-Drug registered three encounters of etizolam in 2012 (first year of encounter) and 3,022 reports in 2021. Flualprazolam was first encountered in 2017 when one report was identified in NFLIS-Drug, and then in 2021, 1,305 encounters were reported. A similar trend was seen with clonazolam. During 2015 (its first year of encounter), 57 cases were reported in NFLIS-Drug, while 3,994 drug reports were identified in 2021. NFLIS-Drug registered five diclazepam encounters in 2014 (its first year of encounter) and 54 encounters in 2021. Flubromazolam encounters totaled 14 in 2015 (its first year of encounter) and 414 in 2021.

The population likely to abuse etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam appears to be the same as those abusing prescription benzodiazepines, barbiturates, and other sedative hypnotic substances. This is evidenced by drug user reports associated with these substances. Because abusers of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam are likely to obtain these substances through unregulated sources, the identity, purity, and quantity of these substances are uncertain and inconsistent, thus posing significant adverse health risks to the end user.

The misuse and abuse of benzodiazepines have been demonstrated and are well-characterized. 11 According to the most recent data from the National Survey on Drug Use and Health (NSDUH), 12 as of 2020, an estimated 4.8 million people aged 12 years or older misused prescription benzodiazepines in the past year. This included 1.1 million young adults aged 18 to 25, 3.5 million adults aged 26 or older, and 157,000 adolescents aged 12 to 17. This population abusing prescription benzodiazepines is likely to be at risk of abusing etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam. Individuals who initiate use of these five substances ( i.e., use a drug for the first time) are likely to be at risk of developing substance use disorder, overdose, and death at rates similar to that of other sedative hypnotics ( e.g., alprazolam, etc.). Law enforcement or toxicology reports demonstrate that the five substances at issue are being distributed and abused.

The increase in benzodiazepine-related overdose deaths in the United States has been exacerbated recently by the availability of NPS benzodiazepines in the illicit drug market. Etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam have been described as derivatives of other known benzodiazepines, each possessing various degrees of potency. Evidence suggests these substances are being abused for their sedative/hypnotic effects (see DEA 3-Factor Analysis). Public health risks associated with the five substances at issue here relate to their pharmacological similarities with known benzodiazepines. Thus, risk to the public health is associated with adverse reactions in humans, which are expected to include CNS depressant-like effects, such as slurred speech, ataxia, altered mental state, and respiratory depression.

Etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam have been increasingly identified in toxicology reports, death investigations, and driving under the influence of drugs (DUID) cases since their first appearance in law enforcement seizures. According to the Center for Forensic Science Research and Education (CFSRE), a non-profit organization in collaboration with the Department of Justice and CDC between 2020 and 2021, etizolam was the most identified NPS benzodiazepine accounting for 697 total toxicology cases in 2020, many of which were co-identified with fentanyl. In 2021, etizolam was identified in 1,012 toxicology cases, while flualprazolam, clonazolam, flubromazolam, and diclazepam were associated with 432, 331, 170, and four toxicology cases, respectively (CSFRE Quarterly Trend Reports: NPS Benzodiazepines in the United States).

Death investigations associated with four of the five NPS benzodiazepines at issue here have increased in recent years. In a 2021 publication by the Orange County Crime Lab in Santa Ana, California, flualprazolam was identified as serving a contributory role in the death of 13 of 24 cases analyzed in the study. 13 In another recently published study, between August 2019 and January 2020, flualprazolam and etizolam were identified in seven and six postmortem blood specimens respectively, out of 18 deaths associated with the abuse of isotonitazene, a schedule I opioid. 14 Then, a study published in 2021 which compiled data from 254 reports published between 2008 and 2021, identified: 33 deaths associated with etizolam, 20 flualprazolam-related deaths, six emergency department (ED) visits associated with clonazolam, 14 flubromazolam-related ED visits, and one death, 12 DUID cases, and four ED visits associated with diclazepam. 15 Additionally, in 2020, the European Monitoring Centre for Drugs and Drug Addiction reported 34 deaths associated with diclazepam use, which were determined through the analysis of biological samples. 16 Furthermore, the National Poison Data System reported that between January 2014 and December 2017, clonazolam was the second most common benzodiazepine associated with poison control center calls, accounting for 50 incidents. 17

Impaired driving is another risk factor associated with the use and abuse of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam. In a recent published report from the Sedgwick County Regional Forensic Science Center in Wichita, Kansas, 12 DUID case samples were analyzed. Etizolam was positively identified in three cases, while flubromazolam was identified in nine of these cases. 18 In a 2021 publication, similar involvement of flubromazolam in drug-impaired driving was reported in Canada where flubromazolam was detected in 10 percent of 113 case samples. 19 Diclazepam has also been implicated in DUID cases domestically and internationally. In a Norwegian study conducted between July 2013 and May 2016, diclazepam was identified in 15 of 77 analyzed samples taken from impaired drivers and individuals involved in other criminal offenses. Then, in 2019, a study of Norwegian drivers was conducted using 575 samples taken predominantly from intoxicated drivers and individuals who committed other criminal offenses. 20 Notably, 334 samples were found to contain diclazepam. Additionally, in a 2021 publication from Orange County Crime Laboratory in Santa Ana, California, researchers identified 22 samples that tested positive for flualprazolam in samples obtained from DUID investigations between August 2018 and September 2020. 21

In accordance with 21 U.S.C. 811(h)(3), based on the available data and information summarized above, the uncontrolled manufacture, distribution, reverse distribution, importation, exportation, conduct of research and chemical analysis, possession, and/or abuse of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam pose imminent hazards to public safety. DEA is not aware of any currently accepted medical uses for these substances in the United States. A substance meeting the statutory requirements for temporary scheduling, 21 U.S.C. 811(h)(1), may only be placed in schedule I. Substances in schedule I are those that have a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. Available data and information for etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam indicate that these five synthetic benzodiazepine substances have a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision.

As required by 21 U.S.C. 811(h)(4), the Administrator transmitted to the Assistant Secretary for Health, via a letter dated October 27 2021, notice of her intent to place etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam in schedule I on a temporary basis. HHS had no objection to the temporary placement of these substances in schedule I.

DEA subsequently published a NOI on December 23, 2022. 87 FR 78887.

In accordance with 21 U.S.C. 811(h)(1) and (3), the Administrator considered available data and information, herein set forth the grounds for her determination that it is necessary to temporarily place etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam in schedule I of the CSA and finds that such placement is necessary to avoid an imminent hazard to the public safety.

This temporary order scheduling these substances will be effective on the date the order is published in the Federal Register and remain in effect for two years, with a possible extension of one year, pending completion of the regular (permanent) scheduling process. 21 U.S.C. 811(h)(1) and (2).

The CSA sets forth specific criteria for scheduling drugs or other substances. Permanent scheduling actions in accordance with 21 U.S.C. 811(a) are subject to formal rulemaking procedures done “on the record after opportunity for a hearing” conducted pursuant to the provisions of 5 U.S.C. 556 and 557. 21 U.S.C. 811. The permanent scheduling process of formal rulemaking affords interested parties with an appropriate process and the government any additional relevant information needed to make determinations. Final decisions that conclude the permanent scheduling process of formal rulemaking are subject to judicial review. 21 U.S.C. 877. Temporary scheduling orders are not subject to judicial review. 21 U.S.C. 811(h)(6).

Upon the effective date of this temporary order, etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam will be subject to the regulatory controls and administrative, civil, and criminal sanctions applicable to the manufacture, distribution, reverse distribution, importation, exportation, possession of, and engagement in research and conduct of instructional activities or chemical analysis with, schedule I controlled substances, including the following:

1. Registration. Any person who handles (possesses, manufactures, distributes, reverse distributes, imports, exports, engages in research, or conducts instructional activities or chemical analysis with) or desires to handle, etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam must be registered with DEA to conduct such activities, pursuant to 21 U.S.C. 822, 823, 957, and 958, and in accordance with 21 CFR parts 1301 and 1312, as of July 26, 2023. Any person who currently handles etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam and is not registered with DEA must submit an application for registration and may not continue to handle etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam as of July 26, 2023, unless DEA has approved that application for registration pursuant to 21 U.S.C. 822, 823, 957, and 958, and in accordance with 21 CFR parts 1301 and 1312. Retail sales of schedule I controlled substances to the general public are not allowed under the CSA. Possession of any quantity of these substances in a manner not authorized by the CSA on or after July 26, 2023 is unlawful, and those in possession of any quantity of these substances may be subject to prosecution pursuant to the CSA.

2. Disposal of stocks. Any person who does not desire or is unable to obtain a schedule I registration to handle etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam must surrender all currently held quantities of these five substances.

3. Security. Etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam are subject to schedule I security requirements and must be handled in accordance with 21 CFR 1301.71-1301.93, as of July 26, 2023.

4. Labeling and Packaging. All labels, labeling, and packaging for commercial containers of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam must comply with 21 U.S.C. 825 and 958(e) and 21 CFR part 1302. Current DEA registrants will have 30 calendar days from July 26, 2023 to comply with all labeling and packaging requirements.

5. Inventory. Every DEA registrant who possesses any quantity of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam on the effective date of this order must take an inventory of all stocks of these substances on hand pursuant to 21 U.S.C. 827 and 958, and in accordance with 21 CFR 1304.03, 1304.04, and 1304.11. Current DEA registrants will have 30 calendar days from the effective date of this order to comply with all inventory requirements. After the initial inventory, every DEA registrant must take an inventory of all controlled substances (including etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam) on hand on a biennial basis pursuant to 21 U.S.C. 827 and 958 and in accordance with 21 CFR 1304.03, 1304.04, and 1304.11.

6. Records. All DEA registrants must maintain records with respect to etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam pursuant to 21 U.S.C. 827 and 958(e) and in accordance with 21 CFR parts 1304, 1312, and 1317, and section 1307.11. Current DEA registrants authorized to handle these five substances shall have 30 calendar days from the effective date of this order to comply with all recordkeeping requirements.

7. Reports. All DEA registrants must submit reports with respect to etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam pursuant to 21 U.S.C. 827 and in accordance with 21 CFR parts 1304, 1312, and 1317, and sections 1301.74(c) and 1301.76(b), as of July 26, 2023. Manufacturers and distributors must also submit reports regarding these five substances to the Automation of Reports and Consolidated Order System pursuant to 21 U.S.C. 827 and in accordance with 21 CFR parts 1304 and 1312.

8. Order Forms. All DEA registrants who distribute etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam must comply with order form requirements pursuant to 21 U.S.C. 828 and in accordance with 21 CFR part 1305 as of July 26, 2023.

9. Importation and Exportation. All importation and exportation of etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam must be in compliance with 21 U.S.C. 952, 953, 957, and 958, and in accordance with 21 CFR part 1312 as of July 26, 2023.

10. Quota. Only DEA-registered manufacturers may manufacture etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam in accordance with a quota assigned pursuant to 21 U.S.C. 826 and in accordance with 21 CFR part 1303, as of July 26, 2023.

11. Liability. Any activity involving etizolam, flualprazolam, clonazolam, flubromazolam, and diclazepam not authorized by or in violation of the CSA, occurring as of July 26, 2023, is unlawful and may subject the person to administrative, civil, and/or criminal sanctions.

The CSA provides for expedited temporary scheduling actions where necessary to avoid imminent hazards to the public safety. Under 21 U.S.C. 811(h), the Administrator, as delegated by the Attorney General, may, by order, temporarily schedule substances in schedule I. Such orders may not be issued before the expiration of 30 days from: (1) The publication of a notice in the Federal Register of the intent to issue such order and the grounds upon which such order is to be issued, and (2) the date that notice of the proposed temporary scheduling order is transmitted to the Assistant Secretary for Health of HHS, as delegated by the Secretary of HHS. 21 U.S.C. 811(h)(1).

Inasmuch as section 811(h) directs that temporary scheduling actions be issued by order (as distinct from a rule) and sets forth the procedures by which such orders are to be issued, including the requirement to publish in the Federal Register a notice of intent, the notice-and-comment requirements of section 553 of the Administrative Procedure Act (APA), 5 U.S.C. 553, which are applicable to rulemaking, do not apply to this temporary scheduling order. The APA expressly differentiates between orders and rules, as it defines an “order” to mean a “final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making. ” 5 U.S.C. 551(6) (emphasis added). The specific language chosen by Congress indicates its intent that DEA issue orders instead of proceeding by rulemaking when temporarily scheduling substances. Given that Congress specifically requires the Administrator (as delegated by the Attorney General) to follow rulemaking procedures for other kinds of scheduling actions, see 21 U.S.C. 811(a), it is noteworthy that, in section 811(h), Congress authorized the issuance of temporary scheduling actions by order rather than by rule.

Alternatively, even if this action was subject to section 553 of the APA, the Administrator finds that there is good cause to forgo its notice-and-comment requirements, as any further delays in the process for issuing temporary scheduling orders would be impracticable and contrary to the public interest given the manifest urgency to avoid imminent hazards to public safety.

Although DEA believes this temporary scheduling order is not subject to the notice-and-comment requirements of section 553 of the APA, DEA notes that in accordance with 21 U.S.C. 811(h)(4), the Administrator took into consideration comments submitted by the Assistant Secretary in response to the notice that DEA transmitted to the Assistant Secretary pursuant to such subsection.

Further, DEA believes that this temporary scheduling action is not a “rule” as defined by 5 U.S.C. 601(2), and, accordingly, is not subject to the requirements of the Regulatory Flexibility Act. The requirements for the preparation of an initial regulatory flexibility analysis in 5 U.S.C. 603(a) are not applicable where, as here, DEA is not required by section 553 of the APA or any other law to publish a general notice of proposed rulemaking.

In accordance with the principles of Executive Orders (E.O.) 12866 and 13563, this action is not a significant regulatory action. E.O. 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health, and safety effects; distributive impacts; and equity). E.O. 13563 is supplemental to and reaffirms the principles, structures, and definitions governing regulatory review as established in E.O. 12866. E.O. 12866 classifies a “significant regulatory action,” requiring review by the Office of Management and Budget, as any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy; a sector of the economy; productivity; competition; jobs; the environment; public health or safety; or State, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the E.O. Because this is not a rulemaking action, this is not a significant regulatory action as defined in section 3(f) of E.O. 12866.

This action will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, in accordance with E.O. 13132 (Federalism), it is determined that this action does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment.

This document of the Drug Enforcement Administration was signed on July 18, 2023, by Administrator Anne Milgram. That document with the original signature and date is maintained by DEA. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DEA Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of DEA. This administrative process in no way alters the legal effect of this document upon publication in the Federal Register .

For the reasons set out above, DEA amends 21 CFR part 1308 as follows:

Background

This document sets forth amendments to the Employment Tax Regulations (26 CFR part 31) under sections 3111, 3131, 3132, 3133, 3134, and 3221.

The Families First Coronavirus Response Act (Families First Act), Public Law 116-127, 134 Stat. 178 (March 18, 2020), as amended and extended by the COVID-related Tax Relief Act of 2020 (Tax Relief Act), enacted as Subtitle B of Title II of Division N of the Consolidated Appropriations Act, 2021, Public Law 116-260, 134 Stat.1182 (December 27, 2020), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281 (March 27, 2020), as amended and extended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), enacted as Division EE of the Consolidated Appropriations Act, 2021, provided relief to taxpayers from economic hardships resulting from the Coronavirus Disease 2019 (COVID-19), including paid sick and family leave credits to eligible employers with respect to qualified leave wages paid for a period of leave taken beginning April 1, 2020, and ending March 31, 2021, and an employee retention credit (ERC) with respect to qualified wages paid after March 12, 2020, and before July 1, 2021, respectively. The American Rescue Plan Act of 2021 (ARP), Public Law 117-2, 135 Stat. 4 (March 11, 2021), provided additional COVID-19 relief with similar paid leave credits under sections 3131 through 3133 of the Code, enacted by section 9641 of the ARP, with respect to qualified leave wages paid for a period of leave taken beginning April 1, 2021, and ending September 30, 2021, and a substantially similar ERC under section 3134 of the Code, enacted by section 9651 of the ARP, with respect to qualified wages paid after June 30, 2021, and before January 1, 2022. 1

I. Table of Abbreviations CFR Code of Federal Regulations DHS Department of Homeland Security FR Federal Register NPRM Notice of proposed rulemaking § Section U.S.C. United States Code II. Background Information and Regulatory History

On March 16, 2023, the Henderson Business and Community Council notified the Coast Guard of an intention to conduct the “Christmas in July” boat parade in Henderson Bay on July 29, 2023. Christmas in July is an annual event in July occurring on or near the last weekend of July. The special local regulation area will occur from 5 p.m. through 9 p.m. and cover all waters within a moving zone that encompasses a 50-yard buffer zone ahead of the lead vessel, 50 yards astern of the last participating vessel, and 50 yards on each side of the parade vessels as it travels the parade route. The parade will start at Waterside Tavern dock at point 43°51′44″ N 76°12′07.3″ W and running north adjacent to the shore to point 43°52′12.2″ N 76°11′32.7″ W, continuing northwest to point 43°53′40.9″ N 76°12′40.6″ W and running south adjacent to the shore to point 43°51′47.2″ N 76°14′08.3″ W, ending at the starting position at point 43°51′44″ N 76°12′07.3″ W. In response, on June 7, 2023, the Coast Guard published a notice of proposed rulemaking (NPRM) titled “Special Local Regulation; Henderson Bay, Henderson Harbor, NY” (88 FR 37194). There we stated why we issued the NPRM and invited comments on our proposed regulatory action related to this boat parade. During the comment period that ended July 7, 2023, we received one comment that was in full support of the rule.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70041. The Captain of the Port Sector Buffalo (COTP) has determined that this rule is necessary to ensure the safety of life and property of the participants within the regulated area before, during, and after the scheduled event.

As noted above, we only received one comment on our NPRM published June 7, 2023, and it fully supported the proposed rule. There are no substantive changes in the regulatory text of this rule from the proposed rule in the NPRM. We did reform the text and corrected the authority citation for 33 CFR part 100.

This rule establishes a special local regulation from 5 p.m. through 9 p.m. on July 29, 2023. The special local regulation area will cover all waters within a moving zone that encompasses a 50-yard buffer zone ahead of the lead vessel, 50 yards astern of the last participating vessel, and 50 yards on each side of the parade vessels as it travels the parade route in Henderson Bay, Henderson Harbor, NY. The duration of the special local regulation is intended to ensure the safety of vessels and these navigable waters before, during, and after the scheduled 5 p.m. through 9 p.m. boat parade. No vessel or person will be permitted to enter the special local regulation area without obtaining permission from the COTP or a designated representative.

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

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, duration, and time-of-day of the special local regulation. Vessel traffic will be able to safely transit around this regulated area which would impact a small-designated area of Henderson Bay. Moreover, the Coast Guard would issue a Local Notice to Mariners about the areas, and the rule would allow vessels to seek permission to enter the areas.

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 received no comments from the Small Business Administration on this rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

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

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

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

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

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

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

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

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a special local regulation lasting that will prohibit persons and vessels from transiting the regulated area during the parade. It is categorically excluded from further review under paragraph L61 of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Memorandum for Record supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

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

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

Purpose of Program: The purpose of the Technical Assistance on State Data Collection program is to improve the capacity of States to meet IDEA data collection and reporting requirements. Funding for the program is authorized under section 611(c)(1) of IDEA, which gives the Secretary authority to reserve not more than 1/2 of 1 percent of the amounts appropriated under Part B for each fiscal year to provide TA activities, where needed, to improve the capacity of States to meet the data collection and reporting requirements under Parts B and C of IDEA. The maximum amount the Secretary may reserve under this set-aside for any fiscal year is $25,000,000, cumulatively adjusted by the rate of inflation. Section 616(i) of IDEA requires the Secretary to review the data collection and analysis capacity of States to ensure that data and information determined necessary for implementation of section 616 of IDEA are collected, analyzed, and accurately reported to the Secretary. It also requires the Secretary to provide TA, where needed, to improve the capacity of States to meet the data collection requirements, which include the data collection and reporting requirements in sections 616 and 618 of IDEA. In addition, the Consolidated Appropriations Act, 2023, Public Law 117-328, gives the Secretary authority to use funds reserved under section 611(c) of IDEA to “administer and carry out other services and activities to improve data collection, coordination, quality, and use under Parts B and C of the IDEA.” Consolidated Appropriations Act, 2023, Public Law 117-328, Div. H, Title III, 136 Stat. 4459, 4891 (2022).

Program Authority: 20 U.S.C. 1411(c), 1416(i), 1418(c), 1418(d), 1442; Consolidated Appropriations Act, 2023, Public Law 117-328, Div. H, Title III, 136 Stat. 4459, 4891 (2022).

Applicable Program Regulations: 34 CFR 300.646-300.647, 300.702; as well as IDEA Part B State Performance Plan (SPP)/Annual Performance Report (APR) Indicators 9 and 10 regarding disproportionate representation resulting from inappropriate identification, under 20 U.S.C. 1416(a)(3)(C) and 34 CFR 300.600(d)(3); and IDEA Part B SPP/APR Indicator 4 regarding significant discrepancy in suspensions and expulsion rates, under 20 U.S.C. 1416(a)(3)(A) and 1412(a)(22) and 34 CFR 300.600(d)(1) and 300.170.

We published a notice of proposed priority and requirements (NPP) for this program in the Federal Register on March 28, 2023 (88 FR 18280). That document contained background information and our reasons for proposing the priority and requirements.

There are differences between the NPP and this notice of final priority and requirements (NFP) as discussed in the Analysis of Comments and Changes section of this document. The most significant change, as discussed below, is the addition of two expected outcomes for the Center.

Public Comment: In response to our invitation in the NPP, 20 parties submitted comments addressing the priority and requirements.

Generally, we do not address technical and other minor changes, or suggested changes the law does not authorize us to make under the applicable statutory authority. In addition, we do not address general comments that raised concerns not directly related to the proposed priority and requirements.

Analysis of Comments and Changes: An analysis of the comments and of any changes in the priority and requirements since publication of the NPP follows. We received comments on a number of specific topics, including the topics for TA. Each topic is addressed below.

Comments: Several commenters specifically expressed support for the proposed center.

Discussion: The Department appreciates the comments and agrees with the commenters that the Center funded under this program will provide necessary and valuable TA to States.

Changes: None.

Comments: Multiple commenters suggested that the Department revise the Center's expected outcomes to include outcomes related to the engagement of parents in the use of data to address disparities and the provision of data in accessible and understandable formats.

Discussion: The Department agrees with commenters that improving State capacity to engage parents in the use of IDEA data will enhance the State's ability to address disparities. Additionally, it is vitally important to provide data to stakeholders in accessible and understandable formats to support the use of the data to address disparities revealed in the data collected. For this reason, the Department will include additional expected outcomes to address the commenters' concerns.

Changes: The final priority includes two additional expected outcomes for the Center, expected outcome (h), focused on improved capacity of State educational agencies (SEAs) to assist local educational agencies (LEAs) to engage parents, families, advocates, and other stakeholders to use data to address disparities revealed in the data they collect and (i), related to improved capacity of SEAs, and LEAs through their work with SEAs, to provide data in timely, usable, accessible, and understandable formats for parents, families, advocates, and other stakeholders.

Comments: A number of commenters proposed that the Department expand the list of suggested Department-funded TA centers with which the Center may collaborate. Specifically, the commenters proposed including equity-related centers to the current list of data-related centers.

Discussion: The Department agrees with the commenters. The Center should collaborate with both equity- and data-related Department-funded TA centers, as appropriate.

Changes: We have revised paragraph (iv)(E) of the final requirements to require applicants to submit the proposed plan for collaborating and coordinating with Department-funded projects, including those providing data-related support to States ( e.g. , the IDEA Data Center, the Center for IDEA Fiscal Reporting, and the National Center for Systemic Improvement) and equity-related support to States ( e.g. , Center on Positive Behavioral Interventions and Supports (PBIS), and Regional Equity Assistance Centers), where appropriate, in order to align complementary work and jointly develop and implement products and services to meet the purposes of this priority.

Comments: Several commenters expressed interest in ensuring that the Center will assist SEAs to specifically work with both rural districts and charter schools that are considered LEAs for the purposes of the identification of significant disproportionality.

Discussion: The Department agrees that SEAs need to support all of their LEAs related to the identification of significant disproportionality. The proposed priority would require the proposed Center to provide TA to SEAs to improve their capacity to support all of their LEAs, which includes rural LEAs and charter schools that are considered LEAs, around issues related to significant disproportionality. Therefore, the priority is consistent with the commenters' suggestion and no change is necessary.

Changes: None.

Comments: A number of commenters expressed concerns that the development of an additional data center focused on significant disproportionality would be duplicative of and overlap with the Department's currently funded centers already providing TA related to significant disproportionality ( e.g. , the IDEA Data Center, the Center for IDEA Fiscal Reporting, and the National Center for Systemic Improvement). The commenters noted that numerous TA opportunities and products have been developed by those existing centers and are in use by States.

Discussion: While we appreciate the commenters' concerns, the Center will not duplicate efforts of other centers, as it will focus on improving the data collection and analysis capacity of States to ensure that data and information determined necessary for implementation of IDEA section 618(d) are collected, analyzed, and accurately reported to the Department. Additionally, the Center will build TA efforts already undertaken by Office of Special Education Programs (OSEP)-funded centers. Existing centers have been tasked with assisting States in their initial implementation of the significant disproportionality regulations. While there has been progress, States still struggle with implementing a robust methodology and assisting LEAs as they review and, as necessary, revise their policies, practices, and procedures in the area of the identified significant disproportionality. Additionally, a recent Office of the Inspector General report  1 noted concerns with the accuracy and reliability of State-reported data related to significant disproportionality. Therefore, there is a demonstrated need for a center with a singular focus on assisting States to collect, report, analyze, and use significant disproportionality data. The work of this Center is critical to meeting this Administration's priority to ensure States and LEAs address significant disproportionality in the identification, placement, or incidence and duration of disciplinary actions, including suspensions and expulsions of children with disabilities based on race and ethnicity. Consistent with the Administration's priorities, this Center will support SEAs, and LEAs through their work with SEAs, in conducting root cause analyses. With effective supports to identify the potential root causes and contributing factors of the significant disproportionality, LEAs can meaningfully address their identified significant disproportionality and set a path towards more equitable services for all students, regardless of their race and ethnicity. Finally, if there are any areas where there appears to be duplication or overlap, project officers for the currently funded centers will work together with the project officer for the new Center to develop a plan to ensure appropriate collaboration, rather than duplication, occurs across the impacted centers.

Changes: None.

Comments: One group of commenters provided responses to the Department's directed question about the supports States require in reviewing policies, practices, and procedures and understanding the expenditure requirements for comprehensive coordinated early intervening services (CCEIS). The commenters suggested that States need TA to better understand the components of policies, practices, and procedures that lead to significant disproportionality, as well as TA on the requirements around the expenditure of funds for CCEIS.

Discussion: The Department appreciates and agrees with the commenters' suggestions. Understanding the potential interaction between significant disproportionality and the policies, practices, and procedures of an LEA and understanding the expenditure requirements for CCEIS are both important, as they are fundamental requirements of the significant disproportionality regulation. The Department believes that proposed expected outcome paragraphs (c) and (d) adequately address the commenters' suggestions.

Changes: None.

Comments: One commenter responded to the first directed question about common challenges or barriers experienced by SEAs and LEAs when using IDEA data to address significant disproportionality and promote equity. The commenter identified the following State needs: addressing critical shortages of specialized instructional support personnel; reviewing and revising policies, practices, and procedures; and providing general guidance on best practices related to the evaluation of students with disabilities, the use of schoolwide approaches such as positive behavioral interventions and supports, and developing and enhancing a multi-tiered system of supports.

Discussion: The Department appreciates the commenter's suggestions. In regard to the commenter's first suggestion, while the Department agrees that securing highly skilled instructional staff is a critical need of LEAs, the Center's focus is on improving data collection and analysis capacity of States to ensure that data and information determined necessary for implementation of IDEA are collected, analyzed, and accurately reported to the Department. The Department agrees with the commenter's second suggestion that SEAs require TA on reviewing and, as necessary, revising policies, practices, and procedures identified as contributing to significant disproportionality. The Department believes that proposed expected outcome paragraph (c) adequately addresses the commenter's suggestion. Finally, the Department agrees with the commenter's third suggestion that States would benefit from general guidance on best practices related to the evaluation of students with disabilities, the use of schoolwide approaches such as positive behavioral interventions and supports, and developing and enhancing a multi-tiered system of supports. To this end, OSEP funds other centers ( e.g. , National Center on Educational Outcomes, Center on PBIS, and National Center on Intensive Intervention) that provide TA on these topics.

Changes: None.

Comments: Another group of commenters responded to all of the Department's directed questions by noting that existing OSEP centers have already developed resources to provide TA on the areas addressed in the directed questions. These commenters did, however, note that their biggest challenge was in understanding the differences in requirements between significant disproportionality and the IDEA Part B SPP/APR Indicators 4 (Suspension/Expulsion), and 9 and 10 (Disproportionate Representation).

Discussion: The Department appreciates the commenters' support of OSEP's currently funded centers. As stated in a response above, the Center will build upon the work that has already been completed. The Department believes that, through the implementation of proposed expected outcome paragraph (f), the Center will assist States and LEAs to improve capacity to distinguish SPP/APR Indicator 4 (Suspension/Expulsion) and SPP/APR Indicators 9 and 10 (Disproportionate Representation), which are collected under section 616 of IDEA, from significant disproportionality data, which are collected under section 618 of IDEA.

Changes: None.

Priority:

The purpose of the National Technical Assistance Center to Improve State Capacity to Collect, Report, Analyze, and Use Accurate IDEA Data to Address Significant Disproportionality (Center) is to promote equity by improving State capacity to accurately collect, report, analyze, and use section 618 data to address issues of significant disproportionality. The Center will also work to increase the capacity of SEAs, and LEAs through their work with SEAs, to use their data to conduct robust root cause analyses and identify evidence-based strategies for effectively using funds reserved for CCEIS.

The Center must achieve, at a minimum, the following expected outcomes:

(a) Increased capacity of SEAs to analyze and use their data collected and reported under section 618 of IDEA to accurately identify significant disproportionality in the State and the LEAs of the State;

(b) Increased capacity of SEAs, and LEAs through their work with SEAs, to use data collected and reported under section 618 of IDEA, as well as other available data, to conduct root cause analyses in order to identify the potential causes and contributing factors of an LEA's significant disproportionality;

(c) Improved capacity of SEAs, and LEAs through their work with SEAs, to review and, as necessary, revise policies, practices, and procedures identified as contributing to significant disproportionality, and to address any other factors identified as contributing to the significant disproportionality;

(d) Improved capacity of SEAs to assist LEAs, as needed, in using data to drive decisions related to the use of funds reserved for CCEIS;

(e) Increased capacity of SEAs, and LEAs through their work with SEAs, to use data to address disparities revealed in the data they collect;

(f) Improved capacity of SEAs, and LEAs through their work with SEAs, to accurately collect, report, analyze, and use data related to significant disproportionality and apply the state methodology for identifying significant disproportionality, including distinguishing data collected under section 616 of IDEA (specifically, SPP/APR Indicator 4 (Suspension/Expulsion) and SPP/APR Indicators 9 and 10 (Disproportionate Representation));

(g) Increased capacity of SEAs to use data to evaluate their own methodology for identifying significant disproportionality;

(h) Improved capacity of SEAs to assist LEAs to engage parents, families, advocates, and other stakeholders to use data to address disparities revealed in the data they collect; and

(i) Improved capacity of SEAs, and LEAs through their work with SEAs, to provide data in timely, usable, accessible, and understandable formats for parents, families, advocates, and other stakeholders.

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

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

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

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

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

Note: This document does not solicit applications. In any year in which we choose to use this priority and these requirements, we invite applications through a notice in the Federal Register .

The Assistant Secretary establishes the following requirements for this program. We may apply these requirements in any year in which this program is in effect.

Requirements:

Applicants must—

(a) Demonstrate, in the narrative section of the application under “Significance,” how the proposed project will—

(1) Address State challenges in collecting, analyzing, reporting, and using their data collected under section 618 of IDEA to correctly identify and address significant disproportionality. To meet this requirement the applicant must—

(i) Demonstrate knowledge of IDEA data collections, including data required under sections 616 and 618 of IDEA, as well as the requirements related to significant disproportionality in section 618(d) of IDEA;

(ii) Present applicable national, State, and local data to demonstrate the capacity needs of SEAs, and LEAs through their work with SEAs, to analyze and use their data collected under section 618 of IDEA to identify and address significant disproportionality;

(iii) Describe how SEAs, and LEAs through their work with SEAs, are currently analyzing and using their data collected under section 618 of IDEA to identify and address significant disproportionality; and

(iv) Present information about the difficulties SEAs, and LEAs through their work with SEAs, including a variety of LEAs such as urban and rural LEAs and charter schools that are LEAs, have in collecting, reporting, analyzing, and using their IDEA section 618 data to address significant disproportionality; and

(2) Result in improved IDEA data collection, reporting, analysis, and use in identifying and addressing significant disproportionality.

(b) Demonstrate, in the narrative section of the application under “Quality of project services,” how the proposed project will—

(1) Ensure equal access and treatment for members of groups that have traditionally been underrepresented based on race, color, national origin, gender, age, or disability. To meet this requirement, the applicant must describe how it will—

(i) Identify the needs of the intended recipients of TA and information; and

(ii) Ensure that products and services meet the needs of the intended recipients of the grant;

(2) Achieve its goals, objectives, and intended outcomes. To meet this requirement, the applicant must provide—

(i) Measurable intended project outcomes; and

(ii) In Appendix A, the logic model (as defined in 34 CFR 77.1) by which the proposed project will achieve its intended outcomes that depicts, at a minimum, the goals, activities, outputs, and intended outcomes of the proposed project;

(3) Use a conceptual framework (and provide a copy in Appendix A) to develop project plans and activities, describing any underlying concepts, assumptions, expectations, beliefs, or theories, as well as the presumed relationships or linkages among these variables, and any empirical support for this framework;

Note: The following websites provide more information on logic models and conceptual frameworks: https://osepideasthatwork.org/sites/default/files/2021-12/ConceptualFramework_Updated.pdf and www.osepideasthatwork.org/resources-grantees/program-areas/ta-ta/tad-project-logic-model-and-conceptual-framework.

(4) Be based on current research and make use of evidence-based practices (EBPs). 2 To meet this requirement, the applicant must describe—

(i) The current capacity of SEAs to use IDEA section 618 data to correctly identify significant disproportionality and assist LEAs as they conduct root cause analyses and review LEA policies, practices, and procedures;

(ii) Current research on effective practices to address significant disproportionality, particularly through the provision of CCEIS; and

(iii) How the proposed project will incorporate current research and EBPs in the development and delivery of its products and services;

(5) Develop products and provide services that are of high quality and sufficient intensity and duration to achieve the intended outcomes of the proposed project. To address this requirement, the applicant must describe—

(i) How it proposes to identify or develop the knowledge base on the capacity needs of SEAs, and LEAs through their work with SEAs, to collect, report, analyze, and use IDEA section 618 data in a manner that correctly identifies and addresses significant disproportionality in States and LEAs;

(ii) Its proposed approach to universal, general TA, 3 which must identify the intended recipients, including the type and number of recipients, that will receive the products and services under this approach;

(iii) Its proposed approach to targeted, specialized TA, 4 which must identify—

(A) The intended recipients, including the type and number of recipients, that will receive the products and services under this approach; and

(B) Its proposed approach to measure the readiness of potential TA recipients to work with the project, assessing, at a minimum, their current infrastructure, available resources, and ability to build capacity at the local level; and

(iv) Its proposed approach to intensive, sustained TA, 5 which must identify—-

(A) The intended recipients, including the type and number of recipients, that will receive the products and services under this approach;

(B) Its proposed approach to measure the readiness of SEA personnel to work with the project, including their commitment to the initiative, alignment of the initiative to their needs, current infrastructure, available resources, and ability to build capacity at the SEA level;

(C) Its proposed plan for assisting SEAs to build or enhance training systems related to the use of IDEA section 618 data to correctly identify and address significant disproportionality that include professional development based on adult learning principles and coaching;

(D) Its proposed plan for working with appropriate levels of the education system ( e.g. , SEAs, regional TA providers, LEAs, schools, and families) to ensure that there is communication between each level and that there are systems in place to support the capacity needs of SEAs, and LEAs through their work with SEAs, to collect, report, analyze, and use IDEA section 618 data to correctly identify and address significant disproportionality; and

(E) Its proposed plan for collaborating and coordinating with Department-funded projects, including those providing data-related support to States ( e.g. , the IDEA Data Center, the Center for IDEA Fiscal Reporting, and the National Center for Systemic Improvement) and equity-related support to States ( e.g. , Center on PBIS, and Regional Equity Assistance Centers), where appropriate, in order to align complementary work and jointly develop and implement products and services to meet the purposes of this priority;

(6) Develop products and implement services that maximize efficiency. To address this requirement, the applicant must describe—

(i) How the proposed project will use technology to achieve the intended project outcomes;

(ii) With whom the proposed project will collaborate and the intended outcomes of this collaboration; and

(iii) How the proposed project will use non-project resources to achieve the intended project outcomes.

(c) In the narrative section of the application under “Quality of the project evaluation,” include an evaluation plan for the project developed in consultation with and implemented by a third-party evaluator. 6 The evaluation plan must—

(1) Articulate formative and summative evaluation questions, including important process and outcome evaluation questions. These questions should be related to the project's proposed logic model required in paragraph (b)(2)(ii) of these requirements;

(2) Describe how progress in and fidelity of implementation, as well as project outcomes, will be measured to answer the evaluation questions. Specify the measures and associated instruments or sources for data appropriate to the evaluation questions. Include information regarding reliability and validity of measures where appropriate;

(3) Describe strategies for analyzing data and how data collected as part of this plan will be used to inform and improve service delivery over the course of the project and to refine the proposed logic model and evaluation plan, including subsequent data collection;

(4) Provide a timeline for conducting the evaluation and include staff assignments for completing the plan. The timeline must indicate that the data will be available annually for the APR and at the end of Year 2 for the review process; and

(5) Dedicate sufficient funds in each budget year to cover the costs of developing or refining the evaluation plan in consultation with a third-party evaluator, as well as the costs associated with the implementation of the evaluation plan by the third-party evaluator.

(d) Demonstrate, in the narrative section of the application under “Adequacy of resources,” how—

(1) The proposed project will encourage applications for employment from persons who are members of groups that have traditionally been underrepresented based on race, color, national origin, gender, age, or disability, as appropriate;

(2) The proposed key project personnel, consultants, and subcontractors have the qualifications and experience to carry out the proposed activities and achieve the project's intended outcomes;

(3) The applicant and any key partners have adequate resources to carry out the proposed activities; and

(4) The proposed costs are reasonable in relation to the anticipated results and benefits, and funds will be spent in a way that increases their efficiency and cost-effectiveness, including by reducing waste or achieving better outcomes.

(e) Demonstrate, in the narrative section of the application under “Quality of the management plan,” how—

(1) The proposed management plan will ensure that the project's intended outcomes will be achieved on time and within budget. To address this requirement, the applicant must describe—

(i) Clearly defined responsibilities for key project personnel, consultants, and subcontractors, as applicable; and

(ii) Timelines and milestones for accomplishing the project tasks;

(2) Key project personnel and any consultants and subcontractors will be allocated and how these allocations are appropriate and adequate to achieve the project's intended outcomes;

(3) The proposed management plan will ensure that the products and services provided are of high quality, relevant, and useful to recipients; and

(4) The proposed project will benefit from a diversity of perspectives, including those of families, educators, TA providers, researchers, and policy makers, among others, in its development and operation.

(f) Address the following application requirements:

(1) Include, in Appendix A, personnel-loading charts and timelines, as applicable, to illustrate the management plan described in the narrative;

(2) Include, in the budget, attendance at the following:

(i) A one- and one-half day kick-off meeting in Washington, DC, or virtually, after receipt of the award, and an annual planning meeting in Washington, DC, or virtually, with the OSEP project officer and other relevant staff during each subsequent year of the project period.

Note: The project must reallocate unused travel funds no later than the end of the third quarter if the kick-off or planning meetings are conducted virtually.

Note: Within 30 days of receipt of the award, a post-award teleconference must be held between the OSEP project officer and the grantee's project director or other authorized representative;

(ii) A two- and one-half day project directors' conference in Washington, DC, or virtually, during each year of the project period; and

Note: The project must reallocate unused travel funds no later than the end of the third quarter of each budget period if the conference is conducted virtually.

(iii) Three annual two-day trips to attend Department briefings, Department-sponsored conferences, and other meetings, as requested by OSEP;

(3) Include, in the budget, a line item for an annual set-aside of 5 percent of the grant amount to support emerging needs that are consistent with the proposed project's intended outcomes, as those needs are identified in consultation with, and approved by, the OSEP project officer. With approval from the OSEP project officer, the project must reallocate any remaining funds from this annual set-aside no later than the end of the third quarter of each budget period;

(4) Maintain a high-quality website, with an easy-to-navigate design, that meets government or industry-recognized standards for accessibility; and

(5) Include, in Appendix A, an assurance to assist OSEP with the transfer of pertinent resources and products and to maintain the continuity of services to States during the transition to this new award period and at the end of this award period, as appropriate.

Under Executive Order 12866, the Office of Management and Budget (OMB) must determine whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by OMB. Section 3(f) of Executive Order 12866, as amended by Executive Order 14094, defines a “significant regulatory action” as an action likely to result in a rule that may—

(1) Have an annual effect on the economy of $200 million or more (adjusted every 3 years by the Administrator of Office of Information and Regulatory Affairs (OIRA) for changes in gross domestic product); or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, territorial, or Tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impacts of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise legal or policy issues for which centralized review would meaningfully further the President's priorities or the principles stated in the Executive order, as specifically authorized in a timely manner by the Administrator of OIRA in each case.

This final regulatory action is not a significant regulatory action subject to review by OMB under section 3(f) of Executive Order 12866 (as amended by Executive Order 14094). Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Office of Information and Regulatory Affairs designated this rule as not a “major rule,” as defined by 5 U.S.C. 804(2).

We have also reviewed this final regulatory action under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—

(1) Propose or adopt regulations only upon a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);

(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;

(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);

(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and

(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.

Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”

We are issuing the final priority and requirements only on a reasoned determination that their benefits justify the costs. In choosing among alternative regulatory approaches, we selected those approaches that maximize net benefits. Based on the analysis that follows, the Department believes that this regulatory action is consistent with the principles in Executive Order 13563.

We also have determined that this regulatory action does not unduly interfere with State, local, and Tribal governments in the exercise of their governmental functions.

In accordance with these Executive orders, the Department has assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action. The potential costs are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities.

The Department believes that this regulatory action does not impose significant costs on eligible entities, whose participation in this program is voluntary. While this action does impose some requirements on participating grantees that are cost-bearing, the Department expects that applicants for this program will include in their proposed budgets a request for funds to support compliance with such cost-bearing requirements. Therefore, costs associated with meeting these requirements are, in the Department's estimation, minimal.

The Department believes that these benefits to the Federal government outweigh the costs associated with this action.

The Department believes that the priority and requirements are needed to administer the program effectively.

The final priority, including requirements, contains information collection requirements that are approved by OMB under OMB control number 1820-0028; the final priority, including requirements, does not affect the currently approved data collection.

Regulatory Flexibility Act Certification: The Secretary certifies that this final regulatory action will not have a significant economic impact on a substantial number of small entities. The U.S. Small Business Administration (SBA) Size Standards define proprietary institutions as small businesses if they are independently owned and operated, are not dominant in their field of operation, and have total annual revenue below $7,000,000. Nonprofit institutions are defined as small entities if they are independently owned and operated and not dominant in their field of operation. Public institutions are defined as small organizations if they are operated by a government overseeing a population below 50,000.

The small entities that this final regulatory action will affect are LEAs, including charter schools that operate as LEAs under State law; institutions of higher education; other public agencies; private nonprofit organizations; freely associated States and outlying areas; Indian Tribes or Tribal organizations; and for-profit organizations. We believe that the costs imposed on an applicant by this final priority, including requirements, will be limited to paperwork burden related to preparing an application and that the benefits of this final priority will outweigh any costs incurred by the applicant.

Participation in the Technical Assistance on State Data Collection program is voluntary. For this reason, the final priority and requirements, imposes no burden on small entities unless they applied for funding under the program. We expect that in determining whether to apply for Technical Assistance on State Data Collection program funds, an eligible entity will evaluate the requirements of preparing an application and any associated costs and weigh them against the benefits likely to be achieved by receiving a Technical Assistance on State Data Collection program grant. An eligible entity will most likely apply only if it determines that the likely benefits exceed the costs of preparing an application.

We believe that the final priority and requirements will not impose any additional burden on a small entity applying for a grant than the entity would face in the absence of the proposed action. That is, the length of the applications those entities would submit in the absence of this final regulatory action and the time needed to prepare an application will likely be the same.

This final regulatory action will not have a significant economic impact on a small entity once it receives a grant because it will be able to meet the costs of compliance using the funds provided under this program.

Intergovernmental Review: This program is subject to Executive Order 12372 and the regulations in 34 CFR part 79. One of the objectives of the Executive order is to foster an intergovernmental partnership and a strengthened federalism. The Executive order relies on processes developed by State and local governments for coordination and review of proposed Federal financial assistance.

This document provides early notification of our specific plans and actions for this program.

Accessible Format: On request to the program contact person listed under FOR FURTHER INFORMATION CONTACT , individuals with disabilities can obtain this document in an accessible format. The Department will provide the requestor with an accessible format that may include Rich Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, Braille, large print, audiotape, or compact disc, or other accessible format.

Electronic Access to This Document: The official version of this document is the document published in the Federal Register . You may access the official edition of the Federal Register and the Code of Federal Regulations at www.govinfo.gov. At this site you can view this document, as well as all other documents of this Department published in the Federal Register , in text or Portable Document Format (PDF). To use PDF you must have Adobe Acrobat Reader, which is available free at the site.

You may also access documents of the Department published in the Federal Register by using the article search feature at www.federalregister.gov. Specifically, through the advanced search feature at this site, you can limit your search to documents published by the Department.

Atlantic highly migratory species (HMS) fisheries, including BFT fisheries, are managed under the authority of the Atlantic Tunas Convention Act (ATCA; 16 U.S.C. 971 et seq. ) and the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act; 16 U.S.C. 1801 et seq. ). The 2006 Consolidated Atlantic HMS Fishery Management Plan (FMP) and its amendments are implemented by regulations at 50 CFR part 635. Section 635.27 divides the U.S. BFT quota recommended by the International Commission for the Conservation of Atlantic Tunas (ICCAT) and as implemented by the United States among the various domestic fishing categories, per the allocations established in the 2006 Consolidated HMS FMP and its amendments. NMFS is required under the Magnuson-Stevens Act to provide U.S. fishing vessels with a reasonable opportunity to harvest quotas under relevant international fishery agreements such as the ICCAT Convention, which is implemented domestically pursuant to ATCA.

The baseline quotas for the Harpoon and Reserve categories are 59.2 mt and 38.2 mt, respectively. The 2023 Harpoon category fishery opened June 1, and is open through November 15, 2023, or until the Harpoon category quota is reached, whichever comes first. In this action, NMFS is transferring 10.8 mt from the Reserve category to the Harpoon category. This transfer results in 70.0 mt (59.2 mt + 10.8 mt = 70.0 mt) being available for the Harpoon category through November 15, 2023, or until the Harpoon category quota is reached, whichever comes first. This transfer also results in 27.4 mt (38.2 mt−10.8 mt = 27.4 mt) being available in the Reserve category through the remainder of the 2023 fishing year.

Under § 635.27(a)(8), NMFS has the authority to transfer quota among fishing categories or subcategories after considering the determination criteria provided under § 635.27(a)(7). NMFS has considered all of the relevant determination criteria and their applicability to this inseason quota transfer. These criteria include, but are not limited to, the following:

Regarding the usefulness of information obtained from catches in the particular category for biological sampling and monitoring of the status of the stock (§ 635.27(a)(7)(i)), biological samples collected from BFT landed by Harpoon category fishermen and provided by BFT dealers continue to provide NMFS with valuable parts and data for ongoing scientific studies of BFT age and growth, migration, and reproductive status. Additional opportunity to land BFT in the Harpoon category would support the continued collection of a broad range of data for these studies and for stock monitoring purposes.

NMFS considered the catches of the Harpoon category quota to date and the likelihood of closure of the Harpoon category if no adjustment is made (§ 635.27(a)(7)(ii) and (ix)). To date, preliminary landings data indicate that the Harpoon category has landed approximately 55 mt. Without a quota transfer at this time, NMFS would likely need to close the Harpoon category fishery and participants would have to stop BFT fishing activities while commercial-sized BFT remain available in the areas where Harpoon category permitted vessels operate. A quota transfer of 10.8 mt would provide limited additional opportunities to harvest the U.S. BFT quota while avoiding exceeding it.

Regarding the projected ability of the vessels fishing under the Harpoon category to harvest the additional amount of BFT quota transferred before the end of the fishing year (§ 635.27(a)(7)(iii)), NMFS considered Harpoon category landings over the last several years and landings to date this year. Landings are highly variable and depend on access to commercial-sized BFT and fishing conditions, among other factors. NMFS anticipates that the Harpoon category could harvest the transferred 10.8 mt prior to the end of the Harpoon category season, subject to weather conditions and BFT availability. NMFS may transfer unused Harpoon category quota to other quota categories, inseason, based on consideration of the determination criteria, as NMFS did in late 2022. Thus, this quota transfer would allow fishermen to take advantage of the availability of BFT on the fishing grounds and provide a reasonable opportunity to harvest the available U.S. BFT quota.

NMFS also considered the estimated amounts by which quotas for other gear categories of the fishery might be exceeded (§ 635.27(a)(7)(iv)) and the ability to account for all 2023 landings and dead discards. In the last several years, total U.S. BFT landings have been below the available U.S. quota such that the United States has carried forward the maximum amount of underharvest allowed by ICCAT from one year to the next. While NMFS does not yet have final estimates of 2022 landings and dead discards, NMFS anticipates having sufficient quota to account for landings and dead discards within the adjusted U.S. quota, consistent with ICCAT recommendations.

NMFS also considered the effects of the adjustment on the BFT stock and the effects of the transfer on accomplishing the objectives of the FMP (§ 635.27(a)(7)(v) and (vi)). This transfer would be consistent with established quotas and subquotas, which are implemented consistent with ICCAT Recommendation 22-10, ATCA, and the objectives of the 2006 Consolidated HMS FMP and amendments. In establishing these quotas and subquotas and associated management measures, ICCAT and NMFS considered the best scientific information available, objectives for stock management and status, and effects on the stock. This quota transfer is in line with the established management measures and stock status determinations. Another principal consideration is the objective of providing opportunities to harvest the available Harpoon category quota without exceeding the annual quota. This consideration is based on the objectives of the 2006 Consolidated HMS FMP and its amendments, and includes achieving optimum yield on a continuing basis and optimizing the ability of all permit categories to harvest available BFT quota allocations (related to § 635.27(a)(7)(x)).

Given these considerations, NMFS is transferring 10.8 mt of the available 38.2 mt of Reserve category quota to the Harpoon category. Therefore, NMFS adjusts the Harpoon category quota to 70 mt for the 2023 Harpoon category fishing season ( i.e., through November 15, 2023, or until the Harpoon category quota is reached, whichever comes first), and adjusts the Reserve category quota to 27.4 mt for the remainder of the 2023 fishing year.

NMFS will continue to monitor the BFT fishery closely. Dealers are required to submit landing reports within 24 hours of a dealer receiving BFT. Late reporting by dealers compromises NMFS' ability to timely implement actions such as quota and retention limit adjustments, as well as closures, and may result in enforcement actions. Additionally, and separate from the dealer reporting requirement, Harpoon category vessel owners are required to report their own catch of all BFT retained or discarded dead within 24 hours of the landing(s) or end of each trip, by accessing https://www.hmspermits.noaa.gov or by using the HMS Catch Reporting app, or calling (888) 872-8862 (Monday through Friday from 8 a.m. until 4:30 p.m.).

Depending on the level of fishing effort and catch rates of BFT, NMFS may determine that additional adjustments are necessary to ensure available quota is not exceeded or to enhance scientific data collection from, and fishing opportunities in, all geographic areas. If needed, subsequent adjustments will be published in the Federal Register . In addition, fishermen may access https://www.hmspermits.noaa.gov, for updates on quota monitoring and inseason adjustments.

NMFS issues this action pursuant to section 305(d) of the Magnuson-Stevens Act and regulations at 50 CFR part 635 and is exempt from review under Executive Order 12866.

The Assistant Administrator for NMFS (AA) finds that pursuant to 5 U.S.C. 533(b)(B), there is good cause to waive prior notice and opportunity to provide comment on this action, as notice and comment would be impracticable and contrary to this action for the following reasons. Specifically, the regulations implementing the 2006 Consolidated HMS FMP and amendments provide for inseason retention limit adjustments to respond to the unpredictable nature of BFT availability on the fishing grounds, the migratory nature of this species, and the regional variations in the BFT fishery. Providing prior notice and opportunity for public comment on this quota transfer to the Harpoon category for the remainder of 2023 is impracticable and contrary to the public interest as the Harpoon category fishery is currently underway. Based on Harpoon category catch rates, a delay in this action would likely result in closure of the Harpoon fishery when the baseline quota is met and the need to re-open the fishery, with attendant administrative costs and costs to the fishery. NMFS could not have proposed this action earlier, as it needed to consider and respond to updated landings data, in deciding to transfer a portion of the Reserve category quota to the Harpoon category quota. A delay in implementing this quota transfer would preclude the fishery from harvesting BFT that are available on the fishing grounds and that might otherwise become unavailable during a delay. This action does not raise conservation and management concerns. Transferring quota from the Reserve category to the Harpoon category does not affect the overall U.S. BFT quota, and available data show the adjustment would have a minimal risk of exceeding the ICCAT-allocated quota. NMFS notes that the public had an opportunity to comment on the underlying rulemakings that established the U.S. BFT quota and the inseason adjustment criteria.

For all of the above reasons, the AA finds that pursuant to 5 U.S.C. 553(d), there is good cause to waive the 30-day delay in effective date.

Authority: 16 U.S.C. 971 et seq. and 1801 et seq.

NMFS published a proposed rule in the Federal Register on May 11, 2023 (88 FR 30272), with public comments invited through June 12, 2023. NMFS received two comment letters on the proposed rule. A summary of the comments and NMFS' responses are provided under the heading Comments and Responses below. The following background sections describe the IFQ Program, the halibut IFQ vessel use caps, and this final rule. Detailed descriptions of the IFQ Program and the rationale and effects of this action are included in the preamble to the proposed rule and in the Analysis prepared for this action and are not repeated here (see ADDRESSES ).

This rule implements regulations to temporarily remove vessel use caps in Areas 4A, 4B, 4C, and 4D for 2023 through 2027. Vessel use caps were recommended by the North Pacific Fishery Management Council (Council) and implemented by NMFS as part of the IFQ Program (58 FR 59375, November 9, 1993) as regulations that were in addition to, and not in conflict with, those adopted by the International Pacific Halibut Commission (IPHC) and consistent with the Halibut Act (16 U.S.C. 773c(c)).

Commercial halibut and sablefish fisheries in Alaska are subject to regulation under the IFQ Program and the Community Development Quota (CDQ) Program (50 CFR part 679). A key objective of the IFQ Program is to support the social and economic character of the fisheries and the coastal fishing communities where many of these fisheries are based. For more information about the IFQ Program, please refer to section 2.3 of the Analysis. Because this rule is specific to the halibut IFQ fishery, reference to the IFQ Program in this preamble is specific to halibut unless otherwise noted.

Under the IFQ Program, access to the commercial halibut fisheries is limited to those persons holding quota share (QS), which is the limited access permit NMFS uses to calculate a person's IFQ each year. Halibut QS is designated for a specific geographic area of harvest, a specific vessel operation type (catcher vessel (C/V) or catcher/processor), and for a specific range of vessel sizes that may be used to harvest the halibut (vessel category). Out of the four vessel categories of halibut QS, category A shares are designated for catcher/processors that process their catch at sea ( e.g., freezer longline vessels) and do not have a vessel length designation, whereas category B, category C, and category D shares are designated to be fished on C/Vs that meet specific length designations (§ 679.40(a)(5)).

NMFS annually issues IFQ permits to each QS holder. IFQ permits authorize permit holders to harvest a specified amount of a particular IFQ species in an area from a specific operation type and vessel category, consistent with the QS they hold. IFQ is expressed in pounds (lb) and is based on the amount of QS held by the permit holder in relation to the total QS pool for each area with an assigned catch.

The IFQ Program also establishes: (1) limits on the maximum amount of QS that a person could use ( i.e., be used to receive annual IFQ) (§ 679.42(f)); (2) limits on the number of small amounts of indivisible QS units, known as QS blocks, that a person can hold (§ 679.42(g)); (3) limits on the ability of IFQ assigned to one C/V vessel category (vessel category B, C, or D IFQ) to be fished on a different (larger) vessel category with some limited exceptions (§ 679.42(a)(2)); and (4) limits on the maximum amount of halibut IFQ that may be harvested by a vessel during an IFQ fishing year (§ 679.42(h)). Only qualified individuals and initial recipients of QS are eligible to hold C/V QS, and they are required to be on the vessel when the IFQ is being fished, with a few limited exceptions (§ 679.41(h)(2)). All of these limitations were established to retain the owner-operator nature of the C/V halibut IFQ fisheries, limit consolidation of QS, and ensure the annual IFQ is not harvested on a small number of larger vessels.

The IFQ Program vessel use caps limit the maximum amount of halibut that can be harvested on any one vessel in any fishing year. The limits are intended to help ensure that a minimum number of vessels are engaged in the halibut IFQ fishery and to address concerns about the socio-economic impacts of fleet consolidation and reduction of crew jobs under the IFQ Program. For additional detail on vessel use caps, see the preamble to the proposed rule for the IFQ Program (57 FR 57130, December 3, 1992).

This preamble refers to halibut catch limits, commercial halibut allocations, and vessel use caps in pounds (lb) and metric tons (mt). Net pounds and net metric tons are defined as the weight of halibut from which the gills, entrails, head, and ice and slime have been removed.

This rule does not modify the vessel use caps for Areas 2C, 3A, 3B, and 4E. Vessels in these areas cannot be used to harvest more halibut IFQ than one-half percent of the combined total catch limits of halibut (§ 679.42(h)(1)). Applying this regulation to 2023 yields a vessel use cap of 89,030 lb (40.4 mt) in all areas. This final rule provides flexibility to vessels harvesting halibut IFQ in Areas 4A, 4B, 4C, and 4D by removing the vessel use cap for 2023 through 2027. Vessels harvesting halibut IFQ in these areas are therefore not limited to a maximum proportion of annual halibut IFQ that may be harvested on a vessel. Halibut harvested in Area 4E is currently entirely allocated under the CDQ Program and CDQ is not subject to vessel use caps. For that reason, the vessel use cap applicable to Area 4E is not modified by this rule.

This rule also removes the vessel use cap applicable to a Community Quota Entity (CQE) in Area 4B from 2023 through 2027. In Area 4B, a CQE is authorized to hold halibut QS in Area 4B on behalf of the community of Adak, Alaska (79 FR 8870, February 14, 2014). A CQE is a NMFS-approved non-profit organization that represents small, remote, coastal communities that meet specific criteria to purchase and hold C/V halibut QS on behalf of an eligible community. The CQE holds QS and leases the IFQ derived from the underlying QS. Any vessel harvesting halibut IFQ derived from the QS held by the CQE representing the community of Adak is not subject to the vessel use cap regulations at § 679.42(h)(1)(ii) from the effective date of this final rule through 2027. Unless modified by a subsequent rulemaking, any vessel harvesting halibut IFQ derived from the QS held by the CQE representing the community of Adak after 2027 will be limited to harvest no more than 50,000 lb (22.7 mt).

This rule does not modify other elements of the IFQ Program, nor IPHC actions related to the program. Specifically, this rule does not do any of the following:

• Increase or otherwise modify the annual halibut catch limits adopted by the IPHC and implemented by NMFS (88 FR 14066, March 7, 2023);

• Modify any other conservation measures recommended by the IPHC and implemented by NMFS, nor any other conservation measures implemented by NMFS independent of the IPHC; or

• Modify other limitations on the use of QS and IFQ described in the previous sections of this preamble.

This rule adds a provision at § 679.42(h)(1)(iii) to remove vessel use caps for vessels harvesting IFQ halibut in Areas 4A, 4B, 4C, and 4D from 2023 through 2027 fishing years. Because vessel use caps are applied under existing regulations at the fishery level, including harvest in all areas, the regulations clarify that harvest of IFQ halibut in regulatory Areas 4A, 4B, 4C, and 4D is excluded from the calculation of vessel use caps in Area 2C, 3A, or 3B from 2023 through 2027. Unless modified by a subsequent rulemaking, after 2027, no vessel in Areas 2C, 3A, 3B, 4A, 4B, 4C, 4D, and 4E can be used to harvest more halibut IFQ than one-half percent of the combined total catch limits of halibut (§ 679.42(h)(1)).

NMFS did not make changes to the regulatory text in this final rule from the regulatory text in the proposed rule.

NMFS received two comment letters during the public comment period for the proposed rule (88 FR 30272, May 11, 2023). One letter was from a CQE authorized to hold QS in Area 4B and the other was from an individual on a topic outside the scope of this action. Below, NMFS summarizes and responds to the three unique relevant comments.

Comment 1: We support the proposed action to suspend the halibut IFQ vessel use caps in Area 4B for 2023 through 2027.

Response: NMFS acknowledges this comment.

Comment 2: The proposed regulatory language at § 679.42(h)(1)(iii) does not explicitly mention a “CQE” but it is clearly inclusive of all vessels harvesting IFQ halibut in Area 4B and this includes IFQ derived from QS held by the CQE in Area 4B.

Response: NMFS agrees. This rule removes the vessel use cap applicable to a vessel harvesting IFQ derived from QS held by a CQE in Area 4B for 2023 through 2027.

Comment 3: This action provides additional flexibility to the CQE authorized to hold QS in Area 4B by removing the 50,000 lb vessel use cap that would otherwise be applicable to harvesting vessels. Removing this vessel use cap will allow more of the CQE-held QS to be harvested and support the local economy.

Response: NMFS acknowledges this comment.

Regulations governing the U.S. fisheries for Pacific halibut are developed by the IPHC, the Pacific Fishery Management Council, the North Pacific Fishery Management Council (Council), and the Secretary of Commerce. Section 5 of the Halibut Act (16 U.S.C. 773c) allows the Regional Fishery Management Council having authority for the geographic area concerned to develop regulations governing the allocation and catch of halibut in the United States portion of Convention waters, provided those regulations do not conflict with IPHC regulations. This action is consistent with the Council's authority to allocate halibut catch among fishery participants in Convention waters off Alaska.

Under 5 U.S.C. 553(d)(1), NMFS waives the 30-day delay in effective date of this final rule, which relieves a restriction on vessels by removing the use cap. It is important that this final rule is implemented in a timely manner before fishing vessels reach their use caps. An expedited implementation provides much needed flexibility and prevents unnecessary limits on fishing activity.

This final rule has been determined to be not significant for purposes of Executive Order 12866.

A Regulatory Impact Review was prepared to assess costs and benefits of available regulatory alternatives. A copy of this analysis is available from NMFS (see ADDRESSES ). Specific aspects of the economic analysis are discussed below in the Final Regulatory Flexibility Analysis section.

A final regulatory flexibility analysis (FRFA) was prepared. The FRFA incorporates the initial regulatory flexibility analysis (IRFA), a summary of the significant issues raised by any public comments in response to the IRFA, NMFS' responses to any such comments, and a summary of the analyses completed to support the action.

Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a final regulatory flexibility analysis, the agency shall publish one or more guides to assist small entities in complying with the rule and shall designate such publications as “small entity compliance guides.” Copies of the proposed rule, this final rule, and the small entity compliance guide are available on the Alaska Region's website at: https://www.fisheries.noaa.gov/alaska/sustainable-fisheries/pacific-halibut-and-sablefish-individual-fishing-quota-ifq-program.

This FRFA incorporates the IRFA and the analyses completed to support this action. Section 604 of the Regulatory Flexibility Act (RFA) requires that when an agency promulgates a final rule under section 553 of Title 5 of the U.S. Code, after being required by that section or any other law to publish a general notice of proposed rulemaking, the agency shall prepare a FRFA. Section 604 describes the required contents of a FRFA: (1) A statement of the need for and objectives of the rule; (2) a statement of the significant issues raised by the public comments in response to the IRFA, a statement of the assessment of the agency of such issues, and a statement of any changes made to the proposed rule as a result of such comments; (3) the response of the agency to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration (SBA) in response to the proposed rule, and a detailed statement of any change made to the proposed rule in the final rule as a result of the comments; (4) a description of and an estimate of the number of small entities to which the rule will apply or an explanation of why no such estimate is available; (5) a description of the projected reporting, recordkeeping, and other compliance requirements of the rule, including an estimate of the classes of small entities that will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and (6) a description of the steps the agency has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes including a statement of the factual, policy, and legal reasons for selecting the alternative adopted in this final rule and why each one of the other significant alternatives to the rule considered by the agency which affect the impact on small entities was rejected.

A description of this final rule and the need for and objectives of this rule are contained in the preamble to this final rule and the preamble to the proposed rule (88 FR 30272, May 11, 2023). That description is not repeated here.

NMFS published the proposed rule on May 11, 2023 (88 FR 30272). An IRFA was prepared and included in the Classification section of the preamble to the proposed rule. The comment period for the proposed rule closed on June 12, 2023. The Chief Counsel for Advocacy of the SBA did not file any comments on the proposed rule. NMFS received no comments specifically on the IRFA; therefore, no changes were made to this rule as a result of comments on the IRFA.

This final rule directly regulates the owners and operators of vessels that harvest halibut IFQ in IFQ Area 4A, 4B, 4C, or 4D. As of 2021 (the most recent year of gross revenue data), there were 98 unique vessels that harvested halibut IFQ in Area 4A, 4B, 4C, or 4D. Based on average annual gross revenue data, including affiliations, all but one of these vessels that landed halibut in 2021 are considered small entities based on the applicable $11 million threshold. Additional details are included in section 2.6 in the Analysis prepared for the proposed rule (see ADDRESSES ).

This action does not contain additional recordkeeping, reporting, or other compliance requirements.

The RFA requires identification of any significant alternatives that accomplish the stated objectives of the action, consistent with applicable statutes, and that would minimize any significant economic impact of the action on small entities. No alternatives to the action were considered. This action is the same as the action implemented in 2022 and 2021 and similar to the action implemented in 2020, which did not include Area 4A.

The status quo alternative would retain the existing vessel use cap restrictions as defined under § 679.42(h). It is possible that such restrictions would increase the likelihood that some of the annual halibut allocation is left unharvested in Area 4.

The action alternative would remove limits on the maximum amount of halibut IFQ that may be harvested by a vessel in IFQ regulatory Areas 4A, 4B, 4C, and 4D. The action alternative and the regulations contained in this action provide flexibility to IFQ participants in 2023 through 2027 to ensure allocations of halibut IFQ can be harvested by the limited number of vessels operating in these Areas. However, this action could result in a reduction in existing operating vessels (and the associated crew jobs) and opportunities for new entrants in Areas 4A, 4B, 4C, and 4D, due to inability to compete with larger, more efficient operations. Additionally, if there are fewer participants in the fishery, it is possible that landings could consolidate to fewer processors and communities depending on landing location and historic harvester-processor relationships.

This rule contains no information collection requirements under the Paperwork Reduction Act of 1995.

For the reasons set out in the preamble, NMFS amends 50 CFR part 679 as follows: