On August 30, 2023, a correction to the “Actual Production History (APH) and Other Crop Insurance Transparency” was published at 88 FR 59789 revising several references to subpart G and production reporting requirements for producers to report “current” year production rather than “previous” year production in various Crop Provisions. That correction inadvertently failed to revise the applicable crop year in the introductory text of the Arizona-California Citrus, California Avocado, Macadamia Nut and Texas Citrus Fruit Crop Provisions. This document makes those corrections.

Accordingly, 7 CFR part 457 is corrected by making the following amendments:

The SBA is revising its Small Business Subcontracting Plan regulations in 13 CFR 125.3 in response to changes made in section 870 of the National Defense Authorization Act (NDAA) of 2020, Public Law 116-92. Specifically, section 870 made changes to section 8(d) of the Small Business Act, 15 U.S.C. 637(d), regarding the requirements that apply to a Federal contractor seeking to obtain subcontracting credit on certain types of Federal contracts. SBA published a proposed rule on December 19, 2022, 87 FR 77529, to implement section 870. After receiving comments from the public, SBA finalizes the rule with the changes described below.

Most Federal contracts require the awardee to enter into a subcontracting plan that includes percentage goals for using small businesses and subcategories of small businesses. Subcontracting plans apply to Federal contracts exceeding $750,000 ($1.5 million for construction), unless the awardee is a small business, the contract does not offer subcontracting opportunities, or the contract will be performed entirely outside the United States and its outlying areas. Prior to SBA's final rule published on December 23, 2016, 81 FR 94246, SBA's regulations permitted a prime contractor to count only its first-tier subcontracts toward the goals in its subcontracting plan. The December 2016 Final Rule, however, mandated that prime contractors receive credit for lower-tier subcontracts under certain criteria. Section 870 changed the criteria for receiving such credit, and this final rule implements those statutory changes.

Section 870 made three changes to subcontracting plan requirements. First, a prime contractor may elect, in some instances, to receive credit toward its subcontracting plan for lower-tier subcontracts to small businesses. Second, agencies are prohibited from setting tier-specific goals for prime contractors that use lower-tier credit. Third, subcontracting plans are required to recite the records that contractors will maintain to substantiate lower-tier credit.

These changes require SBA to change some of the provisions set forth in the December 2016 Final Rule. Most importantly, relying on prior statutory language, the December 2016 Final Rule made it mandatory for contractors with individual subcontracting plans to take credit for lower-tier subcontracts. Section 870, by contrast, removes the mandate and states that prime contractors “may elect to receive credit” either for first-tier subcontracts on their own, or for subcontracts at any tier. Accordingly, SBA is changing the prior mandate to an election.

Additionally, the December 2016 Final Rule only allowed for contractors to receive lower-tier subcontracting credit if the contractor had two sets of subcontracting goals. A contractor would have a goal for small-business subcontracting at the first tier, and an additional goal for small business subcontracting at lower tiers. Section 870 prohibits agencies from setting tier-specific goals for prime contractors that use lower-tier credit. To address section 870, SBA is revising the regulations so that all prime contractors will have only one set of subcontracting goals. This rule also implements the requirement from section 870 that contractors include in their subcontracting plans a statement of the types of records they will maintain to substantiate subcontracting credit.

Section 870 further created a new subparagraph 8(d)(16)(B) in the Small Business Act, 15 U.S.C. 637(d)(16)(B), that requires agencies to collect, report, and review data on compliance with subcontracting plans. The new subparagraph duplicates existing statutory language in section 8(d)(7) of the Small Business Act, 15 U.S.C. 637(d)(7), and has already been implemented in SBA's regulations at 13 CFR 125.6(f)(8). Therefore, no regulatory changes are necessary to implement new subparagraph 8(d)(16)(B).

SBA received 10 comments in response to the proposed rule. The following section discusses and responds to the comments.

Comment: SBA received numerous comments expressing support for the proposed changes that are implemented by this final rule. One commenter specifically highlighted that this rule will increase small business utilization in Federal contracting.

Response: SBA acknowledges the commenters' support. SBA will implement the rule with the changes as noted below.

Comments: SBA received four comments that were unrelated in any way to the proposed rule or the issue of credit for lower-tier subcontracting.

Response: As these comments do not relate to the rulemaking, SBA will not provide a response to these comments.

Comment: SBA received one comment regarding the applicability of lower-tier subcontracting credit for Small Business Participation Plans.

Response: Small Business Participation Plans are not within the purview of SBA regulations and thus are not impacted by this final rule.

Comments: SBA received two comments that opposed the proposed changes that are implemented by this final rule. One commenter opposed the rule on the basis that it grants credit to a prime contractor for the subcontracting work done by a first-tier or lower-tier subcontractor. This commenter emphasized that prime contractors would be able to get credit for something that they do not take full responsibility for. Another commenter opposed the rule on the basis that it would increase costs to the government.

Response: SBA is implementing these regulatory changes in line with the statutory mandate from section 870. In addition, SBA does not agree with the concerns of these commenters. Prime contractors will have to take some level of responsibility for lower-tier subcontracting in their subcontracting plan and compliance review. In addition, there is no basis for concluding that this rule will result in an increased cost to the government. Therefore, these comments do not justify SBA failing to implement the NDAA for FY 2020.

Comments: Two commenters expressed concern with how the Electronic Subcontracting Reporting System (eSRS) would be able to handle the new reporting and elections of lower-tier subcontracting under this rule. Specifically, they highlight issues with certifying subcontractor data entries and limitations in Individual Subcontractor Reports (ISRs) as points of concern.

Response: SBA does not believe that this final rule needs to determine exactly how the new lower-tier subcontracting election and reporting will work within eSRS. Prime contractors are not responsible for certifying the data entries input by subcontractors into eSRS. Any potential issues can be resolved by the technical teams that run eSRS.

Comments: One commenter sought clarification on the applicability of “good faith effort” and liquidated damages to lower-tier subcontracting. Presumably, this commenter was referring to those terms as they are used in the context of subcontracting goals and performance under 13 CFR 125.3. This commenter also sought clarification on the standard of review that a prime contractor is subject to with respect to first-tier and lower-tier subcontractor performance. SBA also presumes this comment refers to Compliance Reviews which are described in 13 CFR 125.3(f).

Response: SBA is not altering any regulatory language other than what is noted below in this final rule. Thus, prime contractors are still subject to the requirement to make good faith efforts to meet subcontracting goals even when a prime contractor elects to receive credit for lower-tier subcontracting. In addition, an agency may impose liquidated damages if a contractor fails to demonstrate good faith effort or fails to provide a corrective action plan after receiving a marginal or unsatisfactory rating following a Compliance Review. 13 CFR 125.3(f)(5)(i).SBA is also declining to adopt a preferential or lenient review standard for Compliance Reviews as that process is described in 13 CFR 125.3(f).

Comment: One commenter requested that SBA provide regulatory language to direct flow-down of relevant FAR clauses (48 CFR Chapter 1) to all applicable subcontracts so that prime contractors can more easily rely on first-tier and lower-tier subcontractors to provide data necessary to comply with subcontracting requirements.

Response: Subcontracting flow-down clauses are already mandated under the CFR and FAR regulations. Therefore, including such language in this rule would be duplicative and unnecessary.

Comment: One commenter requested SBA assistance with holding other-than-small subcontractors accountable for their lower-tier subcontracting plans. This commenter specifically requested that SBA define its role in holding these subcontractors accountable when they fail to meet lower-tier subcontracting goals.

Response: SBA has an interest in seeing all subcontracting plans—at all levels of subcontracting—followed to ensure maximum small business utilization in Federal procurement. To that end, there should be consequences for subcontractors that fail to meet lower-tier subcontracting requirements. Prime contractors can accomplish this by not subcontracting to firms that continuously fail to meet subcontracting requirements. In some cases, it may be appropriate for the government to send a “show cause” letter that proposes debarment for subcontractors that repeatedly fail to meet their lower-tier subcontracting goals.

Comment: One commenter requested that commercial goods and services be omitted from the reporting requirements on prime contractors and subcontractors. This commenter cited a FAR clause that exempts small business reporting requirements for commercial goods and services.

Response: This comment is not related to lower-tier subcontracting credit which is the focus of this rule. This rule does not change any of the reporting requirements for commercial goods and services, it merely allows a prime contractor to elect to receive credit for lower tier subcontracting. The exception to reporting for commercial goods and services found at FAR 52.219-9(j) remains in place. Commercial goods and services could be part of any subcontracting plan so changing the reporting requirements for them would require a much broader rulemaking than the instant one.

Comment: One commenter requested a specific timeline for incorporating lower-tier subcontracting goals of within 90 days of contract award. The commenter noted the difficulty in gathering the required information from first-tier and lower-tier subcontractors in order to prepare a full subcontracting plan especially when relying on input from first-tier and lower-tier subcontractors.

Response: SBA is not adopting this timeline within 13 CFR 125.3(a)(1)(i)(C)( 1 ). All prime contractors are required to have a subcontracting plan in place by the time of award in those cases where a subcontracting plan is mandated by 13 CFR 125.3(a).

Comments: One commenter requested that SBA remove the language in the new regulations that would prohibit lower-tier subcontracting credit for governmentwide and multi-agency contracts. This commenter argued that SBA's proposed regulatory change enlarges the restrictions on lower-tier subcontracting as written in section 870. They requested that SBA strike the language referring to governmentwide and multi-agency contracts in proposed 13 CFR 125.3(a)(1)(i)(C)( 5 ).

Response: The restriction on governmentwide and multi-agency contracts comes directly from the language of section 870. The categories listed in the second sentence of proposed regulation 13 CFR 125.3(a)(1)(i)(C)( 5 ) are all synonymous with “more than one contract with one or more Federal agencies, or to one contract with more than one Federal agency.” Thus, SBA is declining to adopt this comment as it is counter to the plain language of section 870.

Comment: One commenter requested that SBA define what is meant by a single contract with one Federal agency. Specifically, this commenter wanted to know whether individual branches (Army, Navy, etc.) within the Department of Defense are treated as separate agencies.

Response: The term “Executive Agency” is defined in FAR 2.101. In this specific example, Army and Navy would be treated as separate agencies for Federal procurement.

Comments: One commenter asked whether it is possible to “opt-in” to receiving credit for lower-tier subcontracting during the performance of a contract. This commenter highlighted examples where the use of an other-than-small subcontractor may not be known until years into the performance of a contract. In such cases it may be appropriate for the prime contractor to elect to receive credit for lower-tier subcontracting well after contract award.

Response: SBA recognizes that there may be instances when a prime contractor is unaware of subcontracting opportunities for other-than-small firms until after contract award and during performance. However, prime contractors can always request a modification of their subcontracting plan from the contracting officer to account for newly discovered other-than-small subcontractors or other changed circumstances.

SBA is changing the threshold for a required subcontracting plan to $750,000. This makes the threshold consistent with the FAR subpart 19.7 and with other references to the threshold in § 125.3.

SBA is revising the language of 13 CFR 125.3(a)(1)(i)(C) to incorporate the two statutory changes from section 870 that differ from SBA's December 2016 rule: creating an election for using lower-tier subcontracting credit and prohibiting more than one set of goals.

First, the revised language makes lower-tier subcontracting credit discretionary in some circumstances. A prime contractor may elect to take credit for lower-tier subcontractors only when the subcontracting plan applies to a single contract with one Federal agency. In other situations— i.e., where the plan applies to more than one contract or to a single contract with more than one agency—section 870 prohibits the prime contractor from receiving credit for lower-tier subcontracting. Commercial plans and comprehensive subcontracting plans therefore are not eligible to use lower-tier subcontracting credit. They must instead rely solely on first-tier subcontracts. Additionally, governmentwide contracts and multi-agency contracts are not permitted to use lower-tier subcontracting credit.

Where a prime contractor elects to include lower-tier subcontracts towards its goal, the prime contractor will be credited with lower-tier subcontracts that are reported under lower-tier subcontracting plans. This rule does not require prime contractors to submit additional reports. Prime contractors will be required to report only their first-tier awards. Lower-tier subcontracting awards are required to be reported by the prime contractor's lower-tier subcontractors in accordance with their subcontracting plans and SBA's regulations. SBA believes that only having each subcontract at any tier reported once will help prevent duplicative counting of the same awards.

Second, the rule eliminates the prior provision that a prime contractor would have two sets of subcontracting goals—one for the first tier and one for lower tiers. Instead, the prime contractor will incorporate the subcontracting-plan goals of its lower-tier subcontractors into its individual-subcontracting-plan goals.

SBA is creating a new requirement codified at 13 CFR 125.3(c)(1)(xii) to incorporate the new recordkeeping requirements on contractors with subcontracting plans. Specifically, prime contractors are required to maintain records of the procedures used to substantiate the credit they elect to receive for lower-tier subcontracting under 13 CFR 125.3(a)(1)(i)(C).

The Office of Management and Budget (OMB) has determined that this rule is not a significant regulatory action for the purposes of Executive Order 12866.

SBA previously solicited comments from the public on a proposal to provide credit for lower-tier subcontracting. 80 FR 60300. Those comments were considered for this rulemaking. Additionally, as part of its ongoing efforts to engage stakeholders in the development of its regulations, SBA has solicited comments and suggestions from procuring agencies on how to best implement section 870. SBA has incorporated those comments and suggestions to the extent feasible.

For purposes of Executive Order 12988, SBA has drafted this rule, to the extent practicable, in accordance with the standards set forth in section 3(a) and 3(b)(2) of that Executive order, to minimize litigation, eliminate ambiguity, and reduce burden. This rule has no preemptive or retroactive effect.

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.

For the purpose of Executive Order 13132, SBA has determined that this rule will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various layers of government. Therefore, SBA has determined that this rule has no federalism implications warranting preparation of a federalism assessment.

This rule updates the requirements for small business subcontracting plans to add a requirement for prime contractors to include in their subcontracting plans a statement of the types of records they will maintain to substantiate subcontracting credit. The FAR rule implementing this requirement will account for this information collection, and clearance for the information collection will be obtained by the FAR Council.

According to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601, when an agency issues a rulemaking, it must prepare a regulatory flexibility analysis to address the impact of the rule on small entities. However, section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. The RFA defines “small entity” to include “small businesses,” “small organizations,” and “small governmental jurisdictions.”

This rule concerns various aspects of SBA's contracting programs. As such, the rule relates to small business concerns, but would not affect “small organizations” or “small governmental jurisdictions” because those programs generally apply only to “business concerns” as defined by SBA regulations, in other words, to small businesses organized for profit. “Small organizations” or “small governmental jurisdictions” are non-profits or governmental entities and do not generally qualify as “business concerns” within the meaning of SBA's regulations.

There are approximately 350,000 concerns registered as small business concerns in the System for Award Management (SAM) that could potentially be impacted by the implementation of section 870. However, SBA cannot say with any certainty how many will be impacted because we do not know how many of these concerns participate in government contracting as subcontractors. A firm is required to register in SAM in order to participate in Federal contracting as a prime contractor, but not for purposes of subcontracting. Therefore, there are no known compliance or other costs imposed by this rule on small business concerns.

In sum, the regulatory amendments implemented by this rule will not have a disparate impact on small businesses and will increase their opportunities to participate in Federal Government contracting as subcontractors without imposing any additional costs. For the reasons discussed, SBA certifies that this rule will not have a significant economic impact on a substantial number of small business concerns.

The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a “major rule” may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. SBA will submit a report containing this rulemaking and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule cannot take effect until 60 days after it is published in the Federal Register . This rulemaking has been reviewed and determined by OMB not to be a “major rule” under 5 U.S.C. 804(2).

For the reasons stated in the preamble, SBA amends 13 CFR part 125 as follows:

On April 27, 2023, SBA amended its regulation to implement changes to the ownership and control requirements for the 8(a) Business Development program, implement changes related to 8(a) contracts, and implement a statutory amendment from section 863 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2022. This is the second set of corrections. The first set of corrections was published in the Federal Register on May 5, 2023. (88 FR 28985). This document augments those corrections.

In the final rule at § 125.8(b)(iv), SBA inadvertently omitted a regulatory change instruction to clarify language stating how the funds remaining in the joint venture bank account at the conclusion of the joint venture contract(s) and/or termination of the joint venture are to be distributed. This paragraph is revised to state that the funds remaining in the joint venture bank account shall be distributed at the termination of the joint venture according to the percentage of ownership.

This document also corrects a citation in 13 CFR 125.4(c)(5).

The FAA issued a notice of proposed policy, which published in the Federal Register on August 9, 2023 (88 FR 53815). The FAA received comments from two commenters. The comments are available to view in Docket No. FAA-2023-0623 at www.regulations.gov.

The FAA received one comment from an individual that was unrelated to the notice and outside the scope of the proposed policy. The other comment was a request from the General Aviation Manufacturers Association asking for a 30-day extension to the comment period. However, the FAA did not extend the comment period. The FAA chose a 30-day comment period because it balances the need to have a final policy available for applicants with the need for interested persons to have time to comment on the proposed policy. The FAA determined that a 30-day comment period provided adequate time for interested persons to submit comments and that it would not be in the public interest to extend the comment period.

The authority citations for these airworthiness criteria are as follows:

The FAA will continue to allow type certification of VLA as a special class of aircraft under 14 CFR 21.17(b) using CS-VLA or JAR-VLA requirements, while also allowing eligibility for certification as a normal category airplane in accordance with part 23 using accepted means of compliance. The FAA accepts CS-VLA and JAR-VLA airworthiness criteria as providing an equivalent level of safety under § 21.17(b) special class type certification of VLA airplanes. The FAA will consider proposals for airplane designs that differ from the VLA limits defined in AC 21.17-3 for type certification as a special class of aircraft under § 21.17(b), provided the VLA were certificated to the JAR-VLA or CS-VLA requirements plus additional airworthiness criteria the FAA finds appropriate and applicable for the proposed design. Additional design requirements may include but are not limited to the airworthiness criteria identified in the following paragraphs. Other additional airworthiness criteria may be required to address specific design proposals.

If the airplane has advanced avionic displays installed, the following requirements from 14 CFR part 23 apply:

• 14 CFR 23.1307 at amendment 23-49, Miscellaneous Equipment.

• 14 CFR 23.1311 at amendment 23-62, Electronic Display Instrument Systems.

• 14 CFR 23.1321 at amendment 23-49, Arrangement and Visibility.

• 14 CFR 23.1359 at amendment 23-49, Electrical System Fire Protection.

If the airplane has any outboard fins or winglets installed, the design must comply with JAR 23.445.

The requirements in this section are applicable to airplanes with an engine mounting to composite airframe. Tests must be performed that demonstrate that the interface between the metallic engine mount and the glass fiber reinforced plastic fuselage withstand a fire for 15 minutes while carrying loads under the following conditions:

(a) With one lost engine mount fitting the loads are distributed over the remaining three engine mount fittings. The most critical of these fittings must be chosen for the test.

The loads are:

(1) In Z-direction the mass of the propulsion unit multiplied by a maneuvering load factor resulting from a 30° turn for 15 minutes, superimposed by a maneuvering load of 3 seconds representing the maximum positive limit maneuvering load factor of n=3.8 from JAR-VLA 337(a).

(2) In X-direction the engine propulsion force at maximum continuous power for 5 minutes.

(b) The flame to which the component test arrangement is subjected must provide a temperature of 500 °C within the target area.

(c) The flame must be large enough to maintain the required temperature over the entire test zone, i.e., the fitting on the engine compartment side.

(d) It must be shown that the test equipment, e.g., burner and instrumentation are of sufficient power, size, and precision to yield the test requirements arising from paragraphs (a) through (c) of this section.

The requirements in sections VLA.005 through VLA.105 are applicable to airplanes with a single engine (spark- or compression-ignition) having not more than two seats, with a maximum certificated takeoff weight of not more than 750 kg and a stalling speed in the landing configuration of not more than 83 km/h (45 knots)(CAS), to be approved for day-VFR [visual flight rules] or for day-and night-VFR.

(a) Any short period oscillation not including combined lateral-directional oscillations occurring between the stalling speed and the maximum allowable speed appropriate to the configuration of the airplane must be heavily damped with the primary controls—

(1) Free; and

(2) In a fixed position.

(b) Any combined lateral-directional oscillations (“Dutch roll”) occurring between the stalling speed and the maximum allowable speed appropriate to the configuration of the airplane must be damped to 1/10 amplitude in 7 cycles with the primary controls—

(1) Free; and

(2) In a fixed position.

(c) Any long period oscillation of the flight path (phugoid) must not be so unstable as to cause an unacceptable increase in pilot workload or otherwise endanger the airplane. When under the conditions specified in CS-VLA 175, the longitudinal control force required to maintain speeds differing from the trimmed speed by at least plus or minus 15% is suddenly released, the response of the airplane must not exhibit any dangerous characteristics nor be excessive in relation to the magnitude of the control force released.

The pilot compartment must be free from glare and reflections that could interfere with the pilot's vision under all operations for which the certification is requested. The pilot compartment must be designed so that—

(a) The pilot's view is sufficiently extensive, clear, and undistorted, for safe operation;

(b) The pilot is protected from the elements so that moderate rain conditions do not unduly impair the pilot's view of the flight path in normal flight and while landing; and

(c) Internal fogging of the windows covered under paragraph (a) of this section can be easily cleared by the pilot unless means are provided to prevent fogging.

(a) The airplane must be so designed that unimpeded and rapid escape is possible in any normal and crash attitude.

(b) The opening system must be designed for simple and easy operation. It must function rapidly and be designed so that it can be operated by each occupant strapped in their seat, and also from outside the cockpit. Reasonable provisions must be provided to prevent jamming by fuselage deformation.

(c) The exit must be marked for easy location and operation even in darkness.

(a) The engine must meet the specifications of CS-E, amendment 6, 1 or 14 CFR part 33, amendment 33-36, for night-VFR operation.

(b) Restart capability. An altitude and airspeed envelope must be established for the airplane for in-flight engine restarting and the installed engine must have a restart capability within that envelope.

(a) For day-VFR operation, the propeller must meet the specifications of CS-22 Subpart J, amendment 3. For night-VFR operations the propeller and its control system must meet the specifications of CS-P, amendment 2, 2 or 14 CFR part 35, amendment 35-10, except for fixed pitch propellers, for which CS-22  3 subpart J is sufficient.

(b) Engine power and propeller shaft rotational speed may not exceed the limits for which the propeller is certificated or approved.

If an air filter is used to protect the engine against foreign material particles in the induction air supply—

(a) Each air filter must be capable of withstanding the effects of temperature extremes, rain, fuel, oil, and solvents to which it is expected to be exposed in service and maintenance; and

(b) Each air filter must have a design feature to prevent material separated from the filter media from re-entering the induction system and interfering with proper fuel metering operation.

(a) Each exhaust system must ensure safe disposal of exhaust gases without fire hazard or carbon monoxide contamination in the personnel compartment.

(b) Each exhaust system part with a surface hot enough to ignite flammable fluids or vapours must be located or shielded so that leakage from any system carrying flammable fluids or vapours will not result in a fire caused by impingement of the fluids or vapours on any part of the exhaust system including shields for the exhaust system.

(c) Each exhaust system component must be separated by fireproof shields from adjacent flammable parts of the airplane that are outside the engine compartment.

(d) No exhaust gases may discharge dangerously near any fuel or oil system drain.

(e) Each exhaust system component must be ventilated to prevent points of excessively high temperature.

(f) Each exhaust heat exchanger must incorporate means to prevent blockage of the exhaust port after any internal heat exchanger failure.

(g) No exhaust gases may be discharged where they will cause a glare seriously affecting the pilot's vision at night.

(a) The power or supercharger control must give a positive and immediate responsive means of controlling its engine or supercharger.

(b) If a power control incorporates a fuel shut-off feature, the control must have a means to prevent the inadvertent movement of the control into the shut-off position. The means must—

(1) Have a positive lock or stop at the idle position; and

(2) Require a separate and distinct operation to place the control in the shut-off position.

(c) Each power or thrust control must be designed so that if the control separates at the engine fuel metering device, the airplane is capable of continuing safe flight and landing.

(a) The control must require a separate and distinct operation to move the control toward lean or shut-off position.

(b) Each manual engine mixture control must be designed so that, if the control separates at the engine fuel metering device, the airplane is capable of continuing safe flight and landing.

If warning, caution, or advisory lights are installed in the cockpit, they must be—

(a) Red, for warning lights (lights indicating a hazard which may require immediate corrective action);

(b) Amber, for caution lights (lights indicating the possible need for future corrective action);

(c) Green, for safe operation lights; and

(d) Any other color, including white, for lights not described in paragraphs (a) through (c) of this section, provided the color differs sufficiently from the colors prescribed in paragraphs (a) through (c) of this section to avoid possible confusion.

(e) If warning, caution, or advisory lights are installed in the cockpit, they must be effective under all probable cockpit lighting conditions.

(a) Each instrument provided with static pressure case connections must be so vented that the influence of airplane speed, the opening and closing of windows, moisture, or other foreign matter, will not significantly affect the accuracy of the instruments.

(b) The design and installation of a static pressure system must be such that—

(1) Positive drainage of moisture is provided;

(2) Chafing of the tubing, and excessive distortion or restriction at bends in the tubing, is avoided; and

(3) The materials used are durable, suitable for the purpose intended, and protected against corrosion.

(c) Each static pressure system must be calibrated in flight to determine the system error. The system error, in indicated pressure altitude, at sea-level, with a standard atmosphere, excluding instrument calibration error, may not exceed ±9 m (±30 ft) per 185 km/h (100 knots) speed for the appropriate configuration in the speed range between 1.3 V SO with flaps extended and 1.8 V S1 with flaps retracted. However, the error need not be less than ±9 m (±30 ft).

For each airplane—

(a) Each gyroscopic instrument must derive its energy from power sources adequate to maintain its required accuracy at any speed above the best rate-of-climb speed;

(b) Each gyroscopic instrument must be installed so as to prevent malfunction due to rain, oil, and other detrimental elements; and

(c) There must be a means to indicate the adequacy of the power being supplied to the instruments.

(d) For Night VFR operation there must be at least two independent sources of power and a manual or an automatic means to select each power source for each instrument that uses a power source.

(a) Electrical system capacity. Each electrical system must be adequate for the intended use. In addition—

(1) Electric power sources, their transmission cables, and their associated control and protective devices, must be able to furnish the required power at the proper voltage to each load circuit essential for safe operation; and

(2) Compliance with paragraph (a)(l) of this section must be shown by an electrical load analysis, or by electrical measurements, that account for the electrical loads applied to the electrical system in probable combinations and for probable durations.

(b) Functions. For each electrical system, the following apply:

(1) Each system, when installed, must be—

(i) Free from hazards in itself, in its method of operation, and in its effects on other parts of the airplane;

(ii) Protected from fuel, oil, water, other detrimental substances, and mechanical damage; and

(iii) So designed that the risk of electrical shock to occupants and ground personnel is reduced to a minimum.

(2) Electric power sources must function properly when connected in combination or independently.

(3) No failure or malfunction of any electric power source may impair the ability of any remaining source to supply load circuits essential for safe operation.

(4) Each electric power source control must allow the independent operation of each source, except that controls associated with alternators that depend on a battery for initial excitation or for stabilization need not break the connection between the alternator and its battery.

(5) Each generator must have an overvoltage control designed and installed to prevent damage to the electrical system, or to equipment supplied by the electrical system, that could result if that generator were to develop an overvoltage condition.

(d) Instruments. There must be a means to indicate to the pilot that the electrical power supplies are adequate for safe operation. For direct current systems, an ammeter in the battery feeder may be used.

(e) Fire resistance. Electrical equipment must be so designed and installed that in the event of a fire in the engine compartment, during which the surface of the firewall adjacent to the fire is heated to 1,100 °C for 5 minutes or to a lesser temperature substantiated by the applicant, the equipment essential to continued safe operation and located behind the firewall will function satisfactorily and will not create an additional fire hazard. This may be shown by test or analysis.

(f) External power. If provisions are made for connecting external power to the airplane, and that external power can be electrically connected to equipment other than that used for engine starting, means must be provided to ensure that no external power supply having a reverse polarity, or a reverse phase sequence, can supply power to the airplane's electrical system. The location must allow such provisions to be capable of being operated without hazard to the airplane or persons.

(a) Each storage battery must be designed and installed as prescribed in this section.

(b) Safe cell temperatures and pressures must be maintained during any probable charging and discharging condition. No uncontrolled increase in cell temperature may result when the battery is recharged (after previous complete discharge)—

(1) At maximum regulated voltage or power;

(2) During a flight of maximum duration; and

(3) Under the most adverse cooling condition likely to occur in service.

(c) Compliance with paragraph (b) of this section must be shown by tests unless experience with similar batteries and installations has shown that maintaining safe cell temperatures and pressures presents no problem.

(d) No explosive or toxic gases emitted by any battery in normal operation, or as the result of any probable malfunction in the charging system or battery installation, may accumulate in hazardous quantities within the airplane.

(e) No corrosive fluids or gases that may escape from the battery may damage surrounding structures or adjacent essential equipment.

(f) Each nickel cadmium battery installation capable of being used to start an engine or auxiliary power unit must have provisions to prevent any hazardous effect on structure or essential systems that may be caused by the maximum amount of heat the battery can generate during a short circuit of the battery or of its individual cells.

(g) Nickel cadmium battery installations capable of being used to start an engine or auxiliary power unit must have—

(1) A system to control the charging rate of the battery automatically so as to prevent battery overheating;

(2) A battery temperature sensing and over-temperature warning system with a means for disconnecting the battery from its charging source in the event of an overtemperature condition; or

(3) A battery failure sensing and warning system with a means for disconnecting the battery from its charging source in the event of battery failure.

(h) In the event of a complete loss of the primary electrical power generating system, the battery must be capable of providing 30 minutes of electrical power to those loads that are essential to continued safe flight and landing. The 30-minute time period includes the time needed for the pilot(s) to recognize the loss of generated power and to take appropriate load shedding action.

The instrument lights must—

(a) Make each instrument and control easily readable and discernible;

(b) Be installed so that their direct rays, and rays reflected from the windshield or other surface, are shielded from the pilot's eyes; and

(c) Have enough distance or insulating material between current carrying parts and the housing so that vibration in flight will not cause shorting. (A cabin dome light is not an instrument light.)

Each taxi and landing light must be designed and installed so that—

(a) No dangerous glare is visible to the pilots;

(b) The pilot is not seriously affected by halation;

(c) It provides enough light for night operations; and

(d) It does not cause a fire hazard in any configuration.

(a) Electronic equipment and installations must be free from hazards in themselves, in their method of operation, and in their effects on other components.

(b) For operations for which electronic equipment is required, compliance must be shown with CS-VLA 1309.

(a) A placard meeting the requirements of this section must be installed on or near the magnetic direction indicator.

(b) The placard must show the calibration of the instrument in level flight with the engine operating.

(c) The placard must state whether the calibration was made with radio receivers on or off.

(d) Each calibration reading must be in terms of magnetic headings in not more than 30° increments.

(e) If a magnetic non-stabilized direction indicator can have a deviation of more than 10° caused by the operation of electrical equipment, the placard must state which electrical loads, or combination of loads, would cause a deviation of more than 10° when turned on.

The following placards must be plainly visible to the pilot:

(a) A placard stating the following airspeeds (IAS):

(1) Design maneuvering speed, V A ;

(2) The maximum landing gear operating speed, V LO .

(b) A placard stating the following approved operation:

(1) For day-VFR only operation, a placard stating, “This airplane is classified as a very light airplane approved for day-VFR only, in non-icing conditions. All aerobatic maneuvers, including intentional spinning, are prohibited. See Flight Manual for other limitations.”

(2) If night-VFR operation is approved, a placard stating, “This airplane is classified as a very light airplane approved for day- and night-VFR operation, in non-icing conditions. All aerobatic maneuvers, including intentional spinning, are prohibited. See Flight Manual for other limitations.”

(a) Airspeed limitations. The following information must be furnished—

(1) Information necessary for the marking of the airspeed limits on the indicator, as required in CS-VLA 1545, and the significance of the color coding used on the indicator.

(2) The speeds V A , V LO , V LE (maximum landing gear extended speed) where appropriate.

(b) Weights. The following information must be furnished:

(1) The maximum weight.

(2) Any other weight limits, if necessary.

(c) Center of gravity. The established c.g. limits required by CS-VLA 23 must be furnished.

(d) Maneuvers. Authorized maneuvers established in accordance with CS-VLA 3 must be furnished.

(e) Flight load factors. Maneuvering load factors: the following must be furnished—

(1) The factors corresponding to point A and point C in the figure for CS-VLA 333(b), stated to be applicable at V A .

(2) The factors corresponding to point D and point E of figure 1 of CS-VLA 333(b) to be applicable at never exceed speed, V NE .

(3) The factor with wing flaps extended as specified in CS-VLA 345.

(f) The kinds of operation (day-VFR or day- and night-VFR, whichever is applicable) in which the airplane may be used, must be stated. The minimum equipment required for the operation must be listed.

(g) Powerplant limitations. The following information must be furnished:

(1) Limitation required by CS-VLA 1521.

(2) Information necessary for marking the instruments required by CS-VLA 1549 through 1551.

(3) Fuel and oil designation.

(4) For two-stroke engines, fuel/oil ratio.

(h) Placards. Placards required by CS-VLA 1555 through 1561 must be presented.

If the maximum certificated takeoff weight is higher than 750 kg, but not more than 850 kg, the requirements in sections VLA.120 through VLA.210 apply.

If the stall speed in landing configuration is higher than 45 knots, but not more than 50 knots (CAS), the requirements in section VLA.120 through VLA.210 apply.

The maximum horizontal distance traveled in still air, in km per 1,000 m (nautical miles per 1,000 ft) of altitude lost in a glide, and the speed necessary to achieve this, must be determined with the engine inoperative and its propeller in the minimum drag position, and landing gear and wing flaps in the most favorable available position.

(a) Each seat is to be equipped with at least a 4-point harness system;

(b) The applicant shall evaluate the head strike path with validated methods, and minimize the risk of injury in case of a head contact with the aircraft structure or interior.

(c) The design shall provide reasonable precautions to minimize the lumbar compression loads experienced by occupants in survivable crash landings;

(d) Each seat/harness system shall be statically tested to an ultimate inertia load factor of 18g forward, considering an occupant's mass of 77 kg. The lapbelt should react 60% of this load, and the upper torso restraint should react 40% of this load.

(a) The airplane, although it may be damaged in emergency landing conditions, must be designed as prescribed in this section to protect each occupant under those conditions.

(b) The structure must be designed to give each occupant reasonable chances of escaping injury in a minor crash landing when—

(1) Proper use is made of seat belts and shoulder harnesses; and

(2) The occupant experiences the ultimate inertia forces listed below:

(i) Upward 3.0g

(ii) Forward 9.0g

(iii) Sideward 1.5g.

(c) Each item of mass within the cabin that could injure an occupant if it came loose must be designed for the ultimate inertia load factors:

(1) Upward, 3.0g;

(2) Forward, 18.0g; and

(3) Sideward, 4.5g.

Engine mount and supporting structure are included in the above analysis if they are installed behind and above the seating compartment.

(d) The structure must be designed to protect the occupants in a complete turnover, assuming, in the absence of a more rational analysis—

(1) An upward ultimate inertia force of 3g; and

(2) A coefficient of friction of 0.5 at the ground.

(e) Each airplane with retractable landing gear must be designed to protect each occupant in a landing—

(1) With the wheels retracted;

(2) With moderate descent velocity; and

(3) Assuming, in the absence of a more rational analysis;

(i) A downward ultimate inertia force of 3g; and

(ii) A coefficient of friction of 0.5 at the ground.

(a) Each baggage compartment must be designed for its placarded maximum weight of contents and for the critical load distributions at the appropriate maximum load factors corresponding to the flight and ground load conditions for the airplane.

(b) There must be means to prevent the contents of any baggage compartment from becoming a hazard by shifting, and to protect any controls, wiring, lines, equipment, or accessories whose damage of failure would affect safe operations.

(c) Baggage compartments must be constructed of materials which are at least flame resistant.

(d) Designs which provide for baggage to be carried must have means to protect the occupants from injury under the ultimate inertia forces specified in CS-VLA 561(b)(2).

(e) If there is no structure between baggage and occupant compartments, the baggage items located behind the occupants and those which might become a hazard in a crash must be secured for 1.33 × 18g.

(a) General. For each airplane, the following information must be furnished:

(1) The takeoff distance determined under CS-VLA 51, the airspeed at the 15 m height, the airplane configuration (if pertinent), the kind of surface in the tests, and the pertinent information with respect to cowl flap position, use of flight path control devices, and use of the landing gear retraction system.

(2) The landing distance determined under CS-VLA 75, the airplane configuration (if pertinent), the kind of surface used in the tests, and the pertinent information with respect to flap position and the use of flight path control devices.

(3) The steady rate or gradient of climb determined under CS-VLA 65 and 77, the airspeed, power, and the airplane configuration.

(4) The calculated approximate effect on takeoff distance (paragraph (a)(1) of this section), landing distance (paragraph (a)(2) of this section), and steady rates of climb (paragraph (a)(3) of this section), of variations in altitude and temperature.

(5) The maximum atmospheric temperature at which compliance with the cooling provisions of CS-VLA 1041 through 1047 is shown.

(6) The glide performance determined under VLA.120.

(b) Skiplanes. For skiplanes, a statement of the approximate reduction in climb performance may be used instead of new data for skiplane configuration, if—

(1) The landing gear is fixed in both landplane and skiplane configurations;

(2) The climb requirements are not critical; and

(3) The climb reduction in the skiplane configurations is small (0.15 to 0.25 m/s (30 to 50 feet per minute)).

(c) The following information concerning normal procedures must be furnished:

(1) The demonstrated crosswind velocity and procedures and information pertinent to operation of the airplane in crosswinds, and

(2) The airspeeds, procedures, and information pertinent to the use of the following airspeeds:

(i) The recommended climb speed and any variation with altitude.

(ii) V X (speed for best angle of climb) and any variation with altitude.

(iii) The approach speeds, including speeds for transition to the balked landing condition.

(d) An indication of the effect on takeoff distance of a grass surface as determined from at least one takeoff measurement on short mown dry grass must be furnished.

(a) The rotation speed V R , is the speed at which the pilot makes a control input with the intention of lifting the airplane out of contact with the runway.

(b) V R must not be less than stalling speed, V S1 .

(c) The Airplane Flight Manual must provide the rotation speed established above for normal takeoff procedures.

If an Equivalent Level of Safety (ELOS) to CS-VLA 1143(g) and CS-VLA 1147(b) is requested, VLA.150 and VLA.155 are applicable.

Power or supercharger control attachment design must include:

(a) Features which are not likely to separate in flight ( i.e., a large load-bearing washer adjacent to the outside face of the power control cable rod end fitting which attaches to the fuel-metering device);

(b) Mandatory inspection intervals;

(c) Inspection procedures;

(d) Component replacement criteria.

Mixture control attachment design must include:

(a) Features which are not likely to separate in flight ( i.e., a large load-bearing washer adjacent to the outside face of the power control cable rod end fitting which attaches to the fuel-metering device);

(b) Mandatory inspection intervals;

(c) Inspection procedures;

(d) Component replacement criteria.

(a) For an airplane with independently controlled roll and directional controls, it must be possible to produce and to correct roll by unreversed use of the rolling control and to produce and to correct yaw by unreversed use of the directional control, up to the time the airplane stalls.

(b) For an airplane with interconnected lateral and directional controls (2 controls) and for an airplane with only one of these controls, it must be possible to produce and correct roll by unreversed use of the rolling control without producing excessive yaw, up to the time the airplane stalls.

(c) The wing level stall characteristics of the airplane must be demonstrated in flight as follows: The airplane speed must be reduced with the elevator control until the speed is slightly above the stalling speed, then the elevator control must be pulled back so that the rate of speed reduction will not exceed 1.9 km/h (one knot) per second until a stall is produced, as shown by an uncontrollable downward pitching motion of the airplane, or until the control reaches the stop. Normal use of the elevator control for recovery is allowed after the control has been held against the stop for not less than two seconds.

(d) Except where made inapplicable by the special features of a particular type of airplane, the following apply to the measurement of loss of altitude during a stall:

(1) The loss of altitude encountered in the stall (power on or power off) is the change in altitude (as observed on the sensitive altimeter testing installation) between the altitude at which the airplane pitches and the altitude at which horizontal flight is regained.

(2) If power or thrust is required during stall recovery, the power or thrust used must be that which would be used under the normal operating procedures selected by the applicant for this maneuver. However, the power used to regain level flight may not be applied until flying control is regained.

(e) During the recovery part of the maneuver, it must be possible to prevent more than 15° of roll or yaw by the normal use of controls.

(f) Compliance with the requirements of this section must be shown under the following conditions:

(1) Wing flaps. Retracted, fully extended and each intermediate normal operating position;

(2) Landing gear. Retracted and extended;

(3) Cowl flaps. Appropriate to configuration;

(4) Power

(i) Power off; and

(ii) 75% maximum continuous power. If the power-to-weight ratio at 75% of maximum continuous power results in extreme nose-up attitudes, the test may be carried out with the power required for level flight in the landing configuration at maximum landing weight and a speed of 1.4 stalling speed, V S0 , but the power may not be less than 50% maximum continuous power.

(5) Trim. The airplane trimmed at a speed as near 1.5 V S1 as practicable.

(6) Propeller. Full increase rpm position for the power off condition.

Turning flight and accelerated stalls must be demonstrated in tests as follows:

(a) Establish and maintain a coordinated turn in a 30° bank. Reduce speed by steadily and progressively tightening the turn with the elevator until the airplane is stalled or until the elevator has reached its stop. The rate of speed reduction must be constant, and—

(1) For a turning flight stall, may not exceed 1.9 km/h (one knot) per second; and

(2) For an accelerated stall, be 5.6 to 9.3 km/h (3 to 5 knots) per second with steadily increasing normal acceleration.

(b) When the stall has fully developed or the elevator has reached its stop, it must be possible to regain level flight by normal use of controls and without—

(1) Excessive loss of altitude;

(2) Undue pitchup;

(3) Uncontrollable tendency to spin;

(4) Exceeding 60° of roll in either direction from the established 30° bank; and

(5) For accelerated entry stalls, without exceeding the maximum permissible speed or the allowable limit load factor.

(c) Compliance with the requirements of this section must be shown with—

(1) Wing Flaps. Retracted and fully extended for turning flight and accelerated entry stalls, and intermediate, if appropriate, for accelerated entry stalls;

(2) Landing Gear. Retracted and extended;

(3) Cowl Flaps. Appropriate to configuration;

(4) Power. 75% maximum continuous power. If the power-to-weight ratio at 75% of maximum continuous power results in extreme nose-up attitudes, the test may be carried out with the power required for level flight in the landing configuration at maximum landing weight and a speed of 1.4 V S0 , but the power may not be less than 50% maximum continuous power.

(5) Trim. 1.5 V S1 or minimum trim speed, whichever is higher.

(a) Three-control airplanes. The stability requirements for three-control airplanes are as follows:

(1) The static directional stability, as shown by the tendency to recover from a skid with the rudder free, must be positive for any landing gear and flap position appropriate to the takeoff, climb, cruise, and approach configurations. This must be shown with power up to maximum continuous power, and at speeds from 1.2 V S1 up to maximum allowable speed for the condition being investigated. The angle of skid for these tests must be appropriate to the type of airplane. At larger angles of skid up to that at which full rudder is used or a control force limit in CS-VLA 143 is reached, whichever occurs first, and at speeds from 1.2 V S1 to V A , the rudder pedal force must not reverse.

(2) The static lateral stability, as shown by the tendency to raise the low wing in a slip, must not be negative for any landing gear and flap positions. This must be shown with power up to 75% of maximum continuous power at speeds above 1.2 V S1 , up to the maximum allowable speed for the configuration being investigated. The static lateral stability may not be negative at 1.2 V S1 . The angle of slip for these tests must be appropriate to the type of airplane, but in no case may the slip angle be less than that obtainable with 10° of bank.

(3) In straight, steady slips at 1.2 V S1 for any landing gear and flap positions, and for power conditions up to 50% of maximum continuous power, the rudder control movements and forces must increase steadily (but not necessarily linearly) as the angle of slip is increased up to the maximum appropriate to the type of airplane. At larger slip angles up to the angle at which full rudder or aileron control is used or a control force limit contained in CS-VLA 143 is obtained, aileron control movements and forces must not reverse. Enough bank must accompany slipping to hold a constant heading. Rapid entry into, or recovery from, a maximum slip may not result in uncontrollable flight characteristics. The applicant must demonstrate that lateral static stability characteristics do not result in any unsafe handling qualities.

(b) Two-control (or simplified control) airplanes. The stability requirements for two-control airplanes are as follows:

(1) The directional stability of the airplane must be shown by showing that, in each configuration, it can be rapidly rolled from a 45° bank in one direction to a 45° bank in the opposite direction without showing dangerous skid characteristics.

(2) The lateral stability of the airplane must be shown by showing that it will not assume a dangerous attitude or speed when the controls are abandoned for 2 minutes. This must be done in moderately smooth air with the airplane trimmed for straight level flight at 0.9 V H (maximum speed in level flight with maximum continuous power) or V C (design cruising speed), whichever is lower, with flaps and landing gear retracted, and with a rearward center of gravity.

If an ELOS to CS-VLA 161(b)(2)(ii) is requested, VLA.175 through VLA.210 are applicable.

Longitudinal trim. The airplane must maintain longitudinal trim under each of the following conditions:

(a) Approach with landing gear extended and with—

(i) A 3° angle of descent, with flaps retracted and at a speed of 1.4 V S1 ;

(ii) A 3° angle of descent, flaps in the landing position(s) at reference landing approach speed, V REF ; and

(iii) An approach gradient equal to the steepest used in the landing distance demonstrations of CS 23.75, flaps in the landing position(s) at V REF .

For normal, utility and aerobatic category reciprocating engine-powered airplanes of 2,722 kg (6,000 lb) or less maximum weight, the reference landing approach speed, V REF , must not be less than the greater of minimum control speed, V MC , determined under CS 23.149(b) with the wing flaps in the most extended takeoff setting, and 1.3 V SO .

(a) A steady approach at not less than V REF , determined in accordance with CS 23.73(a), (b) or (c) as appropriate, must be maintained down to 15 m (50 ft) height and—

(1) The steady approach must be at a gradient of descent not greater than 5.2% (3°) down to the 15 m (50 ft) height.

(b) A constant configuration must be maintained throughout the maneuver.

(c) The landing must be made without excessive vertical acceleration or tendency to bounce, nose-over, ground loop, porpoise, or water loop.

(d) It must be shown that a safe transition to the balked landing conditions of CS 23.77 can be made from the conditions that exist at the 15 m (50 ft) height, at maximum landing weight, or the maximum landing weight for altitude and temperature of CS 23.63(c)(2) or (d)(2), as appropriate.

(a) Each normal, utility, and aerobatic category reciprocating engine-powered airplane of 2,722 kg (6,000 lb) or less maximum weight must be able to maintain a steady gradient of climb at sea-level of at least 3.3% with—

(1) Takeoff power on each engine;

(2) The landing gear extended;

(3) The wing flaps in the landing position, except that if the flaps may safely be retracted in 2 seconds or less without loss of altitude and without sudden changes of angle of attack, they may be retracted; and

(4) A climb speed equal to V REF , as defined in CS 23.73(a).

(a) It must be possible to carry out the following maneuvers without requiring the application of single-handed control forces exceeding those specified in CS 23.143(c), unless otherwise stated. The trimming controls must not be adjusted during the maneuvers:

(1) With power off, landing gear and flaps extended and the airplane as nearly as possible in trim at V REF , obtain and maintain airspeeds between 1.1 V S0 and either 1.7 V S0 or V FE (maximum flap extended speed), whichever is lower, without requiring the application of two-handed control forces exceeding those specified in CS 23.143(c).

(b) It must be possible, with a pilot control force of not more than 44.5 N (10 lbf), to maintain a speed of not more than V REF during a power-off glide with landing gear and wing flaps extended.

It must be possible, while in the landing configuration, to safely complete a landing without exceeding the one-hand control force limits specified in CS 23.143(c) following an approach to land—

(a) At a speed of V REF 9.3 km/h (5 knots);

(b) With the airplane in trim, or as nearly as possible in trim and without the trimming control being moved throughout the maneuver;

(c) At an approach gradient equal to the steepest used in the landing distance demonstration of CS 23.75;

(d) With only those power changes, if any, which would be made when landing normally from an approach at V REF .

(a) Approach—It must be possible using a favorable combination of controls, to roll the airplane from a steady 30° banked turn through an angle of 60°, so as to reverse the direction of the turn within—

(1) For an airplane of 2,722 kg (6,000 lb) or less maximum weight, 4 seconds from initiation of roll; and

(2) For an airplane of over 2,722 kg (6,000 lb) maximum weight, 1,000/W + 1,300 but not more than 7 seconds, where W is weight in kg. (W + 2800/2200 but not more than 7 seconds where W is weight in lb.).

(b) The requirement of paragraph (a) of this section must be met when rolling the airplane in each direction in the following conditions—

(1) Flaps in the landing position(s);

(2) Landing gear extended;

(3) All engines operating at the power for a 3° approach; and

(4) The airplane trimmed at V REF .

(a) Landing. The stick force curve must have a stable slope at speeds between 1.1 V S1 and 1.8 V S1 with—

(1) Flaps in the landing position;

(2) Landing gear extended; and

(3) The airplane trimmed at—

(i) V REF , or the minimum trim speed if higher, with power off; and

(ii) V REF with enough power to maintain a 3° angle of descent.

The applicant must consider the following safety objectives when showing compliance with regulations applicable to the rechargeable lithium ion battery.

Each rechargeable lithium ion battery installation must:

(a) Be designed to maintain safe cell temperatures and pressures under all foreseeable operating conditions to prevent fire and explosion;

(b) Be designed to prevent the occurrence of self-sustaining, uncontrollable increases in temperature or pressure, and automatically control the charge rate of each cell to protect against adverse operating conditions, such as cell imbalance, back charging, overcharging, and overheating;

(c) Not emit explosive or toxic gases, either in normal operation or as a result of its failure, that may accumulate in hazardous quantities within the airplane;

(d) Meet the requirements of 14 CFR 23.2325(g);

(e) Not damage surrounding structure or adjacent systems, equipment, components, or electrical wiring from corrosive or any other fluids or gases that may escape in such a way as to cause a major or more-severe failure condition;

(f) Have provisions to prevent any hazardous effect on airplane structure or systems caused by the maximum amount of heat it can generate due to any failure of it or its individual cells;

(g) Have a failure sensing and warning system to alert the flightcrew if its failure affects safe operation of the airplane;

(h) Have a monitoring and warning feature that alerts the flightcrew when its charge state falls below acceptable levels if its function is required for safe operation of the airplane;

(i) Have a means to disconnect from its charging source in the event of an over-temperature condition, cell failure, or battery failure.

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority, as it updates airspace descriptions.

The FAA published a notice of proposed rulemaking for Docket No. FAA 2023-1692 in the Federal Register (88 FR 54248; August 10, 2023), proposing to establish Class E airspace for Fauquier Hospital Emergency Transport Heliport, Warrenton, VA. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received.

Class E airspace is published in paragraph 6005 of FAA Order JO 7400.11, Airspace Designations and Reporting Points, incorporated by reference in 14 CFR 71.1 annually. This document amends the current version of that order, FAA Order JO 7400.11H, dated August 11, 2023, and effective September 15, 2023. FAA Order JO 7400.11H is publicly available as listed in the ADDRESSES section of this document. These amendments will be published in the next FAA Order JO 7400.11 update. FAA Order JO 7400.11H lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This action establishes Class E airspace extending upward from 700 feet above the surface within a 6.0-mile radius of Fauquier Hospital Emergency Transport Heliport, Warrenton, VA.

Controlled airspace is necessary for the area's safety and management of instrument flight rules (IFR) operations. This action is necessary to support IFR operations in the area.

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 will only affect air traffic procedures and air navigation, it is certified that this proposed rule, when promulgated, will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1F, “Environmental Impacts: Policies and Procedures,” paragraph 5-6.5.a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

The Entity List (supplement no. 4 to part 744 of the EAR (15 CFR parts 730-774)) identifies entities for which there is reasonable cause to believe, based on specific and articulable facts, that the entities have been involved, are involved, or pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States, pursuant to § 744.11(b). The EAR impose additional license requirements on, and limit the availability of, most license exceptions for exports, reexports, and transfers (in-country) when a listed entity is a party to the transaction. The license review policy for each listed entity is identified in the “License Review Policy” column on the Entity List, and the impact on the availability of license exceptions is described in the relevant Federal Register document that added the entity to the Entity List. The Bureau of Industry and Security (BIS) places entities on the Entity List pursuant to parts 744 (Control Policy: End-User and End-Use Based) and 746 (Embargoes and Other Special Controls) of the EAR.

The End-User Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and makes all decisions to remove or modify an entry by unanimous vote.

The ERC determined to add the following 49 entities to the Entity List: ACE Electronics (HK) Co., Limited; Alliance Electro Tech Co., Limited; Alpha Trading Investments Limited; Asia Link Shanghai Int'l Logistics Co., Ltd.; Benico Limited; Check IC Solution Limited; Chengdu Jingxin Technology Co. Ltd.; E-Chips Solution Co. Ltd.; Farteco Limited; Glite Electronic Technology Co., Limited; Global Broker Solutions Limited; Grants Promotion Service Limited; Guangdong Munpower Electronic Commerce Co. Ltd.; Huayuanshitong Technology Co. Ltd.; IMAXChip; Insight Electronics; Kingford PCB Electronics Co., Ltd.; Kobi International Company; Most Technology Limited; New Wally Target International Trade Co., Limited; Nuopuxun Electronic Technology Co., Limited; Onstar Electronics Co. Ltd.; Robotronix Semiconductors Limited; Rui En Koo Technology Co. Ltd; Shaanxi Yingsaeir Electronic Technology Co. Ltd.; Shanghai IP3 Information Technology Co. Ltd.; Shenzhen One World International Logistics Co., Limited; Shvabe Opto-Electronics Co. LTD.; Suntop Semiconductor Co., LTD.; Tordan Industry Limited; TYT Electronics Co. Ltd.; UCreate Electronics Group; Wargos Industry Limited; Win Key Limited; Xin Quan Electronics Hong Kong Co. Limited; ZeYuan Technology Limited; Zhejiang Foso Electronics Technology Co. Ltd.; Zixis Limited; and Zone Chips Electronics Hong Kong Co. Limited under the destination of China; C & I Semiconductor Co. Ltd. under the destinations of China and India; China Shengshi International Trade Ltd. under the destinations of China and the United Kingdom; PT Technology Asia Limited under the destinations of China and Finland; Elmec Trade OU under the destination of Estonia; Interquest GmbH under the destination of Germany; Abhar Technologies and Services Private Limited; and Innovio Ventures under the destination of India; LL Chip Elektrik Elektronic Paz; and Scitech Tasimacilik Ticaret Limited under the destination of Turkey; and Hulm al Sahra Elect Devices TR under the destination of the United Arab Emirates.

These entities are added to the Entity List for providing support to Russia's military and/or defense industrial base. Specifically, these entities supplied Russian consignees connected to the Russian defense sector with U.S.-origin integrated circuits after March 1, 2023. These integrated circuits are classified under Harmonized Tariff System (HTS)-6 codes 854231, 854232, 854233, and/or 854239. These HTS-6 codes are identified under supplement no. 4 to part 746 (Russian and Belarusian Industry Sector Sanctions Pursuant to § 746.5(a)(1)(ii)). All U.S.-origin items classified under these HTS-6 codes have been controlled for export and reexport and transfer within Russia since September 15, 2022. Such U.S.-origin items require a license under § 746.5(a)(1)(ii) of the EAR when destined to Russia or Belarus. 1

Therefore, the documented shipments by these entities to Russia of such U.S.-origin items are contrary to U.S. national security and foreign policy interests under §  744.11(b) of the EAR. All entities added by this rule have a license requirement for all items subject to the EAR, and a license review policy of denial.

For the reasons described above, this final rule adds 49 entities under the following 52 entries, including aliases where appropriate, to the Entity List:

• Nuopuxun Electronic Technology Co., Limited;

For the changes being made in this final rule, shipments of items removed from eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export, reexport, or transfer (in-country), on October 6, 2023, pursuant to actual orders for export, reexport, or transfer (in-country) to or within a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export, reexport, or transfer (in-country) without a license (NLR) before November 6, 2023. Any such items not actually exported, reexported or transferred (in-country) before midnight, on October 6, 2023, require a license in accordance with this final rule.

On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801-4852). ECRA provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule.

1. This rule has been determined to be not significant for purposes of Executive Order 12866.

2. Notwithstanding any other provision of law, no person is required to respond to or be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This regulation involves an information collection approved by OMB under control number 0694-0088, Simplified Network Application Processing System. BIS does not anticipate a change to the burden hours associated with this collection as a result of this rule. Information regarding the collection, including all supporting materials, can be accessed at https://www.reginfo.gov/public/do/PRAMain.

3. This rule does not contain policies with federalism implications as that term is defined in Executive Order 13132.

4. Pursuant to section 1762 of the Export Control Reform Act of 2018, this action is exempt from the Administrative Procedure Act (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date.

5. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. Accordingly, no regulatory flexibility analysis is required, and none has been prepared.

Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

On August 29, 2023, the Coast Guard was made aware by the Cianbro Companies of the Southport Swing Bridge rehabilitation and construction project in Southport, ME, Maine DOT Project WIN 021751.01. Marine construction actions will consist of coating repairs, replacement of the fender and pier system, full machinery and controls system upgrade, deck replacement and a number of structural repairs. During these construction activities work and crane barges are expected to block the channel and the bridge will be unable to open for vessel traffic. The Captain of the Port Sector Northern New England (COTP) has determined that potential hazards associated with the bridge construction would be a safety concern for anyone within a 50-yard radius of the center point of the bridge. If the project is completed prior to May 17, 2024, enforcement of the safety zone will be suspended and notice given via Broadcast Notice to Mariners, Local Notice to Mariners, or both. The Coast Guard anticipates that this safety zone period is the first in a several year multi-phase bridge construction and remediation project. The Coast Guard will consider comments in issuing a subsequent temporary interim rule or temporary final rule.

The Coast Guard is issuing this temporary interim rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because doing so would be impracticable and contrary to the public interest. The notice allowing the construction project to proceed and providing updated timelines for the project was only recently finalized and provided to the Coast Guard, which did not give the Coast Guard enough time to publish a NPRM, take public comments, and issue a final rule before the existing regulation expires. Timely action is needed to respond to the potential safety hazards associated with the construction and rehabilitation the Southport Swing Bridge. It would be impracticable and contrary to the public interest to publish a NPRM because we must establish the safety zone as soon as possible to protect the safety of the waterway users, construction crew, and other personnel associated with the bridge project. A delay of the project to accommodate a full notice and comment period would delay necessary operations, result in increased costs, and delay the completion date of the bridge project and subsequent reopening of the Southport Swing Bridge for normal operations.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . For reasons stated in the preceding paragraph, delaying the effective date of this rule would be impracticable and contrary to the public interest because timely action is needed to respond to the potential safety hazards associated with the project.

We are soliciting comments on this rulemaking. If the Coast Guard determines that changes to the temporary interim rule are necessary, we will publish a temporary final rule or other appropriate document.

Coast Guard is issuing this temporary interim rule under authority in 46 U.S.C. 70034. The COTP determined that potential hazards associated with this bridge construction and remediation project will be a safety concern for anyone within the work zone through May 17, 2024. The construction and remediation of the bridge will be extremely complex and present many safety hazards including overhead operations, potential falling debris, and barges positioned along the length of the bridge. In order to mitigate the inherent risks involved with the remediation of a bridge, it is necessary to control vessel movement through the area. The purpose of this temporary interim rule is to ensure the safety of the waterway users, the public, and construction workers for the duration of the bridge construction. In order to minimize such unexpected or uncontrolled movement of water no vessel may stop, moor, anchor, or loiter within the safety zone at any time unless receiving permission from the COTP or a designated representative. This temporary interim rule is needed to protect personnel, vessels, and the marine environment in the navigable waters within the safety zone during the bridge construction project.

This temporary interim rule establishes a temporary safety zone from October 23, 2023, through May 17, 2024. This rule will prohibit all persons and vessel traffic from the safety zone unless exceptions are authorized by the COTP or a designated representative.

The Coast Guard will notify the public and local mariners of this safety zone through appropriate means, which may include, but are not limited to, publication in the Federal Register , the Local Notice to Mariners, and Broadcast Notice to Mariners via marine Channel 16 (VHF-FM) in advance of any enforcement.

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

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under Executive Order 12866, 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 safety zone. The safety zone is only in effect for navigable water of the Townsend Gut within a 50-yard radius of the center point of the Southport Swing Bridge. This waterway is typically transited by smaller craft on an infrequent basis over the winter months. Vessel traffic is able to safely transit around this safety zone with a slight delay (approximately 30-120 minutes) by transiting around Southport Island to reach any destination on the other side of Townsend Gut. Additionally, the rule allows vessels to seek permission to enter the zone. Moreover, the Coast Guard will notify the public of enforcement of this rule via appropriate means, such as via Local Notice to Mariners and Broadcast Notice to Mariners via marine Channel 16 (VHF-FM).

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

While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this temporary interim 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 temporary interim rule. If this 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. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this 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 temporary safety zone that will prohibit entry within a 50-yard radius from the center of the Southport Swing Bridge during its construction and rehabilitation. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

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

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

Submitting comments. We encourage you to submit comments through the Federal Decision Making Portal at http://www.regulations.gov. To do so, go to https://www.regulations.gov, type USCG-2023-0815 in the search box and click “Search.” Next, look for this document in the Search Results column, and click on it. Then click on the Comment option. If your material cannot be submitted using http://www.regulations.gov, contact the person in the FOR FURTHER INFORMATION CONTACT section of this document for alternate instructions.

Viewing material in docket. To view documents mentioned in this rule as being available in the docket, find the docket as described in the previous paragraph, and then select “Supporting & Related Material” in the Document Type column. Public comments will also be placed in our online docket and can be viewed by following instructions on the https://www.regulations.gov Frequently Asked Questions web page. We review all comments received, but we will only post comments that address the topic of the rule. We may choose not to post off-topic, inappropriate, or duplicate comments that we receive.

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

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

In 1981, the Congress added section 1128A to the Social Security Act (the Act) (section 2105 of Pub. L. 97-35) to authorize the Secretary of Health and Human Services (the Secretary) to impose civil money penalties (CMPs) and assessments on certain health care facilities, health care practitioners, and other suppliers for noncompliance with rules of the Medicare and Medicaid programs. CMPs and assessments provide an enforcement tool for agencies to use to ensure compliance with statutory and regulatory requirements. These CMPs and assessments may be imposed in addition to potential criminal or civil penalties.

Since 1981, the Congress has increased both the number and the types of circumstances under which the Secretary may impose CMPs. Some CMP authorities address fraud, misrepresentation, or falsification, while others address noncompliance with programmatic or regulatory requirements. The Secretary has delegated the authority for certain provisions to either the Office of Inspector General (OIG) or Centers for Medicare & Medicaid Services (CMS). (See the October 20, 1994, notice, titled “Office of Inspector General; Health Care Financing Administration; Statement of Organization, Functions, and Delegations of Authority” (58 FR 52967).) A summary of these CMP changes is discussed in this section of this final rule.

In 1980, the Congress added section 1862(b) of the Act, which defined when Medicare is the secondary payer to certain primary plans. These provisions are known as the Medicare Secondary Payer (MSP) provisions of the Act.

Section 1862(b)(2)(A) of the Act prohibits Medicare from making payment if payment has been made, or can reasonably be expected to be made by any of the following primary plans:

• Group Health Plans (GHPs).

• Workers' compensation plans.

• Liability insurance (including self-insurance).

• No-fault insurance.

Medicare may make conditional payments, subject to Medicare payment rules, in situations where workers' compensation, liability insurance (including self-insurance), or no-fault insurance has not made payment or cannot be expected to make payment promptly. Any conditional payments that Medicare makes are subject to reimbursement from the primary plan. See section 1862(b)(2)(B) of the Act.

To enhance enforcement of the MSP provisions, section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173) added paragraphs (7) and (8) to section 1862(b) of the Act. These paragraphs established new mandatory reporting requirements regarding Medicare beneficiaries who have coverage under GHP arrangements, as well as when liability insurance (including self-insurance), no-fault insurance, or workers' compensation (collectively referred to as Non-Group Health Plans, or NGHPs) provide settlements, judgments, awards, or assume other payment responsibility for Medicare beneficiaries' care. Sections 1862(b)(7)(A) and (b)(8)(F) of the Act define those parties responsible for this reporting (collectively referred to as responsible reporting entities, or RREs). Under section 1862(b)(7)(A) of the Act, GHPs or third-party administrators are obligated to report beneficiary coverage; almost 1,000 entities are registered as GHP RREs, with 62 percent estimating between 1,000 and 100,000 individual beneficiaries to be reported annually. Under section 1862(b)(8)(F) of the Act, NGHP applicable plans are obligated to report settlements or when the entity otherwise assumes payment responsibility, and over 21,000 entities are registered as NGHP RREs, with the vast majority (88.29 percent) estimating fewer than 500 individual beneficiaries to report annually at the time of registration.

RREs are currently required to submit coverage information for Medicare beneficiaries including, but not limited to, when coverage begins or ends, or when a judgment, award, settlement, or other payment is made, on a quarterly basis through an electronic file submission process that may vary depending upon the number of beneficiary records being reported or updated. NGHP RREs who submit 500 or less claim reports per year are eligible to utilize the Coordination of Benefits Secure website (COBSW) Direct Data Entry (DDE) reporting option to add, update, or delete claim information. DDE submitters have the same responsibility and accountability as any other RRE. This coverage information primarily consists of enough identifying information to uniquely identify the Medicare beneficiary and confirm their beneficiary status, as well as information about the nature of the coverage (such as GHP or NGHP, coverage effective dates, policy limits, settlement amounts, and so forth). These section 111 of MMSEA reporting provisions did not alter any other existing statutory provisions or regulations. Further, these reporting provisions include authority for CMS to impose CMPs against entities that fail to comply with the section 111 of MMSEA reporting requirements under section 1862(b)(7) or (b)(8) of the Act, as amended by the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART Act). These provisions also require that GHPs and NGHPs that fail to comply with these reporting requirements shall be subject to a CMP of $1,000 and up to $1,000, respectively, for each calendar day of noncompliance. Imposition of penalties related to noncompliance with section 111 of MMSEA are required to be promulgated in regulation, which is the purpose of this rule.

In 2013, Congress enacted the SMART Act, which amended section 1862(b)(8)(E) of the Act, which includes the section 111 of MMSEA reporting requirements and describes the enforcement provisions for NGHPs that fail to comply with the reporting requirements. Specifically, the SMART Act revised section 1862(b)(8)(E) of the Act to state that NGHP applicable plans that fail to comply with the reporting requirements may be subject to a civil money penalty of up to $1,000 for each calendar day of reporting noncompliance required of NGHP applicable plans under section 1862(b)(8)(E) of the Act. The SMART Act also added section 1862(b)(8)(I) of the Act, which specifically required rulemaking actions regarding the enforcement of CMP provisions under section 1862(b)(8)(E) of the Act.

We note that the SMART Act did not amend any CMP provisions for GHP arrangements that have reporting obligations under section 1862(b)(7) of the Act. Such GHP arrangements remain subject to mandatory CMPs of $1,000 per calendar day of noncompliance and per individual for whom submission of information was required. In addition, the SMART Act directed rulemaking for NGHP applicable plans regarding the imposition and non-imposition of CMPs.

We further note that the statutory language speaks to “individuals,” though there are situations described that are specifically applicable to Medicare beneficiaries; we have attempted to be consistent with the usage of this statutory terminology but use the term “beneficiary” where it is more appropriate.

As the mandatory insurer reporting requirements themselves are self-implementing, we were able to gradually implement the reporting process from 2009 through 2011. The implemented reporting process included informal communications to RREs regarding their compliance with reporting requirements, including “compliance flags” in response to records that fail to meet specified criteria and even direct outreach to RREs. However, the implementation of civil money penalties for noncompliance requires formal rulemaking. In accordance with the rulemaking directed by the SMART Act, on December 11, 2013 (78 FR 75304), we published an advance notice of proposed rulemaking (ANPRM) titled “Medicare Secondary Payer and Certain Civil Money Penalties.” The December 2013 ANPRM solicited public comment on specific practices for which CMPs may or may not be imposed for failure to comply with MSP reporting requirements for certain GHP and NGHP arrangements.

We received 34 timely pieces of correspondence in response to the December 2013 ANPRM. In section I.D. of the February 18, 2020, proposed rule, we provided an analysis of the public comments received by subject area, with a focus on the most common issues raised, and briefly discuss how we proposed to address the issues raised by commenters in response to the 2013 ANPRM. Commenters expressed many of the same concerns and raised most of the same points that were raised in response to the proposed rule, published on February 18, 2020. While the proposed rule addressed these comments, alterations to the rule, as well as an evolving stakeholder landscape, resulted in many comments to the proposed rule being resubmitted in substantially similar form and content. Specifically, many commenters requested clarity around how a CMP would be calculated, the possibility of a sliding scale or tiered approach to levying CMPs, establishing a statute of limitations, and confirming that enforcement of the rule would be prospective only. For more detailed information on our analysis of the public comments on the ANPRM, please see the February 18, 2020, proposed rule (85 FR 8795 through 8797).

In the February 18, 2020, Federal Register (85 FR 8793), we published the proposed rule titled “Medicare Secondary Payer and Certain Civil Money Penalties.” In drafting the February 2020 proposed rule, we reviewed the public comments in response to our December 11, 2013, ANPRM (78 FR 75304), and other policy considerations. Accordingly, we proposed specific criteria for when CMPs would be imposed and proposed specific criteria for when CMPs would not be imposed, in circumstances when a GHP or an NGHP entity fails to comply (either on its own or through a reporting agent) with MSP reporting requirements specified under section 1862(b)(7) and (b)(8) of the Act. Further, we proposed to amend the amount of these CMPs, as set forth under 45 CFR 102.3 (Penalty adjustment and table).

We received 47 timely pieces of public correspondence on the February 18, 2020, proposed rule. Commenters included various group health plans and private insurance companies (non-group health plan insurers) as well as their representatives, special interest groups, and other interested individuals. Some comments addressed issues or expressed concerns that were outside the scope of this rule and were thus inappropriate to address in this venue. Of the remaining comments, there were many that expressed concern with various aspects of the proposed rule including the possible amount of CMPs, the process by which noncompliance would be discovered, and the proportionality of the possible penalties when compared to the severity of the noncompliance as well as the relative size of the entity against which a penalty was contemplated. In direct response to public comment, as well as substantial internal data analysis, CMS has revised the final rule to be responsive to the concerns of those entities that may be impacted by the rule.

The existing regulation at 42 CFR 402.1 describes the basis for imposition of CMPs against parties who violate the provisions of the Act. We proposed to add regulatory language under § 402.1(c), which would identify situations in which GHP and NGHP RREs would be subject to CMPs under sections 1862(b)(7) and (b)(8) of the Act. To accomplish this regulatory addition, we proposed the following regulatory revisions in § 402.1:

• Removing paragraph (c)(20), which currently refers to a provision that is no longer applicable regarding the imposition of CMPs for employers that fail to timely, and accurately report an employee's group health insurance coverage.

• Redesignating paragraph (c)(21) as paragraph (c)(20).

• Redesignating paragraphs (c)(22) through (34) as paragraphs (c)(23) through (35).

• Adding new paragraphs (c)(21) and (22), which will incorporate the new text finalized in this rule and all applicable provisions.

The existing regulation at 42 CFR 402.105(b) establishes the amounts of penalties assessed against parties who violate the provisions of the Act. We proposed to amend § 402.105(b) by revising paragraph (b)(2) and adding a new paragraph (b)(3). The proposed regulation at § 402.105(b)(2) would codify the amounts of penalties imposed against GHPs, and the proposed regulation at § 402.105(b)(3) would establish the amounts of penalties imposed against NGHPs.

In addition, we proposed to revise the regulations at 45 CFR 102.3 to establish the updated amounts for all CMPs at issue in these regulations.

Comment: Some commenters expressed concerns about the potential size of the CMPs that would be imposed and recommended developing a “sliding scale” or “tiered” CMP approach. These suggestions included scaling the amount of the CMP to be imposed based upon the intentions of the noncompliant entity, or upon whether an excess proportion of individual beneficiary records failed to be reported as required (in essence creating a safe harbor for a certain portion of records to not be reported as required), and other similar recommendations to limit the size of the CMP. Some commenters also noted the statutory discrepancy between the penalty amounts for GHP, which are $1,000 per day of noncompliance, and NGHP entities, which are up to $1,000 per day of noncompliance.

Response: We begin by noting that CMS does not have the authority to alter penalties for GHPs, as penalty amounts are stated in section 1862(b)(7) of the Act. In the proposed rule, we proposed that penalties for NGHP entities would parallel those for GHP entities. However, because CMS has the authority to adjust CMPs for NGHP entities, we are instead finalizing a tiered approach with respect to such entities, under which we will adjust penalty amounts based on the length of time that a report has been untimely. The full explanation of this approach appears in the next section of this document.

While ultimately the responsibility of the RRE, CMS is not unsympathetic to RREs in regard to those situations where a particular late submission was the result of a rare situation, system glitch, defect, or other problem that was unanticipated or out of the immediate control of the RRE. For this reason, an informal notice process will be implemented so that any RRE that receives notice that a CMP is pending against them will have an opportunity to examine their records and alert CMS to any discrepancies or mistakes that could mitigate or eliminate the potential penalty. This process is described in full detail later in this document.

Comment: Some commenters alleged that the amount of CMPs, in certain circumstances, are too high, excessive, disproportionate to the harm to the program, or unconstitutional.

Response: The amounts of the GHP CMPs are set by statute, in accordance with section 1862(b)(7)(B) of the Act, and CMS must enforce the amount as set by statute. While CMS has discretion to adjust CMPs for NGHPs under section 1862(b)(8)(E) of the Act, the statute does not authorize such discretion with respect to GHPs. In the proposed rule, we proposed that CMPs imposed against NGHPs would be aligned with those for GHP entities. However pursuant to this final rule, penalties for NGHP entities will instead be tiered based on the amount of time that a record has been late, or gone unreported, in accordance with the language of the statute which provides that penalties for NGHPs are up to $1,000 per day of noncompliance.

We originally proposed that CMPs may be levied in addition to any MSP reimbursement obligations identified using the reported information, but that CMS would not impose duplicative penalties. For example, failure to timely report the termination of coverage and then submitting the late termination in a manner that exceeds the error tolerance threshold for the fourth time in eight consecutive reporting periods, may meet the criteria for two potential CMPs with the submission of one record. However, we proposed that CMS would only impose a CMP once, and for the lesser of the two potential CMPs. This proposed limitation has been eliminated in the final rule as a result of being rendered unnecessary by the new audit methodology that will be employed.

The proposed regulations at § 402.1(c) identified circumstances where GHP and NGHP entities would be subject to CMPs for violation of sections 1862(b)(7) and (b)(8) of the Act. Following publication of the final rule, we intended to enhance monitoring of recovery process disputes and appeals that contradict reported data, as well as monitoring the reported data and performance over time to identify reporting that exceeded error tolerances. The proposed regulations at § 402.105(b) explained how we would calculate CMP amounts for GHP and NGHP entities that have reporting obligations under sections 1862(b)(7) and (b)(8) of the Act. Furthermore, proposed § 402.1(c) identified situations where GHP and NGHP RREs would not be subject to CMPs for violation of sections 1862(b)(7) and (b)(8) of the Act. The final rule will limit CMPs to only instances of noncompliance based on timely reporting, so as to greatly simplify the process by which CMPs are levied. The changes to the final rule are largely in response to stakeholder concerns raised in response to the ANPRM and proposed rule that alleged that the proposed process was confusing, punitive, and failed to serve the intended purpose of encouraging compliance and fostering collaboration with CMS. More information on this will be in the following section.

Under section 1862(b)(7) of the Act, a GHP RRE shall be subject to a CMP of $1,000 as adjusted annually under 45 CFR part 102 (currently $1,325 as of June 8, 2023; see 87 FR 15101)) for each calendar day of noncompliance for each individual for which the required information should have been submitted. Under section 1862(b)(8) of the Act, an NGHP RRE may be subject to a CMP of up to $1,000 as adjusted annually under 45 CFR part 102 (currently $1,325 as of June 8, 2023; see 87 FR 15101) for each calendar day of noncompliance with respect to each claimant. These CMPs would be in addition to any other penalties prescribed by law, and in addition to any MSP claim under section 1862(b) of the Act with respect to an individual.

In the proposed rule, CMS indicated that a penalty would be imposed if an RRE fails to report or update any GHP beneficiary record within the required timeframe (no more than 1 calendar year after GHP coverage effective date or the Medicare beneficiary's entitlement date, whichever is later). In the proposed rule, CMS proposed that the penalty be calculated on a daily basis, based on the actual number of individual beneficiaries' records that the entity submitted untimely (that is, beyond the required timeframe after the GHP MSP effective date). CMS proposed that the penalty be $1,000 (as adjusted annually under 45 CFR part 102) for each calendar day of noncompliance for each individual for which the required information should have been submitted, as counted from the day after the last day of the RRE's assigned reporting window where the information should have been submitted through the day that CMS received the information, up to a maximum penalty of $365,000 (as adjusted annually under 45 CFR part 102) per individual per year.

In the proposed rule, CMS also proposed a penalty if an RRE failed to report any NGHP beneficiary record within the required timeframe of no more than 1 year after the date of the settlement, judgment, award, or other payment (also referred to as the Total Payment Obligation to Claimant (TPOC)). CMS proposed that the penalty be calculated on a daily basis, based on the actual number of individual beneficiaries' records that the entity submitted untimely (that is, in excess of the required timeframe after the TPOC date). In the proposed rule, CMS proposed that the penalty be up to $1,000 (as adjusted annually under 45 CFR part 102) for each calendar day of noncompliance for each individual for which the required information should have been submitted, as counted from the day after the last day of the RRE's assigned reporting window where the information should have been submitted through the day that CMS received the information, up to a maximum penalty of $365,000 (as adjusted annually under 45 CFR part 102) per individual per year.

In the proposed rule, CMS also proposed that a CMP be assessed if a GHP's or NGHP's response to CMS recovery efforts contradicted the entity's section 111 of MMSEA reporting. For example, if an RRE reported and repeatedly affirmed ongoing primary payment responsibility for a given beneficiary, then responded to recovery efforts with the assertion that coverage for that beneficiary actually terminated 2 years prior to the issuance of the recovery demand letter. The penalty as proposed would have been calculated based on the number of calendar days that the entity failed to appropriately report updates to beneficiary records, as required for accurate and timely reporting under section 111 of MMSEA. In the proposed rule, for a GHP, CMS proposed that the penalty be $1,000 (as adjusted annually under 45 CFR part 102) for each calendar day of noncompliance for each individual for which the required information should have been submitted. For an NGHP, CMS proposed that the penalty be up to $1,000 (as adjusted annually under 45 CFR part 102) per calendar day of noncompliance for each individual, for a maximum annual penalty of $365,000 (as adjusted annually under 45 CFR part 102) for each individual for which the required information should have been submitted.

In the proposed rule, CMS also proposed that a penalty be assessed if a GHP or NGHP entity had reported and exceeded any error tolerance(s) threshold established by the Secretary in any 4 out of 8 consecutive reporting periods (as defined later in this section). We proposed that the initial and maximum error tolerance threshold would be 20 percent (representing errors that prevent 20 percent or more of the beneficiary records from being processed), with any reduction in that tolerance to be published for notice and comment in advance of implementation. We proposed that this tolerance would be applied as an absolute percentage of the records submitted in a given reporting cycle.

In this final rule, all other proposed avenues for receiving a CMP have been eliminated and the only method of noncompliance that would be ripe for a CMP would be untimely reporting, as fully explained in the following section.

Comment: Many commenters emphasized that this rule should not be aimed at those exhibiting “good faith efforts” or those who make an earnest attempt at reporting but may do so occasionally with error but instead be aimed at those who fail to report at all.

Response: It is not our intent to penalize RREs for honest, infrequent mistakes, but instead to only resort to penalty when an RRE fails to report or submits reports in an untimely manner. We acknowledge that the overwhelming majority of RREs report correctly and timely a majority of the time and commend those entities for working with CMS to provide accurate data. It is, therefore, CMS's shared opinion with commenters that the focus shall not be to punish and impose consequences but instead to motivate proper reporting and maintain compliance with existing statute and regulation. To that end, CMS is adopting an audit approach in this final rule whereby we will audit a randomized sample of new beneficiary records received each quarter, rather than undertaking an automated review of all records submitted, as proposed. By using this random auditing approach, CMS will be better able to monitor trends in reporting, via manual review of said records, rather than a mass, computer-based algorithm, which will allow us to discover areas that appear to be more of a challenge for RREs without resorting to penalties that may be disproportionate to the level of noncompliance exhibited or have the effect of penalizing an entity for an honest mistake or system error. RREs will also be able to avail themselves of the informal notice and dispute process to alert CMS to their “good faith efforts” to report any records that CMS has identified as being out of compliance.

Comment: Some commenters raised concerns about the imposition of CMPs related to the reporting of Ongoing Responsibility for Medicals, (ORM). Specifically, these commenters cited difficulty with proper and timely reporting and understanding how to report ORM termination correctly.

Response: In the proposed rule, CMS proposed imposing penalties for failing to accurately and timely report ORM acceptance or termination. In the final rule, based on stakeholder concerns and submitted comments, CMS has chosen to focus its definition of noncompliance solely on those situations where an entity has failed to provide its initial report of primary payment responsibility in a timely manner. That means that untimely termination of ORM coverage records would not be considered eligible for a civil money penalty under this rule. While not a part of this final rule, we also note that CMS strives to engage with stakeholders, including RREs, about the reporting process and continuous process improvement efforts particularly as they relate to ORM, and will continue to do so in the future. We invite any RREs with concerns about ORM or any other aspect of reporting to proactively use the available outreach and education tools to address their questions.

We also wish to convey that time delays caused by CMS or its contractors in the reporting process will not trigger penalties related to timeliness. RREs must adhere to all applicable timelines, but any delay encountered when following CMS's policies and procedures will not be held against the RRE (for example, time delays related to processing by CMS contractors will not trigger any penalty).

Comment: A number of commenters suggested that CMS should develop a formal appeal process to provide entities with reporting obligations a formal structure in which to appeal any notice of a pending or imposed CMP.

Response: We note that CMPs imposed in accordance with this final rule will be subject to the formal appeals process as prescribed by 42 CFR 402.19 and set forth under 42 CFR part 1005. In broad terms, parties subject to CMPs will receive formal written notice at the time penalty is proposed. The recipient will have the right to request a hearing with an Administrative Law Judge (ALJ) within 60 calendar days of receipt. Any party may appeal the initial decision of the ALJ to the Departmental Appeals Board (DAB) within 30 calendar days. The DAB's decision becomes binding 60 calendar days following service of the DAB's decision, absent petition for judicial review.

Comment: Some commenters stressed the possibility of delays and uncertainty regarding their appeals due to backlogs at various stages of the administrative appeals process, and some suggested that CMS utilize a different appeals process.

Response: We affirm that CMS is bound by the appeal process as prescribed in 42 CFR 402.19 and set forth under 42 CFR part 1005.

Comment: Many commenters requested that CMS explain how it will provide notice to entities regarding pending or imposed CMPs and how much information will be included.

Response: We intend to communicate with the entity informally before issuing formal notice regarding a CMP. The informal (that is, prior to formal enforcement actions) written “pre-notice” process will allow the RRE the opportunity to present mitigating evidence for CMS review prior to the imposition of a CMP. The RRE will have 30 calendar days to respond with mitigating information before the issuance of a formal written notice in accordance with 42 CFR 402.7.

Common to all such instances where informal notice will be given is the intention to give the RRE an opportunity to clarify, mitigate, or explain any errors that were the result of a technical issue or due to an error or system issue caused by CMS or its contractors. It would be impractical and counter to the spirit of the informal notice process to regulate or enumerate all circumstances in which mitigating information could be provided or what that information should convey. As such, any mitigating factors or circumstances are welcomed, and a dialogue is encouraged in an attempt to find solutions that are short of imposing a CMP. We believe it is in the best interests of all RREs to leave the informal notice process open to any reasonable submission of mitigating factors so that we are free to entertain all such documentation without strict limits on what is, or is not, acceptable.

Once we determine that a CMP will be imposed (after the informal notice period) we will provide formal notice to the entity in writing in accordance with 42 CFR 402.7, which will contain information on the event that has triggered the proposed imposition of a CMP, the amount of the proposed CMP, and next steps for the entity, including a right to a hearing in accordance with 42 CFR 402.19 and part 1005.

Comment: Commenters suggested that CMS should not impose CMPs in situations where required information has already been reported to another agency or entity, such as the Department of Labor, or in situations where multiple entities have obligations to report the same information to CMS and one entity has already reported.

Response: Sections 1862(b)(7) and (b)(8) of the Act imposed certain unique requirements on specific entities to report data to CMS for the purposes of identifying those situations where another party has primary payment responsibility. These reporting requirements were imposed under the Act, regardless of whether another agency or entity requires the same or similar data (and such data must also be reported to CMS in the manner and form specified by the Secretary). The current Office of Management and Budget (OMB) control number assigned to this information collection effort, as required under the Paperwork Reduction Act, is 0938-1074.

Commenters provided examples of data submitted to other agencies that they believe are similar, but the data are not used for a comparable purpose to the data that is reported to CMS. Consequently, this data is neither in the same format that CMS systems require, nor is it the complete set of data that CMS needs for the proper coordination of benefits. Therefore, any attempt to create a data-sharing agreement that would render reporting to CMS truly duplicative would require that other agencies update their data collection efforts to align with CMS, despite the fact that those agencies may have no need for that data. Not only would that impose additional costs to the federal government to accommodate a relatively small number of entities, it would also undermine efforts under this rule to verify the accuracy or timeliness of the reporting. Therefore, it is impractical to attempt to promulgate such data sharing agreements and all RREs must continue to perform reporting as required by the Act.

Comment: Commenters suggested that CMS not impose CMPs when CMS has been able to coordinate benefits correctly or CMS has otherwise been able to recover any conditional payments made due to untimely or inaccurate reporting.

Response: The obligations to report under sections 1862(b)(7) and (b)(8) of the Act are separate and distinct from any other obligation with respect to MSP, including reimbursement. Providing accurate information in response to recovery efforts does not satisfy those obligations and the fact that we may be able to eventually correctly coordinate benefits and retain the right to pursue recovery does not negate the reporting obligations established under sections 1862(b)(7) and (b)(8) of the Act.

Comment: Most commenters requested a statute of limitations on the imposition of CMPs.

Response: We agree and will apply the 5-year statute of limitations as required by 28 U.S.C. 2462. Under 28 U.S.C. 2462, we may only impose a CMP within 5 years from the date when the noncompliance occurred.

Comment: Many commenters suggested that the statute of limitations should be 3 years.

Response: Under 28 U.S.C. 2462, the applicable statute of limitations is 5 years. Although section 1862(b)(2)(B)(iii) of the Act establishes a 3-year statute of limitations for certain actions, that provision applies only to legal actions CMS may utilize for the recovery of MSP debts. While recovery of conditional payments (overpayments) and the imposition of CMPs may appear, on their face, to be similar actions, they are unique and serve separate, distinct purposes and the statute of limitations applicable to the former does not also apply to the latter. An explanation and example of how this 5-year statute of limitations will apply is as follows: For failure to initially report the date of settlement or effective date of coverage timely (where applicable), noncompliance occurs on every day of non-reporting after the required timeframe for reporting has elapsed. For example, if the date of settlement is January 1, 2025, then the RRE will have 1 year from that date to report the coverage before being potentially subject to a CMP (that is, January 1, 2026). If the settlement date was January 1, 2025, but the RRE did not report it to CMS until October 15, 2026, the RRE will be considered noncompliant for the period of January 2, 2026, through October 15, 2026. If CMS does not act until after October 15, 2031, then the statute of limitations has elapsed and no CMP may be imposed.

Comment: Many commenters suggested that the rule should be enforced prospectively only.

Response: We concur and will evaluate compliance based only upon files submitted by the RRE on or after the effective date of the final rule. CMPs will only be imposed on instances of noncompliance based on those settlement dates, coverage effective dates, or other operative dates that occur after the effective date of this regulation and as such, there will be no instances of inadvertent or de facto retroactivity of CMPs. The 1-year period to report the required information before CMPs would potentially be imposed would begin on the latter of the rule effective date or the settlement or coverage effective dates which an RRE is required to report in accordance with sections 1862(b)(7) and (b)(8) of the Act.

Comment: Commenters suggested that CMS refrain from imposing CMPs where NGHPs with reporting obligations under section 1862(b)(8) of the Act make “good faith efforts” to obtain required information from individuals who are unwilling or unable to provide it. Some “good faith efforts” suggested included the following: (1) CMS could accept documentation signed by the individual stating that he or she is either not a Medicare beneficiary, or will not provide the NGHP entity with his or her Social Security Number (SSN) (full SSN or last 5 digits); and (2) CMS could accept a judicial order establishing that the individual is not required to provide his or her Medicare Beneficiary Identifier (MBI) or SSN to the NGHP entity.

Response: We note that concerns about “good faith efforts” were received from the NGHP industry and not the GHP industry during both rounds of comments, which we believe is reflective of the fundamental differences between the two industries and the relationships between those plans and the individuals in question. Our understanding is that NGHP applicable plans may at times be in an adversarial relationship with the reportable individual, whereas the reportable individual is typically the client of a GHP. To this end we understand the concern regarding privacy law or consumer protection statute violations, as were mentioned by some commenters.

In response to these comments, we stress that CMPs will not be imposed against NGHP entities where those entities have made good faith efforts, as outlined in this final rule, to obtain necessary reporting information. NGHP entities must document their efforts to obtain this reporting information and retain this documentation, as we retain the right to audit such documentation. In response to comments, we are finalizing a revised version of our proposal regarding how NGHPs may avoid being subject to CMPs where they have made sufficient efforts to obtain the necessary information. The revisions we are finalizing address commenter concerns regarding the type and number of communication attempts an RRE must perform, as well as documentation of express refusal by an individual or their attorney or representative to provide the requested information as a way to satisfy the obligation to attempt to collect that information.

Comment: Many commenters continued to suggest that CMS should specify a series of “safe harbors” that would preclude the assessment of a CMP.

Response: In this section, we outline two such safe harbors but acknowledge that other situations may exist where it is inappropriate to penalize an entity for noncompliance. We welcome RREs to use the informal or formal appeal process if there are other situations that the RRE believes makes it inappropriate to receive a CMP.

First, any untimely reporting that is the result of a technical or system issue outside of the control of the RRE, or that is the result of an error caused by CMS or one of its contractors would not be considered noncompliance for purposes of this rule. See a more thorough explanation in “Amount of CMPs”.

Second, any untimely reporting by an NGHP that is the result of a failure to acquire all necessary reporting information due to a lack of cooperation by the beneficiary will not lead to a CMP provided that certain standards are met. This situation is addressed in greater detail in section III.D. of this final rule and § 402.1(c)(22)(ii)(A) as finalized.

Comment: Commenters suggested that CMS consider suspending the imposition of CMPs where changes to mandatory reporting procedures require RREs to make significant revisions to the systems used to prepare the data for reporting.

Response: We will continue to provide a minimum of 6 months' (180 calendar days) notice prior to any changes in procedure, including systems alterations or changes to the required data elements, associated with section 111 of MMSEA required reporting to allow reporting entities adequate time to react. We will not assess any CMPs associated with a specific change for a minimum of 2 reporting periods following the implementation (effective date) of that policy or procedural change. As provided in § 402.1(c)(21)(ii)(A) and (c)(22)(ii)(C) as finalized, in the event we are unable to provide a minimum of 6 months' notice prior to implementing any reporting process changes (such as the addition of a new required data element), we will not impose any CMPs associated with that specific reporting process change for a minimum of 1 year after that change becomes effective. CMPs associated with any unchanged aspects of reporting may still be imposed during this time.

We solicited comments on our proposed approaches to imposing and not imposing CMPs, including our proposed methods of calculating CMP amounts. Our proposed approach to imposing CMPs was developed with the intention of giving entities meaningful opportunities to resolve most reporting issues, without the immediate risk that a CMP would be imposed. After consideration of the public comments we received, we have made a number of important revisions in this final rule.

As described in the proposed rule and earlier in this final rule, the amount of CMPs for GHPs is established in section 1862(b)(7)(B) of the Act, and, except for those situations and criteria described in this final rule, CMS does not have the authority to adjust the amount of the CMP levied on a GHP entity. In the case of NGHPs, where CMS is permitted discretion in the amount of the CMP, we are finalizing a tiered approach based upon the length of time for which a submission was untimely to better align the penalty to the severity of the noncompliance. In the case of GHPs, the statutory language at section 1862(b)(7)(B) of the Act does not allow this level of discretion, and CMS is therefore unable to adjust the amount of GHP-related CMPs.

The submission of information or documentation that serves to mitigate the noncompliance, or explain a technical error, will be considered on a case-by-case basis in an effort to prevent the imposition of a CMP at all.

Based on the comments we received, we have determined that we will only impose penalties where the initial report was not received in a timely manner. Penalties will not be imposed on any other basis, such as in relation to the quality of reporting. Timeliness is determined by comparing the date a record is submitted and accepted against the date CMS should have received the record. The date CMS should receive a record is determined by the effective date of coverage or the date of settlement (or settlement funding date if the funding of the settlement is delayed) plus 1 year (365 days). For every day a record is submitted that is past the date that CMS should have received the information, a penalty of up to $1,000 per day for NGHP RREs or $1,000 per day, in the case of GHP RREs, will be imposed.

No CMP will be imposed until at least 1 year (365 days) after the later of: (1) the applicability date of this final rule; or (2) the coverage effective date, or settlement date, an RRE is required to report. This is a minor change from the proposed rule which seeks to clarify that RREs will have at least 1 year from the rule applicability date before any CMP is contemplated. The date that information was submitted by the RRE will determine timeliness. Any delay that is the result of technical or administrative issues on the part of CMS or its contractors will not be held against the RRE for purposes of calculating whether reporting was timely.

In the proposed rule, we proposed that we would not impose a CMP in the following situations, where all of the applicable conditions are met:

• If an RRE reports any GHP beneficiary record that is reported on a quarterly submission timeframe within the required timeframe (not to exceed 1 year after the GHP effective date), or any NGHP beneficiary record that is submitted within the required timeframe (not to exceed 1 year after the settlement date or ORM effective date).

• If an RRE complies with any settlement reporting thresholds or any other reporting exclusions published in CMS's MMSEA Section 111 User Guides or otherwise established by CMS. Note that these thresholds are not defined in the regulatory text as they include operational thresholds that are currently subject to change on an annual basis per section 1862(b)(9)(B) of the Act as well as other operational thresholds for reporting that CMS elects to impose, such as the current $5,000 threshold for Health Reimbursement Arrangements, which are communicated to RREs through the MMSEA Section 111 User Guides. Our ability to implement such thresholds and operational exclusions, whether as statutorily mandated or to be responsive to stakeholder or litigation needs, is not altered by this regulation.

• If an NGHP entity fails to report timely because the NGHP entity was unable to obtain information necessary for reporting from the reportable individual, including an individual's last name, first name, date of birth, gender, MBI, or SSN (or the last 5 digits of the SSN), and the responsible applicable plan has made and maintained records of its good faith effort to obtain this information by taking all of the following steps:

++ The NGHP has communicated the need for this information to the individual and his or her attorney or other representative (if applicable) and requested the information from the individual and his or her attorney or other representative at least twice by mail and at least once by phone or other means of contact such as electronic mail in the absence of a response to the mailings.

++ The NGHP certifies that it has not received a response, or has received a response in writing that the individual will not provide his or her MBI or SSN (or last 5 digits of his or her SSN).

++ The NGHP has documented its efforts to obtain the missing information, such as the MBI or SSN (or the last 5 digits of the SSN) and the reason for the failure to collect this information.

The NGHP entity should maintain records of these good faith efforts (such as dates and types of communications with the individual) in order to be produced as mitigating evidence should CMS contemplate the imposition of a CMP. Such records must be maintained for a period of 5 years. The current OMB control number assigned to this information collection effort, as required under the Paperwork Reduction Act, is 0938-1074.

The final rule incorporates some of the provisions of the proposed rule and also revises some of the provisions as proposed. Additionally, the final rule clarifies how the identification of noncompliance will occur, which was not discussed in the proposed rule. Those provisions of this final rule that differ from the proposed rule are as follows:

The only basis for the imposition of a CMP will be untimely reporting of required information. The final rule removes all references in the proposed rule to “contradictory reporting” or “exceeding error tolerance” as a reason to impose a CMP. Specifically, any references to an applicable plan providing contradictory reporting, and any CMPs imposed as a result, that were proposed in 42 CFR 402.1(c)(21) and (c)(22), 402.105(b)(2) and (b)(3), or elsewhere, are removed and are not being finalized. As such, the following sections of the proposed regulations text have been removed and are not being finalized:

• Sections 402.1(c)(21)(ii) and (iii).

• Sections 402.1 (c)(22)(ii) and (iii).

• Sections 402.105(b)(2)(ii) and (iii).

• Sections 402.105(b)(3)(ii) and (iii).

To identify potential instances of noncompliance, rather than imposing CMPs based upon automated monitoring of all RRE submissions as contemplated in the proposed rule, we will utilize the following process to audit a randomized sample of recently added beneficiary records:

• CMS has determined that, given the time and resources necessary to accurately and thoroughly evaluate the accuracy of any submitted record, it would be possible to audit a total of 1,000 records per calendar year across all RRE submissions, divided evenly among each calendar quarter (250 individual beneficiary records per quarter).

• CMS will evaluate a proportionate number of GHP and NGHP records based on the pro-rata count of recently added records for both types of coverage over the calendar quarter under evaluation. For example, if over the calendar quarter being evaluated, CMS received 600,000 GHP records and 400,000 NGHP records for a total of 1,000,000 recently added beneficiary records, then 60 percent of the 250 records audited for that quarter would be GHP records, and 40 percent would be NGHP records.

• At the end of each calendar quarter, CMS will randomly select the indicated number of records and analyze each selected record to determine if it is in compliance with the reporting requirements as required by statute and defined herein.

• Noncompliance is defined as any time CMS identifies a new beneficiary record that was not reported to CMS timely. Timeliness is defined as reporting to CMS within 1 year of the date GHP coverage became effective, the date a settlement, judgment, award, or other payment determination was made (or the funding of a settlement, judgment, award, or other payment, if delayed), or the date when an entity's Ongoing Responsibility for Medicals (ORM) became effective. Failure to report timely prevents CMS from promptly and accurately determining the proper primary payer and taking the appropriate actions.

• For GHP entities, for any selected record that is more than 1 year (365 calendar days) late, a penalty of $1,000 per day (as adjusted) of noncompliance will be imposed as indicated herein.

• For NGHP entities, for any selected record determined to be noncompliant, a tiered approach to penalties will be implemented as described in detail in section III.C. of this final rule.

• To calculate the penalty imposed against an RRE, CMS will multiply the number of audited records found to be noncompliant by the number of days that each record was late (in excess of 365 days). The product will then be multiplied by the appropriate penalty amount, as described previously and below.

Because we have the statutory authority to adjust the amounts of penalties imposed on NGHP RREs, a tiered approach and cap on the total amount of penalties applicable to such RREs are being finalized in this rule. As explained previously, the statute does not permit us to extend this approach to GHP RREs. For any record selected via the random audit process described above where the NGHP RRE submitted the information more than 1 year after the date of settlement, judgment, award, or other payment (including the effective date of the assumption of ongoing payment responsibility for medical care); the daily penalty will be—

• $250, as adjusted annually under 45 CFR part 102, for each calendar day of noncompliance, where the record was reported 1 year or more, but less than 2 years after, the required reporting date;

• $500, as adjusted annually under 45 CFR part 102, for each calendar day of noncompliance, where the record was reported 2 years or more, but less than 3 years after, the required reporting date; or

• $1,000, as adjusted annually under 45 CFR part 102, for each calendar day of noncompliance, where the record was reported 3 years or more after the required reporting date.

Additionally, the total penalty for any one instance of noncompliance by an NGHP RRE for a given record identified by CMS will be no greater than $365,000 (as adjusted annually under 45 CFR part 102).

While we emphasize that all RREs are obligated to comply with their reporting obligations, CMS's approach to enforcement, where a randomized sample of records will be reviewed closely (as opposed to an automated review of all records), means that smaller entities are inherently much less likely to have their records audited for compliance. We also encourage entities that are smaller and less experienced with Medicare's coordination of benefits processes to take advantage of the resources and support available to ensure compliance.

A key change for the final rule is the expansion of the circumstances under which an NGHP entity may avoid CMPs for noncompliance caused by failure to obtain identifying information from an individual despite a good faith effort to do so.

In the proposed rule, we proposed providing NGHPs with the ability to document “good faith” efforts to obtain identifying information of reportable individuals. In the final rule, we are expanding this exemption. Specifically, as proposed in the proposed rule, NGHPs must make a total of three attempts to obtain the required information. At least two attempts to obtain the required information from the individual and his or her attorney must be by mail or electronic mail, but the final rule permits that the third attempt may be via telephone, electronic mail, or some other reasonable method.

Further, the final rule permits that, should an individual or their attorney or representative clearly and unambiguously decline to provide the information requested, no further attempts by the RRE to obtain the required information would be required. This documented refusal to provide the required information must be maintained for a minimum of 5 years, in accordance with the other requirements of this section of the rule.

We understand that NGHP RREs are concerned that attempts to obtain beneficiary information, particularly when in an adversarial relationship with the beneficiary, may be construed as running afoul of certain state and local privacy and anti-harassment laws. If the intent and purpose of the RRE's communications with beneficiaries was solely to comply with federal requirements, we believe any privacy or anti-harassment law would be preempted by the reporting requirements set forth in the Act.

All other parameters related to obtaining identifying information, including records retention requirements, are being finalized as proposed.

This document does not impose any new information collection requirements, that is, reporting, recordkeeping, or third-party disclosure requirements. The associated information collection requirements imposed under mandatory insurer reporting are already approved under OMB control number 0938-1074. Consequently, there is no need for review by the Office of Management and Budget under the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). We did not receive comments on the previous statement and therefore are finalizing the language without modification.

We have examined the impact of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993) and Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011) as amended by the Executive Order on Modernizing Regulatory Review on April 6, 2023), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104- 4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (CRA) (5 U.S.C. 804(2)).

Executive Orders 12866 and 13563, as amended by the Executive Order on Modernizing Regulatory Review on April 6, 2023, direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A Regulatory Impact Analysis (RIA) must be prepared for major rules with economically significant effects ($200 million or more in any 1 year). Modelling of potential penalties likely to be imposed under this rule demonstrates that this rule does not reach the economic threshold and thus is not considered a major rule.

Based on CMS workload and resource availability, the sampling methodology explained herein would result in a fixed number of submitted records to be audited each calendar quarter to determine compliance and potential penalty. At present, and absent a notice-and-comment period to alter such limit, CMS will audit up to 1,000 records each year, or up to 250 each calendar quarter. CMS has utilized the methodology as described in previous sections, in conjunction with utilizing data from the preceding calendar year regarding RRE reporting habits and volume, to determine the anticipated penalties that would be levied if no other changes in behavior were observed. Although we note that CMS believes that publication of the rule will have the intended effect of incentivizing increased compliance with reporting requirements in an effort to avoid a CMP, we have analyzed the existing data with no adjustments for subjective analysis. Assuming the rule had been in effect and CMPs could have been imposed based upon reporting behavior for calendar year 2022, the maximum penalties imposed would have been $86.4 million for GHP entities and $42.4 million for NGHP entities, for a total annual CMP amount of $128.8 million, which is below the $200 million threshold to be considered an economically significant rule. We also note that reporting behavior in this period may be skewed towards more untimely reporting, potentially reflecting efforts to come into compliance in advance of this rule becoming effective. Consequently, we believe this is a worst-case scenario and do not expect to collect CMPs totaling $200 million or more in any given year, nor do we expect this rule to have any other economic effects that meet or exceed that threshold.

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Most hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $7.0 million to $35.5 million in any 1 year. Individuals and States are not included in the definition of a small entity. We consider a rule to have a significant impact on a substantial number of small entities if it has at least a 3 percent impact of revenue on at least 5 percent of small entities. Affected entities with reporting responsibilities have been required to comply with sections 1862(b)(7) and (b)(8) of the Act since these provisions were added to the Act in 2007. This rule is intended to define how CMPs would be imposed as a consequence of noncompliance with these statutory obligations, and thus does not present any additional burden beyond the review of the rule. As discussed later in this section, the total cost impact of reviewing this rule by all 20,855 actively reporting RREs, regardless of size, is estimated to be $7,699,249, or $369.18 per entity. As the provisions and regulations, the violation of which will result in a CMP under this regulation, are already in place, no additional costs to comply with this regulation should be realized by any RRE. This regulation merely enumerates when and how CMPs will be levied but does not impose any additional rules or requirements on any RRE that does not already, at present, exist. This falls below the standard definition of “significance” of 3 or more of small entity revenue. As a result, we have determined, and the Secretary certifies, that this rule would not have a significant economic impact on a substantial number of small entities.

In addition, section 1102(b) of the Act requires us to prepare an RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 for the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this rule would not have a significant impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2023, the threshold is approximately $177 million. This rule will have no consequential effect on state, local, or tribal governments or on the private sector. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has Federalism implications. Since this final rule does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable.

We used the current number of actively reporting GHP RREs (1,039) and NGHP RREs (19,816) to determine the total number of impacted entities (20,855). We recognize that this is a slight overestimate, as a single corporate parent may have multiple associated RREs. We welcome any comments on the approach in estimating the number of entities which will review this rule.

Using the May 2022 wage information from the U.S. Department of Labor Bureau of Labor Statistics for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this rule is $123.06 per hour, based on doubling the mean hourly wage of $61.53 to include overhead and fringe benefits (see https://www.bls.gov/oes/current/oes119111.htm ). We assume that one individual associated with each of the 20,855 impacted entities will read the rule. Assuming an average reading speed, we estimate that it would take approximately 3 hours for the staff to review this rule. For each entity that reviews the rule, the estimated cost is $369.18 (3 hours × $123.06). Therefore, we estimate that the total cost of reviewing this rule is $7,699,249 ($369.18 × 20,855).

We did not receive additional comments on the regulatory impact statement section through the public comment period.

In accordance with the provisions of Executive Order 12866, this rule was reviewed by the Office of Management and Budget.

Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & Medicaid Services, approved this document on September 28, 2023.

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services proposes to amend 42 CFR chapter IV as set forth below:

For the reasons specified in the preamble, the Department of Health and Human Services amends 45 CFR part 102 as specified below: