I. Background

On July 29, 2016, Public Law 114-216 amended the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 et seq. ) (amended Act) to require USDA to establish a national, mandatory standard for disclosing any food that is or may be BE. USDA published a final rule (2018 BE final rule) promulgating the regulations (7 CFR part 66) to implement the Standard on December 21, 2018 (83 FR 65814). The regulations became effective on February 19, 2019, with a mandatory compliance date of January 1, 2022. Under 7 CFR 66.1, a BE food is a food that, subject to certain factors, conditions, and limitations, contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (rDNA) techniques and for which the modification could not otherwise be obtained through conventional breeding or found in nature.

The regulations, at 7 CFR 66.6, contain the List, which currently includes: alfalfa, apple (Arctic TM varieties), canola, corn, cotton, eggplant (BARI Bt Begun varieties), papaya (ringspot virus-resistant varieties), pineapple (pink flesh varieties), potato, salmon (AquAdvantage®), soybean, squash (summer), and sugarbeet. As stated in the preamble to the 2018 BE final rule, at 83 FR 65852, the List establishes a presumption about what foods require disclosure under the Standard. However, a food or food ingredient's absence from the List does not absolve regulated entities from the requirement to disclose the BE status of food and food ingredients produced with foods not on the List when the regulated entities have actual knowledge that such foods or food ingredients are BE. If a regulated entity is using a food or ingredient produced from an item on the List, it must make a BE food disclosure unless it has records demonstrating that the food or ingredient it is using is not BE. Similarly, even if a food is not on the List, a regulated entity must make a BE food disclosure if it has actual knowledge that a food or a food ingredient being used is a BE food or a BE food ingredient. In accordance with 7 CFR 66.7(a)(5), this final rule updates the List.

On July 22, 2022, AMS published a proposed rule in the Federal Register seeking public comment on recommendations to update the List (87 FR 43751). In the proposed rule, AMS sought comments on adding “sugarcane (Bt insect-resistant varieties)” to the List and amending “squash (summer)” to “squash (summer, mosaic virus-resistant varieties).” Pursuant to 7 CFR 66.7(a)(3), AMS consulted with the government agencies responsible for oversight of the products of biotechnology, Animal and Plant Health Inspection Service (APHIS), Environmental Protection Agency (EPA), and Food and Drug Administration (FDA), on the proposed updates to the List.

The comment period for the proposed rule closed on September 20, 2022. AMS received a total of 37 comments, out of which 36 comments were related to the proposed rule and one comment was unrelated. Commenters included individuals, consumer groups, companies, and organizations that represent different segments of the food industry. After reviewing the public comments, AMS is proceeding with this final rule to add “sugarcane (Bt insect-resistant varieties)” to the List and amend “squash (summer)” to “squash (summer, coat protein-mediated virus-resistant varieties).” Table 1 summarizes the final revisions to the List.

Most commenters supported the proposed rule overall, with many stating that they thought that the two proposed List updates would provide the public with accurate information on the BE status of foods. There was, however, opposition from two commenters about AMS's proposal to add “sugarcane (Bt insect-resistant varieties)” to the List. AMS has reviewed and considered the issues raised by commenters and provides its responses below.

AMS requested public comments on the proposed addition of “sugarcane (Bt insect-resistant varieties)” to the List.

Comment: Commenters both supported and opposed the addition of “sugarcane (Bt insect-resistant varieties)” to the List. Commenters in support of the addition of “sugarcane (Bt insect-resistant varieties)” expressed that it would provide more information to consumers. Commenters opposed to the addition of “sugarcane (Bt insect-resistant varieties)” expressed concern that this would place an undue burden on regulated industry for a product that was unlikely to be sold in the United States. Lastly, some commenters suggested that because sugar produced from “sugarcane (Bt insect-resistant varieties)” is highly refined, it does not contain detectable modified genetic material, it is not a BE food, and it should not be added to the List.

AMS Response: AMS has considered all the information provided to the agency related to the addition of “sugarcane (Bt insect-resistant varieties)” to the List. AMS has determined that the criteria identified in 7 CFR 66.7(a)(4) are met. “Sugarcane (Bt insect-resistant varieties)” has been authorized for commercial production in Brazil and is currently in legal commercial production for human food in Brazil. 1 There is no statutory or regulatory requirement that a BE food must be sold or grown in the United States for that food to be placed on the List. 7 CFR 66.7(a)(4) states that when determining if a food will be added to the List, “AMS will consider whether foods for inclusion on the List have been authorized for commercial production somewhere in the world, and whether the food is currently in legal commercial production for human food somewhere in the world.” AMS notes that the BE sugarcane grown in Brazil could be sold in the United States as an ingredient in single or multi-ingredient food products.

Additionally, AMS requested commenters provide any data and evidence that would suggest “sugarcane (Bt insect-resistant varieties)” is being used for seedling bulk up rather than human consumption but did not receive any information in response to this request.

AMS does not believe that the addition of “sugarcane (Bt insect-resistant varieties)” constitutes an undue burden for regulated entities. AMS notes that regulated entities, both domestic and foreign, likely will have customary and reasonable records in accordance with the Standard if they are maintaining records in compliance with other laws and regulations associated with the food sector (83 FR 65830). Records are required to substantiate a decision not to label under 7 CFR 66.9. The Standard at 7 CFR 66.302(a)(4) includes a non-exhaustive list of records that could satisfy the recordkeeping requirements. That list includes, but is not limited to, supply chain records, bills of lading, invoices, supplier attestations, contracts, or brokers' statements (such as those used to maintain compliance with the Perishable Agricultural Commodities Act); third party certifications (such as organic certifications provided by the USDA's National Organic Program); laboratory testing results, and validated process verifications. These records could also include country of origin records that show a product or ingredient is from a country that has not authorized a BE variety of the crop for commercial production.

In response to some commenters' statements that sugarcane is likely highly refined, AMS notes that the List establishes a presumption about what foods and food ingredients are or may be BE. Inclusion on the List does not affirmatively mean an item on the List, or a food produced from an item on the List, is a BE food. Rather, inclusion on the List establishes a presumption and requires a regulated entity to make a BE food disclosure unless it maintains records, in accordance with 7 CFR 66.9, to demonstrate genetic material is not detectable, or that the regulated entity or food qualifies for an exemption listed at 7 CFR 66.5.

Comment: One commenter opposed the addition of “sugarcane (Bt insect-resistant varieties)” to the List, noting that while the regulations require AMS to consider whether a food is authorized for commercial production somewhere in the world, and whether the food is currently in legal commercial production for human food somewhere in the world, AMS retains discretion as to its decision. Another commenter noted that in light of AMS's regulatory requirement to consider “all relevant information,” sugarcane should not be added to the List at this time.

AMS Response: As stated in the 2018 BE final rule that established the Standard, the List captures BE crops or foods that meet the statutory definition of bioengineering, based on existing technology, and that could potentially be offered for sale in the United States. 2 In addition, Section 66.1 of the Standard defines the List as a list, maintained and updated by AMS and provided in 7 CFR 66.6, of foods for which BE versions have been developed. Commenters did not dispute that there is a BE version of sugarcane and that a BE version of sugarcane is currently authorized for commercial production and is currently in legal commercial production for human consumption in Brazil.

AMS requested public comments on the proposed List update changing “squash (summer)” to “squash (summer, mosaic virus-resistant varieties).”

Comment: Most commenters supported updating “squash (summer)” on the List to include a modifier, and no commenters opposed the inclusion of a modifier. As with the addition of “sugarcane (Bt insect-resistant varieties),” commenters generally agreed that updating “squash (summer)” to include a modifier would provide additional information to consumers. Although no commenters were opposed to updating “squash (summer),” one commenter suggested revising the proposed modifier, which is discussed in the next comment discussion below. No commenters addressed AMS's questions requesting information on the market share of BE and non-BE squash.

AMS Response: AMS proposed to update the List entry for “squash (summer)” to “squash (summer, mosaic virus-resistant varieties)” to provide additional descriptive information to stakeholders, including regulated entities and consumers. This change would be consistent with the treatment of other items on the List, where modifiers are included to describe a trait, as is the case with eggplant, papaya, and pineapple. AMS believes the further revised modifier for squash serves these goals as detailed below.

Comment: A commenter stated that the proposed “mosaic virus-resistant varieties” modifier is not specific enough to provide meaningful information to consumers. The commenter asked AMS to change the proposed “mosaic virus-resistant varieties” modifier to a more technical modifier to provide more meaningful information to consumers.

AMS Response: The goal in adding a modifier to the List entry for squash is to narrow the presumption of what type of squash is considered BE. The preamble to the 2018 BE final rule states, “Where practical, the List includes specific information about individual crops and foods, such as descriptions or trade names, to help distinguish bioengineered versions of those foods from their non-bioengineered counterparts, as requested by commenters.”  3 Amending the modifier for squash to include a more specific descriptor would be consistent with the treatment of other items on the List, where descriptive modifiers are included. A request for comments published July 24, 2020, sought to narrow the scope of the List entry for squash to serve this goal. 4 AMS received 22 comments on the request for comments, and later the proposed rule, supporting a modifier as it would provide additional information to consumers.

The proposed modifier in the request for comments was to amend “squash (summer)” to “squash (summer, virus-resistant varieties).” Comments on the request for comments suggested using a trade name; however, as explained in the proposed rule, the availability of two squash varieties in legal commercial production precludes this option. 5 6 Both varieties provide resistance to mosaic viruses, so the proposed modifier was updated to “mosaic virus-resistant varieties” in the proposed rule. Despite this further refinement, a commenter still noted the modifier was too broad in a comment on the proposed rule.

In response to the comment on the proposed rule, AMS researched whether the modifier was still too broad and if further refinement was indeed required. AMS concluded that further refinement was needed to provide more specific information to regulated entities and consumers on squash varieties requiring disclosure. As technology advances and new squash varieties are developed, the modifier may need further refinement. The originally proposed modifier, “mosaic virus-resistant varieties”, covers the two BE squash varieties mentioned above, it would also cover squash varieties that are not BE. “Mosaic virus-resistance” specifies the result of the trait, namely that the squash is less susceptible to diseases caused by mosaic virus pathogens  7 “mosaic virus resistance” to describe both BE and non-BE squash that are resistant to mosaic viruses. The two BE squash varieties mentioned above are mosaic virus resistant. 5 6 Non-BE squash varieties could be more resistant to viruses naturally  7 or as a result of conventional breeding, 8 9 10 the result would be a mosaic virus-resistant squash that is not BE. AMS believes that it should refine the modifier to include all BE squash varieties and exclude all non-BE squash varieties.

AMS considered several options for a modifier that would accomplish the above goals and be narrower than “mosaic virus-resistant varieties.” Use of a trade name was not possible, as explained above, because of the availability of two BE squash varieties. The terms “transgenic virus resistance”  11 and “genetically engineered virus resistance”  12 would narrow the “mosaic virus-resistant varieties” modifier. These two modifiers describe the process used to achieve the virus resistance trait; however, the terms “transgenic” and “genetically engineered” are not defined in the Standard. AMS believes that using terms like “transgenic” or “genetically engineered” may create inconsistency with the Standard's scope of disclosure.

“Pathogen-derived resistance”  13 has been used to describe the traits found in BE squash. However, this modifier is broad and could refer to bacterial or fungal resistance, 14 not just virus resistance. Therefore, it would not be wholly accurate and would not narrow the proposed modifier, “mosaic virus-resistant varieties”. “Coat protein-mediated protection”  15 and “coat protein-mediated virus resistance”  16 17 refer specifically to the trait found in BE squash varieties. Both these terms explain a subset of pathogen derived resistance in which a gene from a virus is added to a plant genome through biotechnology. The added viral coat protein gene then slows or prevents subsequent viral infection. AMS determined that “coat protein-mediated virus resistance” is the preferred terminology as it is more descriptive than “coat protein-mediated protection,” and it is used by academics and the industry. AMS believes the preferred term is more helpful to regulated entities and consumers. Both varieties of BE squash mentioned above use coat protein-mediated virus resistance to achieve mosaic virus resistance. Only BE squash is known to have coat protein-mediated virus resistance. The “coat protein-mediated virus-resistant varieties” modifier is more specific than “mosaic virus-resistant varieties” and currently pertains only to mosaic virus resistance achieved in BE squash varieties. 18 Therefore, the “coat protein-mediated virus-resistant varieties” modifier encompasses both BE varieties of squash without including any non-BE varieties. AMS believes that this modifier narrows the List entry for squash and will amend the List using this modifier. With the addition of the modifier, summer squash that is not a coat protein-mediated virus-resistant variety will no longer be presumed to be a BE food.

AMS consulted with the government agencies responsible for oversight of the products of biotechnology, APHIS, EPA, and FDA, regarding the two updates to the List, including the updated “coat protein-mediated virus-resistant varieties” modifier. Representatives from APHIS and FDA had no comments on the use of “coat protein-mediated virus-resistant varieties” for the modifier used on the List. EPA suggested adding “gene” to the modifier: “coat protein gene-mediated virus-resistant varieties.” EPA's suggestion would clarify that “coat protein” is the name of the gene that encodes the coat protein of a virus and that it is the presence of the gene in BE squash that confers resistance to mosaic viruses, rather than the protein product of the gene. While EPA's proposed modifier may provide more scientific clarity, AMS will use “coat protein-mediated virus-resistant varieties” without adding “gene.” AMS believes adding “gene” to the commonly used, AMS-preferred term would not provide any additional insight for consumers in identifying what foods are presumed to be a BE food.

Commenters expressed that the proposed amendment would create burdens in connection with recordkeeping for sugarcane. They recommended that sources, trade names, and modifiers should be included on the List to minimize the recordkeeping burden of substantiating a determination not to disclose. One commenter stated that AMS's economic analysis was flawed. The commenter stated that AMS miscalculated the costs associated with the use of sugarcane in products, underestimating the time and resources required to comply with the recordkeeping requirements. The commenter also stated that AMS calculated estimated costs by erroneously considering only Universal Product Codes (UPCs) that use cane sugar as an ingredient. The commenter contends that this analysis does not account for the costs incurred by regulated entities with those UPCs that contain other ingredients made from BE foods and crops in addition to cane sugar. The commenter's position is that these regulated entities would incur costs associated with their use of cane sugar regardless of whether the final product contains other BE ingredients or ingredients derived from BE sources.

AMS Response: AMS has considered all information provided to the agency related to the modifier for sugarcane and has determined “sugarcane (Bt insect-resistant varieties)” to be the most precise naming convention to minimize the recordkeeping burden. The List includes specific information about certain individual crops and foods, such as modifiers or trade names, to help distinguish BE versions of those foods from their non-BE counterparts. The specificity of the sugarcane modifier “Bt insect-resistant varieties” is intended to identify foods for which disclosure may be necessary, based on the regulated entities' records. There would be no presumption that sugarcane or sugarcane-derived ingredients would be BE unless they were sourced from Bt insect-resistant varieties. Regulated entities may refer to the AMS website to obtain additional information regarding the associated BE events for crops or foods they are sourcing and determine whether they need to make a disclosure.

Products with potential BE ingredients (other than cane sugar) do not need to be added into the calculation for recordkeeping costs (since the recordkeeping costs associated with those ingredients are already included in the cost of the baseline program). Products that could use BE varieties of sugarcane, but list only “sugar” as an ingredient already require recordkeeping under the Standard and thus were not considered when estimating costs associated with this rule. If a regulated entity was already disclosing a BE food, their disclosure requirements would not change, nor would they incur additional costs.

Customary and reasonable records can be used to justify non-disclosure for sugarcane-containing products. For further details on the economic analysis, see Section III.D of this rule.

Comment: Commenters explained that recordkeeping for refined sugars typically does not follow standard recordkeeping specifications that track the sugar back to its source. Commenters further stated that generating records and coordinating with suppliers and laboratories for such records is a significant cost. Due to these obstacles, commenters requested a 24-month enforcement discretion period for recordkeeping of sugarcane.

AMS Response: The final rule at 7 CFR 66.7(b) states that, “regulated entities will have 18 months following the effective date of the updated List of Bioengineered Foods to revise food labels to reflect changes to the List in accordance with the disclosure requirements.” After considering input from commenters and other available information when drafting the 2018 BE final rule, AMS recognized that regulated entities should have sufficient time to transition their recordkeeping and labeling processes and procedures to implement the BE disclosure requirements. AMS continues to believe that regulated entities will have sufficient time to update recordkeeping procedures and to revise food labels to reflect changes to the List contained in this update within the 18-month compliance phase-in period.

Comment: Commenters requested increased outreach and education to consumers on BE foods to include definitions for the descriptions of resistant varieties.

AMS Response: AMS intends to update the List on its website consistent with this final rule. Any definitions for the modifiers of resistant varieties included in this final rule will be reflected on the AMS website. The AMS website provides consumers and regulated entities with additional information including FDA-reviewed BE events in the food supply, BE varieties, trade names, source, and traits ( e.g., non-browning, pesticide resistance, virus resistance, enhanced growth, etc.) for items on the List. While the List names each food known to have a BE variety, this additional information on the website seeks to enumerate each available BE variety. Regulated entities can use this information, to better understand if their products require a BE disclosure. Similarly, consumers can use this information to understand the types of BE products available. AMS will continue to update the website and corresponding outreach materials as new information becomes available.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the information collection related to the Standard has previously been approved by OMB and assigned OMB No. 0581-0315—National Bioengineered Food Disclosure Standard. AMS estimates that changes in the recordkeeping burden due to the proposed revisions to the List would be minimal.

Generally, the records necessary to substantiate the need for a disclosure are customary and reasonable, and maintained in the usual course of business. The same records would be required to substantiate a decision not to label under 7 CFR 66.9. Limiting reporting to specific varieties of summer squash does not impact recordkeeping. Entities may still be subject to an examination of customary or reasonable records for summer squash following a BE audit, as outlined in 7 CFR 66.402.

AMS requested comments with data or information on market share or proportion of squash of virus-resistant varieties and the number of entities that might be impacted by this change as part of the proposed rule during the 60-day comment period. While AMS received two comments during the open comment period for the Information Collection renewal request published in 2022, 19 those comments were not substantive and did not include any data or comments on market share or proportion of virus-resistant varieties of squash.

AMS has considered the potential civil rights implications of this final rule on minorities, women, or persons with disabilities to ensure that no person or group shall be discriminated against based on race, color, national origin, gender, religion, age, disability, sexual orientation, marital or family status, political beliefs, parental status, or protected genetic information. This review included persons that are employees of the entities that are subject to these regulations.

The 2018 BE final rule offers several distinct avenues of compliance for regulated entities that can be tailored to the needs of their consumers. This final rule to update the List of BE Foods does not alter those options. No persons or groups are denied the benefits of the program nor are any persons or groups subjected to discrimination by making amendments to the List. The amended Act is a federal law that established a national, mandatory standard for disclosing any food that is or may be BE. The law applies generally to all persons conducting business subject to the Standard. Congress declared in the amended Act that “a sound, efficient, and privately operated system for distributing and marketing agricultural products is essential to a prosperous agriculture and is indispensable to the maintenance of full employment and to the welfare, prosperity, and health of the Nation”. 20

USDA, AMS' Food Disclosure and Labeling Division administers and enforces the Standard and its regulations and is responsible for establishing new rules as needed. This final rule updates the List of BE Foods at 7 CFR 66.6 by adding “sugarcane (Bt insect-resistant varieties)” to the List and amending “squash (summer)” to “squash (summer, coat protein-mediated virus-resistant varieties)” under the Standard. Regulated entities, subject to this final rule, and consumers who benefit from the rule, would not be required to apply to any program or opt-in to participate. This final rule is not intended to: (1) opt-in any stakeholder to participation under the AMS final rule; and/or (2) recruit any stakeholder including consumers, retailers, manufacturers, or importers. The regulation acts as a federal law that would establish the requirement for BE food disclosure to consumers; and regulated entities that fail to disclose would be subject to an investigation and results reported on the AMS website.

This rule has been reviewed in accordance with the requirements of Executive Order 13175—Consultation and Coordination with Indian Tribal Governments. Executive Order 13175 requires Federal agencies to consult with Tribes on a government-to-government basis on policies that have Tribal implications, including regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes or the distribution of power and responsibilities between the Federal Government and Indian Tribes.

This final rule may impact individual members of Indian Tribes that operate as food manufacturers or retailers; however, AMS has determined that this final rule does not have a direct effect on Tribes or the relationship or distribution of power and responsibilities between the Federal Government and Indian Tribes that would require consultation. AMS continues to engage with Tribes on such changes, including through teleconference calls on March 11, 2021, and July 22, 2021, where AMS provided Tribal representatives with an overview of the upcoming proposed rule that would add “sugarcane (Bt insect-resistant varieties)” to the List, amend “squash (summer)” to include the modifier “mosaic virus-resistant varieties” and extended the opportunity for questions and requests for additional information. At that time, AMS received no questions or requests from Tribal representatives.

On September 20, 2022, the comment period for the proposed rule closed. Only one comment out of 37 comments received on the proposed rule was identified as being submitted from a Tribal representative. The commenter acknowledged the proposed rule provides transparency to the consumer about BE foods and stated that the Tribal groups have not yet seen if certain groups will be affected, but the exemptions seem to offer such groups with a cushion. AMS will continue to extend outreach to ensure Tribe members are aware of the requirements and benefits under this final rule once effective. Where Tribes request consultation on relevant matters that are not required under legislation, AMS will collaborate with the Office of Tribal Relations to ensure meaningful consultation is provided.

USDA is issuing this final rule in conformance with Executive Orders 12866 and 13563, which 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, which include potential economic, environmental, public health and safety effects, distributive impacts, and equity. Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 reaffirms, supplements, and updates Executive Order 12866 and further directs agencies to solicit and consider input from a wide range of affected and interested parties through a variety of means. This rule has been designated “Significant” under Executive Order 12866 as amended by Executive Order 14094. To provide sufficient time to help mitigate impacts to regulated entities, pursuant to 7 CFR 66.7(b), regulated entities have 18 months following the effective date of the updated List of Bioengineered Foods to revise food labels to reflect changes to the List in accordance with the disclosure requirements of this part.

AMS identified three benefits of this rule. First it fulfills the regulatory responsibility to update the List according to 7 CFR 66.7. Sugarcane has satisfied the criteria for inclusion, as does the amendment to squash; in addition, the amendment to squash was initiated by a comment from the stakeholder. The updates in this final rule inform consumers whether certain products are BE, and aid regulated entities in determining if their product requires disclosure. Second, this rule provides specific information to consumers about the types of BE foods that are or could become available for retail sale. Third, this rule removes the presumption that all summer squash is BE and now only “coat protein-mediated virus-resistant varieties” will be presumed to be BE.

Cost changes due to this action will be limited to the addition of “sugarcane (Bt insect-resistant varieties)” to the List because regulated entities have already incurred costs associated with the inclusion of summer squash on the List. More specifically, processors and retailers of summer squash are already required to keep records to justify their decision to label or not label their product. The addition of a new modifier to summer squash does not absolve regulated entities of the recordkeeping responsibility. The number of BE “squash (summer, coat protein-mediated virus-resistant varieties)” that must be labeled will remain the same as the number of BE “squash (summer)” that were required to be labelled pursuant to the original List in the 2018 BE final rule. All BE squash still must bear a disclosure. With the addition of the modifier, summer squash that is not a coat protein-mediated virus-resistant variety will no longer be presumed BE. The record keeping burden for regulated entities selling summer squash, or products with summer squash ingredients will also remain the same, since regulated entities are required to maintain records demonstrating that their product is not BE to satisfy the requirements of 7 CFR 66.302.

The addition of “sugarcane (Bt insect-resistant varieties)” to the List would not significantly increase the cost of compliance with, or enforcement of, the BE labeling requirements. To estimate the cost of this action, we used the Label Insight Database to determine the number of products that use sugarcane as an ingredient, and which have no other ingredients that would otherwise require labeling of the product as BE as described in the Regulatory Impact Analysis for the 2018 BE final rule on page 19. 21 A total of 10,600 individual UPCs were identified using this criterion. Products that could use BE varieties of sugarcane, but list only “sugar” as an ingredient already require recordkeeping under the Standard and thus were not considered when estimating costs associated with this rule.

Increased costs associated with this rule are analytical costs and testing costs. Analytical costs represent the administrative costs of determining applicability of the Standard to products and compiling any records that may be required. Testing costs represent the costs that regulated entities would incur to test their products for detectable modified genetic material. The upper and lower bounds of the estimate were calculated by multiplying 10,600 UPCs by the unit cost for testing for detectability (unit cost range: $153-$431) and for analytical costs (unit cost range: $376-$3,084) as described in the Regulatory Impact Analysis for the 2018 BE final rule. 22 This is likely an overestimate of costs, as a test may be used to cover multiple UPCs. For example, different sizes of the same product would have different UPCs yet require only a single test for the product. AMS estimates that the costs associated with this action would range from $6 million to $37 million for the initial year, with no ongoing annual costs and no significant change in benefits. The annualized cost would be between $500,000 and $3.5 million (annualized over 20 years using a seven percent discount rate). Most of the estimated costs are related to a one-time deliberation and potential testing by food manufacturers to confirm the source of sugar used in their products and to comply with recordkeeping and labeling requirements.

AMS has examined the economic implications of this final rule as required by the Regulatory Flexibility Act (5 U.S.C. 601-612). If a rule has significant economic impact on a substantial number of small entities, the Regulatory Flexibility Act requires agencies to analyze regulatory options that would lessen the economic effect of the rule on small entities, consistent with statutory objectives. AMS has concluded that the rule will not have a significant economic impact on a substantial number of small entities.

The addition of “sugarcane (Bt insect-resistant varieties)” and amendment of “squash (summer)” to “squash (summer, coat protein-mediated virus-resistant varieties)” to the List would directly affect three industry sectors: manufacturers that process sugarcane, processed food manufacturers that use sugarcane or summer squash as ingredients, and grocery or other retailers that sell raw sugarcane or summer squash.

According to the 2017 Study of U.S. Business (SUSB) from the U.S. Census, there were 37 manufacturers that process sugarcane in the United States. Approximately 32 of these manufacturers would meet the Small Business Administration definition of small. Of the 32 small firms, 11 would also qualify as very small food manufacturers under the Standard and would be exempt from disclosure requirements. Accordingly, those 11 firms would incur no costs associated with the addition of “sugarcane (Bt insect-resistant varieties)” to the List. The remaining 21 small firms would not likely face significant costs as they only have one product and are likely to know where the cane for their sugar originates. At this time “sugarcane (Bt insect-resistant varieties)” is grown commercially only in Brazil. If “sugarcane (Bt insect-resistant varieties)” becomes more prevalent, manufacturers that process sugarcane may incur additional costs associated with substantiating non-disclosure ( e.g., maintaining customary and reasonable records on the origin of the sugarcane processed into sugar, certification costs associated with demonstrating that the final product has no detectable modified genetic material). If the refinement of cane sugar, like beet sugar, would verifiably not contain detectable modified genetic material and therefore would not be BE, cane sugar producers would face minimal labeling costs.

Processed food manufacturers that use sugarcane as an ingredient will need to determine whether the sugar they use is BE—assuming sugar made from “sugarcane (Bt insect-resistant varieties)” makes it into the U.S. market. Most food manufacturers already face costs associated with determining whether their ingredients are BE and maintaining records to demonstrate that determination. The marginal cost associated with an additional ingredient is expected to be small. As noted in section III(D) of this rule, the costs associated with this final rule will be limited to administrative costs to analyze applicability of the rule and compliance and validation testing to determine the presence of detectable modified genetic material in affected products. As with beet sugar, it is unlikely that refined sugarcane would contain detectable levels of modified genetic material. As a result, regulated entities may not have additional labeling costs due to the addition of “sugarcane (Bt insect-resistant varieties)” to the List.

Food manufacturers whose products contain summer squash and retailers that sell uncooked summer squash will see no change in costs as the amendment to the List would reduce the varieties of squash that are presumed to be a BE food. Food manufacturers whose products contain summer squash and retailers that sell uncooked summer squash are already maintaining records or labeling relevant products in accordance with the Standard.

Food manufacturers that use summer squash are likely concentrated in Fruit and Vegetable Preserving and Specialty Food Manufacturing (The North American Industry Classification System (NAICS) 3114). This industry sector had 1,540 firms listed in the 2017 Statistics of US Businesses. Of these, approximately 1,475 would be classified as small. Additionally, 904 firms would be classified as very small food manufacturers by the Standard and are therefore exempt. Food manufacturers already face the administrative costs associated with using a product on the List. The final rule would make it easier for regulated entities, who are already maintaining records in compliance with the Standard, to demonstrate that labeling is not required if they know they are not receiving BE varieties. Costs to small food manufacturers using summer squash therefore will remain unchanged by this proposal.

Retailers will not see a change in the number of labels required as a result of the change in the modifier of summer squash or by the addition of sugarcane. Summer squash that meets the requirement for disclosure under the 2018 BE final rule will also meet the requirement for disclosure under this amendment. The same number of labels are required under the two rules. Therefore, the cost to retailers will remain unchanged. Therefore, the costs to each of the three affected industry sectors would not be significant. For these reasons, AMS is certifying that this rule to add “sugarcane (Bt insect-resistant varieties)” to the List and limiting the varieties of squash listed as BE foods to “summer, coat protein-mediated virus-resistant varieties” will not have a significant economic impact on a substantial number of small entities.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. The final rule is not intended to have retroactive effect. All labeling claims made in conjunction with this regulation must be consistent with other applicable Federal requirements. There are no administrative procedures that must be exhausted prior to any judicial challenge to the provisions of this rule.

Pursuant to Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (the Congressional Review Act), the Office of Information and Regulatory Affairs has determined that this action does not meet the criteria set forth in 5 U.S.C. 804(2).

For the reasons stated in the preamble, the Agricultural Marketing Service amends 7 CFR part 66 as set forth below:

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) amended TILA to add special appraisal requirements for “higher-risk mortgages.”  1 In January 2013, the Agencies jointly issued a final rule implementing these requirements and adopted the term “higher-priced mortgage loan” (HPML) instead of “higher-risk mortgage” (the January 2013 Final Rule). 2 In July 2013, the Agencies proposed additional exemptions from the January 2013 Final Rule. 3 In December 2013, the Agencies issued a supplemental final rule with additional exemptions from the January 2013 Final Rule (the December 2013 Supplemental Final Rule). 4 Among other exemptions, the Agencies adopted an exemption from the new HPML appraisal rules for transactions of $25,000 or less, to be adjusted annually for inflation.

The OCC's, the Board's, and the Bureau's versions of the January 2013 Final Rule and December 2013 Supplemental Final Rule and corresponding official interpretations are substantively identical. The FDIC, NCUA, and FHFA adopted the Bureau's version of the regulations under the January 2013 Final Rule and December 2013 Supplemental Final Rule. 5

The OCC's, the Board's, and the Bureau's regulations, 6 and their accompanying interpretations, 7 provide that the exemption threshold for smaller loans will be adjusted effective January 1 of each year based on any annual percentage increase in the CPI-W that was in effect on the preceding June 1. Any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the annual percentage increase in the CPI-W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the annual percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900. If there is no annual percentage increase in the CPI-W, the OCC, the Board, and the Bureau will not adjust the threshold amounts from the prior year. 8

On November 30, 2016, the OCC, the Board, and the Bureau published a final rule in the Federal Register to memorialize the calculation method used by the OCC, the Board, and the Bureau each year to adjust the exemption threshold to ensure that the values for the exemption threshold keep pace with the CPI-W (HPML Small Dollar Adjustment Calculation Rule). 9 The HPML Small Dollar Adjustment Calculation Rule memorialized the policy that, if there is no annual percentage increase in the CPI-W, the OCC, the Board, and the Bureau will not adjust the exemption threshold from the prior year. The HPML Small Dollar Adjustment Calculation Rule also provided that, in years following a year in which the exemption threshold was not adjusted because there was a decrease in the CPI-W from the previous year, the threshold is calculated by applying the annual percentage change in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly; if the resulting amount calculated, after rounding, is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted, after rounding.

Effective January 1, 2024, the exemption threshold amount will increase from $31,000 to $32,400. This amount is based on the CPI-W in effect on June 1, 2023, which was reported on May 10, 2023 (based on April 2023 data). 10 The CPI-W is a subset of the CPI-U index (based on all urban consumers) and represents approximately 30 percent of the U.S. population. The CPI-W reported on May 10, 2023, reflects a 4.6 percent increase in the CPI-W from April 2022 to April 2023. Accordingly, the 4.6 percent increase in the CPI-W from April 2022 to April 2023 results in an exemption threshold amount of $32,400, after rounding. The OCC, the Board, and the Bureau are revising the commentaries to their respective regulations to add new comments as follows:

• Comment 203(b)(2)-3.xi to 12 CFR part 34, Appendix C to Subpart G (OCC);

• Comment 43(b)(2)-3.xi to Supplement I of 12 CFR part 226 (Board); and

• Comment 35(c)(2)(ii)-3.xi to Supplement I of 12 CFR part 1026 (Bureau).

These new comments state that, from January 1, 2024, through December 31, 2024, the threshold amount is $32,400. These revisions are effective January 1, 2024.

Under the Administrative Procedure Act, notice and opportunity for public comment are not required if the agency finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 11 The amendments in this rule are technical and apply the method previously memorialized in the December 2013 Supplemental Final Rule and the HPML Small Dollar Adjustment Calculation Rule. For these reasons, the OCC, the Board, and the Bureau have determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendments are adopted in final form.

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 12 As noted previously, the OCC, the Board, and the Bureau have determined that it is unnecessary to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

The information collections contained in Regulation Z which implements TILA are approved by OMB under Control number 3170-0015. The current approval for this control number expires on May 31, 2026. In accordance with the Paperwork Reduction Act of 1995, 13 the OCC, the Board, and the Bureau reviewed this final rule. The OCC, the Board, and the Bureau have determined that this rule does not create any new information collections or substantially revise any existing collections.

As a general matter, the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531 et seq., requires the preparation of a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. However, the UMRA does not apply to final rules for which a general notice of proposed rulemaking was not published. See 2 U.S.C. 1532(a). Therefore, because the OCC has found good cause to dispense with notice and comment for this final rule, the OCC has not prepared a budgetary impact statement for the final rule under the UMRA.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Bureau will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to the rule taking effect. The Office of Information and Regulatory Affairs has designated this rule as not a “major rule” as defined by 5 U.S.C. 804(2).

For purposes of the Congressional Review Act, OMB makes a determination as to whether a final rule constitutes a “major” rule. 14 If a rule is deemed a “major rule” by OMB, the Congressional Review Act generally provides that the rule may not take effect until at least 60 days following its publication. 15

The Congressional Review Act defines a “major rule” as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in (A) an annual effect on the economy of $100,000,000 or more; (B) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies or geographic regions, or (C) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets. 16 The OCC currently supervises approximately 1,060 national banks, federal savings associations, trust companies and federal branches and agencies of foreign banks (collectively, banks). 17 Based on the CPI-W in effect as of June 1, 2023, this final rule will increase the exemption threshold from $31,000 to $32,400, effective January 1, 2024. The Office of Information and Regulatory Affairs has designated this rule as not a “major rule” as defined by 5 U.S.C. 804(2).

For the same reasons set forth above, the OCC is adopting this final rule without the delayed effective date generally prescribed under the Congressional Review Act. The delayed effective date required by the Congressional Review Act does not apply to “any rule which an agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rule issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”  18 In light of the fact that the final rule will have a de minimis impact, delaying the effective date of the final rule is unnecessary.

As required by the Congressional Review Act, the OCC will submit the final rule and other appropriate reports to Congress and the Government Accountability Office for review.

For the reasons set forth in the preamble, the OCC amends 12 CFR part 34 as set forth below:

For the reasons set forth in the preamble, the Board amends Regulation Z, 12 CFR part 226, as set forth below:

For the reasons set forth in the preamble, the Bureau amends Regulation Z, 12 CFR part 1026, as set forth below:

Section 19(b)(2) of the Act (12 U.S.C. 461(b)(2)) requires each depository institution to maintain reserves against its transaction accounts and nonpersonal time deposits, as prescribed by Board regulations, for the purpose of implementing monetary policy. The Board's actions with respect to this provision are discussed below.

Section 19(b) of the Act authorizes different ranges of reserve requirement ratios depending on the amount of transaction account balances at a depository institution. Section 19(b)(11)(A) of the Act (12 U.S.C. 461(b)(11)(A)) provides that a zero percent reserve requirement ratio shall apply at each depository institution to total reservable liabilities that do not exceed a certain amount, known as the reserve requirement exemption amount. Section 19(b)(11)(B) provides that, before December 31 of each year, the Board shall issue a regulation adjusting the reserve requirement exemption amount for the next calendar year if total reservable liabilities held at all depository institutions increase from one year to the next. The Act requires the percentage increase in the reserve requirement exemption amount to be 80 percent of the percentage increase in total reservable liabilities of all depository institutions over the one-year period that ends on the June 30 prior to the adjustment. No adjustment is made to the reserve requirement exemption amount if total reservable liabilities held at all depository institutions should decrease during the applicable time period.

Total reservable liabilities of all depository institutions decreased by 8.6 percent, from $20,841 billion to $19,057 billion, between June 30, 2022, and June 30, 2023. 1 Accordingly, the reserve requirement exemption amount for 2024 will remain at $36.1 million, unchanged from its level in 2023. 2

Pursuant to Section 19(b)(2) of the Act (12 U.S.C. 461(b)(2)), transaction account balances maintained at each depository institution over the reserve requirement exemption amount and up to a certain amount, known as the low reserve tranche, may be subject to a reserve requirement ratio of not more than 3 percent (and which may be zero). Transaction account balances over the low reserve tranche may be subject to a reserve requirement ratio of not more than 14 percent (and which may be zero). Section 19(b)(2) also provides that, before December 31 of each year, the Board shall issue a regulation adjusting the low reserve tranche for the next calendar year. The Act requires the adjustment in the low reserve tranche to be 80 percent of the percentage increase or decrease in total transaction accounts of all depository institutions over the one-year period that ends on the June 30 prior to the adjustment.

Net transaction accounts of all depository institutions decreased 8.6 percent, from $17,549 billion to $16,037 billion, between June 30, 2022, and June 30, 2023. 3 Accordingly, the Board is amending Regulation D to set the low reserve tranche for net transaction accounts for 2024 at $644.0 million, a decrease of $47.7 million from 2023. The new low reserve tranche will be effective for all depository institutions beginning January 1, 2024.

Effective March 26, 2020, the Board reduced reserve requirement ratios on all net transaction accounts to zero percent, eliminating reserve requirements for all depository institutions. The annual indexation of the reserve requirement exemption amount and the low reserve tranche for 2024 is required by statute but will not affect depository institutions' reserve requirements, which will remain zero.

The provisions of 5 U.S.C. 553(b) relating to notice of proposed rulemaking have not been followed in connection with the adoption of these amendments. The amendments involve expected, ministerial adjustments prescribed by statute and by the Board's policy concerning reporting practices. The adjustments in the reserve requirement exemption amount and the low reserve tranche serve to reduce regulatory burdens on depository institutions. Accordingly, the Board finds good cause for determining, and so determines, that notice in accordance with 5 U.S.C. 553(b) is unnecessary.

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 4 As noted previously, the Board has determined that it is unnecessary to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

In accordance with the Paperwork Reduction Act of 1995, 5 the Board reviewed this final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule.

For the reasons set forth in the preamble, the Board is amending 12 CFR part 204 as follows:

I. Background

Regulation I governs the issuance and cancellation of capital stock by the Reserve Banks. Under section 5 of the Federal Reserve Act  1 and Regulation I, 2 a member bank must subscribe to capital stock of the Reserve Bank of its district in an amount equal to six percent of the member bank's capital and surplus. The member bank must pay for one-half of this subscription when the Reserve Bank issues the capital stock, while the remaining half of the subscription shall be subject to call by the Board. 3

Section 7(a)(1) of the Federal Reserve Act  4 provides that Reserve Bank stockholders with $10 billion or less in total consolidated assets shall receive a six percent dividend on paid-in capital stock, while stockholders with more than $10 billion in total consolidated assets shall receive a dividend on paid-in capital stock equal to the lesser of six percent and “the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of such dividend.” Section 7(a)(1) requires that the Board adjust the threshold for total consolidated assets annually to reflect the change in the Gross Domestic Product Price Index, published by the BEA.

Regulation I implements section 7(a)(1) of the Federal Reserve Act by (1) defining the term “total consolidated assets,”  5 (2) incorporating the statutory dividend rates for Reserve Bank stockholders  6 and (3) providing that the Board shall adjust the threshold for total consolidated assets annually to reflect the change in the Gross Domestic Product Price Index. 7 The Board has explained that it “expects to make this adjustment [to the threshold for total consolidated assets] using the final second quarter estimate of the Gross Domestic Product Price Index for each year, published by the Bureau of Economic Analysis.”  8

The Board annually adjusts the $10 billion total consolidated asset threshold based on the change in the Gross Domestic Product Price Index between the second quarter of 2015 (the baseline year) and the second quarter of the current year. 9 The second quarter 2023 Gross Domestic Product Price Index estimate published by the BEA in September 2023 (121.789) is 25.17 percent higher than the second quarter 2015 Gross Domestic Product Price Index estimate published by the BEA in September 2023 (97.302). Based on this change in the Gross Domestic Product Price Index, the threshold for total consolidated assets in Regulation I will be $12,517,000,000 as of January 1, 2024.

The provisions of 5 U.S.C. 553(b) relating to notice of proposed rulemaking have not been followed in connection with the adoption of these amendments. The amendments involve expected, ministerial adjustments that are required by statute and Regulation I and are consistent with a method previously set forth by the Board. 10 Accordingly, the Board finds good cause for determining, and so determines, that notice in accordance with 5 U.S.C. 553(b) is unnecessary.

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 11 As noted previously, the Board has determined that it is unnecessary to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

In accordance with the Paperwork Reduction Act of 1995, 12 the Board has reviewed this final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule.

For the reasons set forth in the preamble, the Board amends Regulation I, 12 CFR part 209, as follows:

The Dodd-Frank Act increased the threshold in the CLA for exempt consumer leases, and the threshold in the Truth in Lending Act (TILA) for exempt consumer credit transactions, 1 from $25,000 to $50,000, effective July 21, 2011. 2 In addition, the Dodd-Frank Act requires that, on and after December 31, 2011, these thresholds be adjusted annually for inflation by the annual percentage increase in the CPI-W, as published by the Bureau of Labor Statistics. 3 In April 2011, the Board issued a final rule amending Regulation M (which implements the CLA) consistent with these provisions of the Dodd-Frank Act, along with a similar final rule amending Regulation Z (which implements TILA) (collectively, the Board Final Threshold Rules). 4

Title X of the Dodd-Frank Act transferred rulemaking authority for a number of consumer financial protection laws from the Board to the Bureau, effective July 21, 2011. In connection with this transfer of rulemaking authority, the Bureau issued its own Regulation M implementing the CLA, 12 CFR part 1013, substantially duplicating the Board's Regulation M. 5 Although the Bureau has the authority to issue rules to implement the CLA for most entities, the Board retains authority to issue rules under the CLA for certain motor vehicle dealers covered by section 1029(a) of the Dodd-Frank Act, and the Board's Regulation M continues to apply to those entities. 6

The Agencies' regulations, 7 and their accompanying commentaries, provide that the exemption threshold will be adjusted annually effective January 1 of each year based on any annual percentage increase in the CPI-W that was in effect on the preceding June 1. They further provide that any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the annual percentage increase in the CPI-W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the annual percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900. 8 Since 2011, the Agencies have adjusted the Regulation M exemption threshold annually, in accordance with these rules.

On November 30, 2016, the Agencies published a final rule in the Federal Register to memorialize the calculation method used by the Agencies each year to adjust the exemption threshold to ensure that, as contemplated by section 1100E(b) of the Dodd-Frank Act, the values for the exemption threshold keep pace with the CPI-W (Regulation M Adjustment Calculation Rule). 9 The Regulation M Adjustment Calculation Rule memorialized the policy that, if there is no annual percentage increase in the CPI-W, the Agencies will not adjust the exemption threshold from the prior year. The Regulation M Adjustment Calculation Rule also provided that, in years following a year in which the exemption threshold was not adjusted because there was a decrease in the CPI-W from the previous year, the threshold is calculated by applying the annual percentage change in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly; if the resulting amount calculated, after rounding, is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted, after rounding.

Effective January 1, 2024, the exemption threshold amount is increased from $66,400 to $69,500. This amount is based on the CPI-W in effect on June 1, 2023, which was reported on May 10, 2023 (based on April 2023 data). 10 The CPI-W is a subset of the CPI-U index (based on all urban consumers) and represents approximately 30 percent of the U.S. population. The CPI-W reported on May 10, 2023, reflects a 4.6 percent increase in the CPI-W from April 2022 to April 2023. Accordingly, the 4.6 percent increase in the CPI-W from April 2022 to April 2023 results in an exemption threshold amount of $69,500, after rounding. The Agencies are revising the commentaries to their respective regulations to add new comment 2(e)-11.xv to state that, from January 1, 2024, through December 31, 2024, the threshold amount is $69,500. These revisions are effective January 1, 2024.

Under the Administrative Procedure Act, notice and opportunity for public comment are not required if the Agencies find that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 11 The amendments in this rule are technical and apply the method previously set forth in the Board Final Threshold Rules and the Regulation M Adjustment Calculation Rule. For these reasons, the Agencies have determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendments are adopted in final form.

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 12 As noted previously, the Agencies have determined that it is unnecessary to publish a general notice of proposed rulemaking for this joint final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

The information collections contained in Regulation Z which implements TILA are approved by OMB under Control number 3170-0006. The current approval for this control number expires on October 31, 2025. In accordance with the Paperwork Reduction Act of 1995, 13 the Agencies reviewed this final rule. The Agencies have determined that this rule does not create any new information collections or substantially revise any existing collections.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Bureau will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to the rule taking effect. The Office of Information and Regulatory Affairs has designated this rule as not a “major rule” as defined by 5 U.S.C. 804(2).

For the reasons set forth in the preamble, the Board amends Regulation M, 12 CFR part 213, as set forth below:

For the reasons set forth in the preamble, the Bureau amends Regulation M, 12 CFR part 1013, as set forth below:

I. Background

The Dodd-Frank Act increased the threshold in TILA for exempt consumer credit transactions, 1 and the threshold in the Consumer Leasing Act (CLA) for exempt consumer leases, from $25,000 to $50,000, effective July 21, 2011. 2 In addition, the Dodd-Frank Act requires that, on and after December 31, 2011, these thresholds be adjusted annually for inflation by the annual percentage increase in the CPI-W, as published by the Bureau of Labor Statistics. 3 In April 2011, the Board issued a final rule amending Regulation Z (which implements TILA) consistent with these provisions of the Dodd-Frank Act, along with a similar final rule amending Regulation M (which implements the CLA) (collectively, the Board Final Threshold Rules). 4

Title X of the Dodd-Frank Act transferred rulemaking authority for a number of consumer financial protection laws from the Board to the Bureau, effective July 21, 2011. In connection with this transfer of rulemaking authority, the Bureau issued its own Regulation Z implementing TILA, 12 CFR part 1026, substantially duplicating the Board's Regulation Z. 5 Although the Bureau has the authority to issue rules to implement TILA for most entities, the Board retains authority to issue rules under TILA for certain motor vehicle dealers covered by section 1029(a) of the Dodd-Frank Act, and the Board's Regulation Z continues to apply to those entities. 6

The Agencies' regulations, 7 and their accompanying commentaries, provide that the exemption threshold will be adjusted annually effective January 1 of each year based on any annual percentage increase in the CPI-W that was in effect on the preceding June 1. They further provide that any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the annual percentage increase in the CPI-W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the annual percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900. 8 Since 2011, the Agencies have adjusted the Regulation Z exemption threshold annually, in accordance with these rules.

On November 30, 2016, the Agencies published a final rule in the Federal Register to memorialize the calculation method used by the Agencies each year to adjust the exemption threshold to ensure that, as contemplated by section 1100E(b) of the Dodd-Frank Act, the values for the exemption threshold keep pace with the CPI-W (Regulation Z Adjustment Calculation Rule). 9 The Regulation Z Adjustment Calculation Rule memorialized the policy that, if there is no annual percentage increase in the CPI-W, the Agencies will not adjust the exemption threshold from the prior year. The Regulation Z Adjustment Calculation Rule also provided that, in years following a year in which the exemption threshold was not adjusted because there was a decrease in the CPI-W from the previous year, the threshold is calculated by applying the annual percentage change in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly; if the resulting amount calculated, after rounding, is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted, after rounding.

Effective January 1, 2024, the exemption threshold amount is increased from $66,400 to $69,500. This amount is based on the CPI-W in effect on June 1, 2023, which was reported on May 10, 2023 (based on April 2023 data). 10 The CPI-W is a subset of the CPI-U index (based on all urban consumers) and represents approximately 30 percent of the U.S. population. The CPI-W reported on May 10, 2023, reflects a 4.6 percent increase in the CPI-W from April 2022 to April 2023. Accordingly, the 4.6 percent increase in the CPI-W from April 2022 to April 2023 results in an exemption threshold amount of $69,500, after rounding. The Agencies are revising the commentaries to their respective regulations to add new comment 3(b)-3.xv to state that, from January 1, 2024, through December 31, 2024, the threshold amount is $69,500. These revisions are effective January 1, 2024.

Under the Administrative Procedure Act, notice and opportunity for public comment are not required if the Agencies find that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 11 The amendments in this rule are technical and apply the method previously set forth in the Board Final Threshold Rules and the Regulation Z Adjustment Calculation Rule. For these reasons, the Agencies have determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendments are adopted in final form.

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 12 As noted previously, the Agencies have determined that it is unnecessary to publish a general notice of proposed rulemaking for this joint final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

The information collections contained in Regulation Z which implements TILA are approved by OMB under Control number 3170-0015. The current approval for this control number expires on May 31st, 2026. In accordance with the Paperwork Reduction Act of 1995, 13 the Agencies reviewed this final rule. The Agencies have determined that this rule does not create any new information collections or substantially revise any existing collections.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Bureau will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to the rule taking effect. The Office of Information and Regulatory Affairs has designated this rule as not a “major rule” as defined by 5 U.S.C. 804(2).

For the reasons set forth in the preamble, the Board amends Regulation Z, 12 CFR part 226, as set forth below:

For the reasons set forth in the preamble, the Bureau amends Regulation Z, 12 CFR part 1026, as set forth below:

On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, followed by the closure of Signature Bank by the New York State Department of Financial Services. The FDIC was appointed as the receiver for both institutions. 1

Section 13(c)(4)(G) of the FDI Act permits the FDIC to take action or provide assistance to an IDI for which the FDIC has been appointed receiver as necessary to avoid or mitigate adverse effects on economic conditions or financial stability, following a recommendation by the FDIC Board of Directors (Board), with the written concurrence of the Board of Governors of the Federal Reserve System (Board of Governors), and a determination of systemic risk by the Secretary of the U.S. Department of Treasury (Treasury) (in consultation with the President). 2

On March 12, 2023, the Secretary of the Treasury, acting on the recommendation of the Board and Board of Governors, and after consultation with the President, invoked the statutory systemic risk exception to allow the FDIC to complete its resolution of both Silicon Valley Bank and Signature Bank in a manner that fully protects depositors. 3 The full protection of depositors, rather than imposing losses on uninsured depositors, was intended to strengthen public confidence in the nation's banking system.

On March 12 and 13, 2023, the FDIC transferred deposits—both insured and uninsured—and substantially all assets of these banks to newly created, full-service FDIC-operated bridge banks, Silicon Valley Bridge Bank, N.A. (Silicon Valley Bridge Bank) and Signature Bridge Bank, N.A. (Signature Bridge Bank), in an action designed to protect depositors of these banks. 4 The transfer of deposits was completed under the systemic risk exception declared on March 12, 2023.

On March 19, 2023, the FDIC announced it entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank. 5 On March 27, 2023, the FDIC entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company (First Citizens), with loss-sharing provided on the commercial loans it purchased from Silicon Valley Bridge Bank. 6

Under section 13(c)(4)(G) of the FDI Act, the loss to the DIF arising from the use of a systemic risk exception must be recovered from one or more special assessments on IDIs, depository institution holding companies (with the concurrence of the Secretary of the Treasury with respect to holding companies), or both, as the FDIC determines to be appropriate. 7 As required by the FDI Act, the special assessment, detailed below, is intended and designed to recover the losses to the DIF incurred as the result of the actions taken by the FDIC to protect the uninsured depositors of Silicon Valley Bank and Signature Bank following a determination of systemic risk. 8

Section 13(c)(4)(G) of the FDI Act provides the FDIC with discretion in the design and timeframe for any special assessments to recover the losses to the DIF as a result of a systemic risk determination. As detailed in the sections that follow, and as required by section 13(c)(4)(G) of the FDI Act, the FDIC considered the types of entities that benefit from any action taken or assistance provided under the determination of systemic risk, economic conditions, the effects on the industry, and such other factors as the FDIC deemed appropriate and relevant to the action taken or assistance provided. 9

On May 11, 2023, the Board approved a notice of proposed rulemaking (the proposed rule, or proposal) to implement a special assessment, as required by the FDI Act, to recover the loss to the DIF arising from the protection of uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. 10 The FDIC proposed to collect a special assessment that would be approximately equal to the losses attributable to the protection of uninsured depositors at these two failed banks, which were estimated to total $15.8 billion.

The FDIC proposed an annual special assessment rate that would be derived by dividing the loss estimate attributable to the protection of uninsured depositors by the assessment base calculated for all IDIs subject to the special assessment. The proposed assessment base (special assessment base) was equal to an IDI's estimated uninsured deposits as reported in the Consolidated Reports of Condition and Income (Call Report) or Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002) as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits at the banking organization level. 11

In response to the proposal, the FDIC received 312 comment letters from depository institutions, depository institution holding companies, trade associations, members of Congress, and other interested parties. 12 As further detailed below, the majority of commenters expressed support for the proposal and for the scope of application of the proposed rule, including the $5 billion deduction applied to the special assessment base. Other comment letters suggested the exclusion, or different treatment, of certain types of uninsured deposits included in the special assessment base, different reporting dates of estimated uninsured deposits used to calculate the assessment base, or adjustment of the $5 billion deduction from the special assessment base. Commenters additionally discussed a range of other matters that are addressed in the relevant sections below.

After careful consideration of the comments received on the proposal and analysis of the applicable statutory factors, the FDIC is adopting, as final, the proposed special assessment, with clarifications to promote transparency and a modification to apply any corrective amendments to estimated uninsured deposits for the December 31, 2022, reporting period to the calculation of the special assessment, following adoption of the final rule.

The special assessment implemented through this final rule will recover the loss to the DIF arising from the protection of uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. The total amount collected for the special assessment will be approximately equal to the estimated losses attributable to the protection of uninsured depositors at these two failed banks, which are currently estimated to total $16.3 billion.

The majority of commenters expressed support for the proposal and for the scope of application, including the $5 billion deduction applied to the assessment base for the special assessment. While some commenters broadly objected to the collection of a special assessment, the FDIC is required by the FDI Act to take this action in connection with the systemic risk determination announced on March 12, 2023. 13 In the FDIC's view, the final rule, consistent with the proposed rule, reflects an appropriate balancing of the goal of applying the special assessment to the types of entities that benefited the most from the protection of uninsured depositors provided under the determination of systemic risk while ensuring equitable, transparent, and consistent treatment. The final rule, consistent with the proposed rule, also allows for payments to be collected over an extended period of time in order to reduce the likelihood of overcollecting and to mitigate the liquidity effects of the special assessment by requiring smaller, consistent quarterly payments.

To determine the cost of the failures attributable to the cost of covering uninsured deposits pursuant to the determination of systemic risk, the FDIC determined the percentage of deposits that were uninsured at the time of failure and applied that percentage to the total cost of the failure for each bank.

At Signature Bank, for which 67 percent of deposits were uninsured at the time of failure, the portion of the total estimated loss of $0.9 billion that is attributable to the protection of uninsured depositors is $0.6 billion. The cost estimate for the sale of the Signature Bridge Bank to New York Community Bancorp decreased following the issuance of the proposal from $2.4 billion to approximately $0.9 billion. The decline in the cost estimate was primarily attributable to recoveries from assets in receivership that were higher than previously estimated offset, in part, by higher costs of liabilities assumed by the receivership.

At Silicon Valley Bank, for which 88 percent of deposits were uninsured at the time of failure, the portion of the total estimated loss of $17.8 billion that is attributable to the protection of uninsured depositors is $15.7 billion. The cost estimate for the sale of the Silicon Valley Bridge Bank to First Citizens was revised following the issuance of the proposal from $16.1 billion to approximately $17.8 billion mainly due to recoveries from assets in receivership that were less than previously anticipated and higher costs of liabilities assumed by the receivership.

The revised cost estimates form the basis for the current special assessment calculation in this final rule. In total, of the $18.7 billion in estimated losses at the two banks and incurred by the DIF, the estimated loss attributable to the protection of uninsured depositors is $16.3 billion, an increase of approximately $500 million from the estimate of $15.8 billion described in the proposal.

As with all failed bank receiverships, these loss estimates will be periodically adjusted as assets are sold, liabilities are satisfied, and receivership expenses are incurred. The exact amount of losses incurred will be determined when the FDIC terminates the receiverships. As noted below, the amount of the special assessment will be adjusted as the loss estimates change.

One commenter suggested that the special assessment should recover the entire amount of estimated losses. As proposed, and as required by statute, the FDIC will recover through the special assessment the $16.3 billion estimated loss incurred as a result of the actions taken by the FDIC pursuant to the determination of systemic risk, which, in the case of the determination pursuant to the closures of Silicon Valley Bank and Signature Bank, was to protect uninsured depositors.

The proposed special assessment rate was derived by dividing the loss estimate attributable to the protection of uninsured depositors by the assessment base calculated for all IDIs subject to the special assessment as of December 31, 2022. As described in detail below, the proposed assessment base was equal to estimated uninsured deposits reported for the quarter that ended December 31, 2022, after applying the $5 billion deduction.

Under the final rule, the FDIC will impose a special assessment rate equal to approximately 13.4 basis points annually, an increase from the 12.5 basis point annual rate in the proposal. 14 Amendments to reported estimated uninsured deposits filed since the adoption of the proposed rule have resulted in a lower total assessment base. The decline in the total assessment base combined with the increase in the cost estimate have resulted in a higher annual rate relative to the proposal. 15 As of November 2, 2023, the total assessment base was $6.0 trillion. The special assessment rate will not change following the date of adoption of this final rule through the duration of the initial eight-quarter collection period.

The resulting quarterly rate is 3.36 basis points, or an annual rate of approximately 13.4 basis points. Over the initial eight-quarter collection period, the FDIC projects that it will collect an amount sufficient to recover estimated losses attributable to the protection of uninsured depositors of Silicon Valley Bank and Signature Bank, which are currently estimated to total $16.3 billion, totaling approximately $2.0 billion per quarter.

Under the proposal, each IDI's assessment base for the special assessment would be equal to estimated uninsured deposits as reported in the Call Report or FFIEC 002 for the quarter that ended December 31, 2022, after applying the $5 billion deduction. 16 As a result of this deduction, most small IDIs and IDIs that are part of a small banking organization would not pay anything towards the special assessment. The special assessment would not be applicable to any banking organizations with total assets under $5 billion.

The majority of commenters stated that community banks should be exempt from the special assessment. The FDIC received 63 comments related to the calculation of the special assessment base and the scope of application for the special assessment, or the calculation of the special assessment rate. Some of these commenters stated that certain groups of banks should be exempt from or pay less of the special assessment, while one commenter recommended that all banks be subject to the special assessment. 17 One commenter said that U.S. global systemically important banks (GSIBs) did not benefit from the actions taken under the determination of systemic risk and that although GSIBs served as a source of strength to the banking sector, they are responsible for a disproportionate share of the special assessment.

One commenter noted that given that the FDIC is required by statute to recover the estimated amount of loss attributable to the protection of uninsured depositors following the determination of systemic risk, any changes to the proposed special assessment base will necessarily redistribute the obligation among banking organizations subject to the special assessment.

Several commenters recommended alternative measures for the special assessment base, including total assets, total deposits, uninsured deposits as a percentage of total deposits, an institution's regular risk-based deposit insurance assessment base, or to otherwise take a more risk-based approach to calculating the special assessment base. One commenter recommended a more detailed approach, stating that the special assessment base should be the entire deposit base, or alternatively the entire assessment base applied for regular quarterly deposit insurance assessments, for the largest institutions and uninsured deposits for all other banks, and that the rate for the special assessment should incorporate an adjusted tangible equity capital ratio and a scalar to factor in interest rate risk.

With the rapid collapse of Silicon Valley Bank and Signature Bank in the space of 48 hours, concerns arose that risk could spread more widely to other institutions and that the financial system as a whole could be placed at risk. Shortly after Silicon Valley Bank was closed on March 10, 2023, a number of institutions with large amounts of uninsured deposits reported that depositors had begun to withdraw their funds.

The extent to which IDIs rely on uninsured deposits for funding varies significantly. Uninsured deposits were used to fund nearly three-quarters of assets at Silicon Valley Bank and Signature Bank. On average, the largest banking organizations by asset size fund a larger share of assets with uninsured deposits, as depicted in Table 1 below, based on data as of December 31, 2022, the most recently available date reflecting the amount of uninsured deposits in each institution near or at the time the determination of systemic risk was made. Among banking organizations that report uninsured deposits, those with total assets between $1 billion and $5 billion are generally the least reliant on uninsured deposits for funding, with uninsured deposits averaging 27.9 percent of assets, compared with the largest banking organizations with total assets greater than $250 billion, which had uninsured deposits that averaged 35.1 percent of assets.

Uninsured deposit concentrations of IDIs, meaning the percentage of domestic deposits that are uninsured, also vary significantly. At Silicon Valley Bank, 88 percent of deposits were uninsured at the point of failure compared to 67 percent at Signature Bank. On average, the largest banking organizations by asset size reported significantly greater uninsured deposit concentrations relative to smaller banking organizations, as illustrated in Table 2 below, based on data as of December 31, 2022. Banking organizations with total assets between $1 billion and $5 billion generally reported the lowest percentage of uninsured deposits to total domestic deposits, averaging 33.0 percent, compared with the largest banking organizations with total assets greater than $250 billion, which averaged 50.4 percent.

Following the announcement of the systemic risk determination, the FDIC observed a significant slowdown in uninsured deposits leaving certain institutions, evidence that the systemic risk determination helped stem the outflow of these deposits while providing stability to the banking industry.

As of March 31, 2023, banks in all asset size groups experienced quarterly declines in uninsured deposit balances, but these declines were particularly severe and widespread among banks between $50 billion and $250 billion in total assets. In addition, between December 31, 2022, and March 31, 2023, the eight U.S. GSIBs reported a weighted average decline in uninsured deposits of 2.1 percent, albeit slower than the industry average of approximately eight percent. However, changes in uninsured deposit balances over this time period varied widely for the GSIBs. Two of the eight GSIBs experienced growth in uninsured deposits of 2.6 percent and 2.0 percent over this period while the other six GSIBs experienced declines, some significant, ranging between less than two percent to nearly 17 percent.

Defining the assessment base for the special assessment as estimated uninsured deposits reported as of December 31, 2022, and deducting $5 billion from a banking organization's assessment base, serves several purposes. First, banking organizations that reported $5 billion or less in estimated uninsured deposits as of December 31, 2022, would not be subject to the special assessment. Banking organizations that reported more than $5 billion in estimated uninsured deposits would pay based on the marginal amounts of uninsured deposits they reported, helping to mitigate a “cliff effect” that might otherwise apply if a different method, such as applying an asset size threshold, were used to determine applicability, and thereby ensuring more equitable treatment. Otherwise, a situation may arise in which a banking organization just over a particular size threshold would pay a special assessment, while a banking organization just below such size threshold would pay none.

In general, large banks and regional banks, and particularly those with large amounts of uninsured deposits, were the banks most exposed to and likely would have been the most affected by uninsured deposit runs but for the determination of systemic risk. Indeed, shortly after Silicon Valley Bank was closed, a number of institutions with large amounts of uninsured deposits reported that depositors had begun to withdraw their funds. The failure of Silicon Valley Bank and the impending failure of Signature Bank raised concerns that, absent immediate assistance for uninsured depositors, there could be negative knock-on consequences for similarly situated institutions, depositors and the financial system more broadly. Generally speaking, larger banks benefited the most from the stability provided to the banking industry under the systemic risk determination. With the $5 billion deduction from the assessment base, the banks that benefited the most—banks of larger asset sizes and that hold greater amounts of uninsured deposits—will be responsible for paying the special assessment.

Second, the $5 billion deduction from the assessment base results in most small IDIs and IDIs that are part of a small banking organization not paying anything towards the special assessment. The special assessment is not applicable to any banking organizations with total assets under $5 billion. 18

Finally, deducting $5 billion from the assessment base of estimated uninsured deposits at the banking organization level rather than at the IDI level for banking organizations with more than one subsidiary IDI ensures that banking organizations with similar amounts of estimated uninsured deposits pay a similar special assessment, regardless of banking organization structure. For example, a banking organization with multiple IDIs with large amounts of estimated uninsured deposits will not have an advantage over other banking organizations with only one subsidiary IDI with a similarly large amount of estimated uninsured deposits because instead of excluding $5 billion of estimated uninsured deposits for each IDI in one banking organization, the $5 billion deduction will be distributed across multiple affiliated IDIs.

In implementing special assessments, the FDI Act requires the FDIC to consider the types of entities that benefit from any action taken or assistance provided pursuant to the determination of systemic risk. 19 The assessment base of estimated uninsured deposits with the $5 billion deduction ensures that the banks that benefited most from the assistance provided under the systemic risk determination will be charged a special assessment to recover losses to the DIF resulting from the protection of uninsured depositors, with banks of larger asset sizes and that hold greater amounts of uninsured deposits paying a higher special assessment. For these reasons, the FDIC is adopting the proposed exclusion of the first $5 billion from estimated uninsured deposits from the assessment base for the special assessment, without change.

Under the proposal, each IDI's assessment base for the special assessment would be equal to estimated uninsured deposits as reported in the Call Report or FFIEC 002 for the December 31, 2022, reporting period, after applying the $5 billion deduction. The FDIC sought comment on whether the special assessment base should be equal to estimated uninsured deposits reported as of December 31, 2022, or reported as of some other date, and the reasons for using a different date.

Two commenters expressed support for the proposed December 31, 2022, reporting date for uninsured deposits to determine the special assessment base. Thirteen commenters, including two trade associations and three letters from members of Congress, requested that estimated uninsured deposits reported as of a more recent date than December 31, 2022, be used to calculate the assessment base for the special assessment. Most of these commenters suggested an alternative date, such as March 31, 2023, or June 30, 2023, while others suggested that the assessment base should reference the estimated uninsured deposits reported as of each quarter-end during the collection period or did not specify a date. Some commenters that supported a later reporting date said that institutions, particularly mid-sized and regional banks, that reported declines in uninsured deposit balances after December 31, 2022, should not be charged a special assessment on uninsured deposit balances that they no longer hold or that are now insured.

In the FDIC's view, estimated uninsured deposits as of December 31, 2022, most closely approximate an institution's vulnerability to significant deposit withdrawals in the absence of the determination of systemic risk, and therefore reflect the institutions that most benefited from such determination. An assessment base that is calculated using the amount of uninsured deposits as of December 31, 2022, would result in transparent and consistent payments, best approximate an institution's vulnerability to deposit withdrawals, and would result in a more simplified framework for calculating the special assessment. For these reasons, the FDIC is adopting as final the proposed special assessment base of estimated uninsured deposits as of December 31, 2022.

Under the proposed rule, the assessment base for the special assessment would be adjusted to exclude the first $5 billion from estimated uninsured deposits reported as of December 31, 2022, applicable either to the IDI, if an IDI is not a subsidiary of a holding company, or at the banking organization level, to the extent that an IDI is part of a holding company with one or more subsidiary IDIs. The FDIC sought comment on whether it should consider an exemption for specific types of deposits from the special assessment base, and on what basis.

Multiple commenters supported the exclusion of, or different treatment for, certain types of uninsured deposits included in the proposed assessment base for the special assessment of estimated uninsured deposits reported as of December 31, 2022, less the $5 billion deduction.

The FDIC received 25 comments requesting that the FDIC either exclude, or provide a different treatment for, collateralized deposits in the calculation of the special assessment base. In particular, commenters requested such treatment for the uninsured portion of public deposits, or deposits of states and political subdivisions that are secured or collateralized as required under state law (also referred to as preferred deposits). These commenters reasoned that collateralized deposits are more stable than other uninsured deposits because they are secured, and therefore pose little risk to the DIF. Seven of these commenters requested the exclusion of additional types of collateralized deposits, including collateralized operational deposits or trust-related deposits that are required to be collateralized under federal or state law ( e.g., fiduciary funds awaiting investment or distribution), from the special assessment base.

Banks report preferred deposits annually for the December 31 Call Report date, but they do not report other types of collateralized deposits such as those mentioned by the commenters. 20 Given that preferred deposits represent only a subset of collateralized deposits, providing an exclusion or different treatment for this subset of deposits would result in preferential treatment for this subset of collateralized deposits on the sole basis that these are the only type of collateralized deposits for which data were collected.

Moreover, even if banks reported data on all collateralized deposits, in the FDIC's view, the presence of collateral does not fully mitigate run risk. Collateral may not always be sufficient to cover the full amount of such a deposit, depending on the economic environment, and particularly in the event of a liquidity crisis during which loss in value may need to be realized. Further, in certain types of resolutions, collateralized deposits reduce the assets available to the FDIC as receiver to satisfy claims, including the FDIC's subrogated claim as deposit insurer, and result in a higher loss to the DIF in the event of a bank failure compared to a bank holding the same level of deposits that are not collateralized.

The FDIC received one joint comment from three custody banks stating that the special assessment base should be adjusted to mitigate the disproportionate and unwarranted impact on the custody bank business model and on sound asset-liability and risk management practices. The commenters proposed various adjustments: that the FDIC should allow custody banks to exclude domestic deposit balances placed with the Federal Reserve from the measure of estimated uninsured deposits used to calculate the assessment base for the special assessment; that the FDIC should allow custody banks to deduct 75 percent of the domestic operational deposits  21 from the assessment base for the special assessment; or that the FDIC should retain the regular risk-based assessment methodology for the special assessment while maintaining the exclusion of the first $5 billion in estimated uninsured deposits.

The FDIC disagrees. The banks that benefited most from the assistance provided under the systemic risk determination were large banks and those that held greater amounts of uninsured deposits, regardless of the assets that those deposits were used to fund. Custody banks, especially those whose primary business is fiduciary and custodial and safekeeping, hold large amounts of uninsured deposits and many of those uninsured deposits are from depositors with large deposit balances. Further, while certain deposits held by custody banks, such as operational deposits, may be more stable than non-operational funding, in the event of idiosyncratic stress, counterparties likely would reduce the amount of their operational deposits. 22 The adjustments proposed in the joint comment letter would result in custody banks paying significantly lower amounts of the special assessment despite holding significant amounts of uninsured deposits.

The FDIC received 12 comments requesting the exclusion of, or different treatment for, intercompany deposits in the calculation of the special assessment base. Commenters argued that intercompany deposits, such as the deposits of subsidiaries that are not IDIs, deposits of other affiliates such as sister companies that are not IDIs, or deposits of a parent holding company of the IDI, are stable and present minimal run risk because entities within the banking organization's structure are unlikely to withdraw funds in a crisis. Further, some commenters argued that intercompany deposits would not result in a loss to the DIF because they would not be provided deposit insurance coverage or would not need deposit insurance coverage in the event of the bank's failure. Some commenters noted that the methodology for including intercompany deposits in the assessment base for the special assessment may lead to double-counting certain deposits at the banking organization level for banking organizations with multiple IDIs, to the extent an IDI's deposits with its affiliates are funded with uninsured deposits it has taken from a depositor.

There is no clear evidence that intercompany deposits are more stable relative to other deposits. Organizational structures, board members, governance, and decision making can differ between entities within the same banking organization. Likewise, the behavior of creditors, including uninsured depositors, of each entity can differ. Further, an affiliated entity's deposits at a bank are insured to the same extent as an unaffiliated entity's deposits in the event of the bank's failure. Each depositor is entitled to deposit insurance as permitted by law, and to pro rata receivership distribution on the remaining, uninsured balances. Additionally, it is not possible to accurately estimate the portion of uninsured deposits that are intercompany deposits using existing items on the Call Report.

Deposits are the most common funding source for many banks. Depositors and other creditors are often differentiated by their stability and customer profile characteristics. While some uninsured deposit relationships remain stable when a bank is in good condition, such relationships might become less stable due to their uninsured status if a bank experiences financial problems or if the banking industry experiences stress events.

Any revisions to the methodology for calculating the special assessment base, such as excluding or adjusting for certain types of uninsured deposits, would change the allocation of the special assessment, but the FDIC is required by statute to recover the full amount of the losses to the DIF incurred as the result of the systemic risk determination. As a result, any exclusion for a type of uninsured deposits from the special assessment base would reduce the amount of the special assessment for banking organizations that hold those excluded, uninsured deposits, and increase the assessment burden for all other banks holding other types of uninsured deposits. For this reason, and for the reasons described above, and consistent with the proposal, the FDIC is not excluding any particular type of uninsured deposits from the assessment base for the special assessment.

Following careful consideration of the comments, and for the reasons described above, the FDIC is adopting as final the proposed assessment base for the special assessment, while applying any corrective amendments to estimated uninsured deposits reported for the December 31, 2022, reporting period in calculating the assessment base. The methodology adopted in this final rule ensures that the banks that benefited most from the assistance provided under the systemic risk determination will be charged a special assessment to recover losses to the DIF resulting from the protection of uninsured depositors, with banks of larger asset sizes and that hold greater amounts of uninsured deposits paying a higher special assessment.

Consistent with the proposal, each IDI's assessment base for the special assessment will be equal to estimated uninsured deposits as reported in the Call Report or FFIEC 002 as of December 31, 2022, after applying the $5 billion deduction. The deduction of the first $5 billion from estimated uninsured deposits in the assessment base for the special assessment is applicable either to the IDI, if an IDI is not a subsidiary of a holding company, or at the banking organization level, to the extent that an IDI is part of a holding company with one or more subsidiary IDIs. 23

For a banking organization that has more than one subsidiary IDI, the assessment base for the special assessment is equal to the IDI's total estimated uninsured deposits reported for the quarter that ended December 31, 2022, less its share of the $5 billion deduction, which is based on its share of total estimated uninsured deposits held by all IDI affiliates in the banking organization. 24 Table 3 provides an example of the calculation of the special assessment for a banking organization with three subsidiary IDIs.

Table 3—Calculation of the Special Assessment Within a Banking Organization With More Than One Insured Depository Institution Subsidiary [Dollar amounts in millions]   Column A Estimated

Based on data reported for the quarter that ended December 31, 2022, and as illustrated in Table 4 below, the FDIC estimates that 114 banking organizations, which include IDIs that are not subsidiaries of a holding company and holding companies with one or more subsidiary IDIs and which comprise 81.3 percent of industry assets, will be subject to the special assessment, including 48 banking organizations with total assets over $50 billion and 66 banking organizations with total assets between $5 and $50 billion. No banking organizations with total assets under $5 billion would pay the special assessment, based on data for the December 31, 2022, reporting period. 25

Under the proposal, amendments to an IDI's Call Report for the December 31, 2022, reporting period made after the date of adoption of any final rule would not have affected an institution's rate or base for the special assessment.

The FDIC is finalizing this aspect of the rule, as proposed, but in calculating the special assessment, will apply any amendments made by IDIs to correct the reporting of estimated uninsured deposits that are confirmed through, or associated with the result of, the FDIC's review of an institution's reporting methodology (as described below).

Following the issuance of the proposed rule, the FDIC observed that some IDIs were reporting or filing amendments to the reporting of estimated uninsured deposits for the December 31, 2022, reporting period in a manner that is inconsistent with the instructions to the Call Report. For example, some institutions incorrectly reduced the reported amount of uninsured deposits to the extent that they are collateralized by pledged assets; this is incorrect because in and of itself, the existence of collateral has no bearing on the portion of a deposit that is covered by federal deposit insurance. Additionally, some institutions incorrectly reduced the amount of uninsured deposits reported on Schedule RC-O by excluding certain intercompany deposit balances.

The FDIC did not receive any comments on the proposed treatment of prior period amendments. Some commenters, however, raised concerns about the accuracy of the amount of estimated uninsured deposits reported on the Call Report. The FDIC received two comment letters indicating that banks may be reporting uninsured deposits differently, or in an inconsistent manner, and one comment letter indicating that some banks were confused about whether to include collateralized deposits in the amount of estimated uninsured deposits reported on the Call Report.

On July 24, 2023, the FDIC issued a Financial Institution Letter (FIL) on Estimated Uninsured Deposits Reporting Expectations, reiterating longstanding instructions and stating that each IDI is responsible for the accuracy of the data reported in its Call Report and for filing amendments as necessary to ensure Call Report accuracy. 26 The FIL stated that, consistent with the requirement to file accurate Call Reports, IDIs that incorrectly reported uninsured deposits should amend their Call Reports by making the appropriate changes to the data and submitting the revised data file.

As a general matter, the amount of estimated uninsured deposits reported on the Call Report is monitored as one of many indicators of safety and soundness, and its accuracy, as with all items collected on the Call Report, is of the utmost importance. The reported amount of estimated uninsured deposits is also used to determine the amount of estimated insured deposits in calculating the DIF reserve ratio, which is the ratio of the DIF balance to all insured deposits. 27

The FDIC is conducting a review (Assessment Reporting Review) of the reporting methodology for estimated uninsured deposits and related items on the Call Report because of the importance of these items as indicators of safety and soundness. 28 The Assessment Reporting Review may result in amendments to uninsured deposits and related items reported on the Call Report if the FDIC determines that an institution is not reporting these items in accordance with the instructions. Given the planned Assessment Reporting Review, in calculating this special assessment this final rule applies any amendments made by IDIs to correct the reporting of estimated uninsured deposits that are confirmed through, or associated with the result of, the FDIC's review of an institution's reporting methodology.

Under the final rule, the special assessment rate and each banking organization's special assessment base has been calculated using estimated uninsured deposits for the December 31, 2022, reporting period as reported on November 2, 2023. 29 Amendments made to an institution's December 31, 2022, Call Report through November 2, 2023, have been accounted for in the calculations, as proposed. In addition, under the final rule, certain amendments filed after November 2, 2023, will affect the calculation of an institution's special assessment base, as described below.

In particular, if, as part of the FDIC's Assessment Reporting Review of an institution's reporting methodology (described above), the FDIC finds that, as of November 2, 2023, an institution was not reporting uninsured deposits for the December 31, 2022, reporting period in accordance with the Call Report instructions, and the institution files a corrective amendment as a result of the FDIC's review after November 2, 2023, the FDIC will adjust the special assessment base based on such corrective amendment for such institution, and any affiliates, as applicable, for all collection periods. Additionally, if an institution files an amendment to the reporting of estimated uninsured deposits for the December 31, 2022, reporting period after November 2, 2023, and the FDIC finds that such amendment brings the reporting of uninsured deposits into compliance with the Call Report instructions, the FDIC will adjust the special assessment base based on such corrective amendment for such institution, and any affiliates, as applicable, for all collection periods. If such institution is part of a banking organization with multiple subsidiary IDIs, such corrective amendments will also affect the distribution of the $5 billion deduction from the banking organization's assessment base for all collection periods.

Prior period amendments filed after November 2, 2023, that are not the result of corrections to errors or misreporting will not affect an institution's special assessment base. Modifications to an institution's special assessment base will take effect beginning the collection quarter following the date of amendment, and the FDIC will apply such modifications retroactively to the first quarterly collection period, as applicable.

Any retroactive special assessment amount due will be included, in full, on the invoice for the quarter following the date of the amendment. If the amendment resulted in a downward revision of the assessment base for the special assessment, the banking organization will be credited the amount the institution overpaid, with interest, and such amount, including interest, will be applied to any remaining amount of the special assessment due from the banking organization beginning in the quarter following the date of the amendment. In the unlikely event a credit remains after the special assessment collection period has ended, the excess credit amount will be refunded to the banking organization, with interest. The FDIC will pay interest on credited amounts resulting from amendments to correct the reporting of estimated uninsured deposits that are confirmed through, or associated with the result of, the FDIC's Assessment Reporting Review of an institution's reporting methodology and will collect interest on any retroactive special assessment amounts due to the FDIC as a result of such amendments. 30

The FAA invites you to send any written relevant data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2023-2152; Project Identifier MCAI-2023-00798-T” at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

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

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Gabriel Kim, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; telephone 516-228-7300; email 9-avs-nyaco-cos@faa.gov. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

Transport Canada, which is the aviation authority for Canada, has issued Transport Canada AD CF-2023-48, dated June 30, 2023 (Transport Canada AD CF-2023-48), to correct an unsafe condition on certain Bombardier, Inc., Model BD-100-1A10 airplanes. Transport Canada AD CF-2023-48 states that a Bombardier design review of the avionic architecture of the pitch trim indication and alerting system has revealed that software errors in the input/output concentrator, data concentrator unit, and/or adaptive flight display could generate misleading pitch trim indication to the crew, leading to incorrect horizontal stabilizer positioning at takeoff. Incorrect horizontal stabilizer positioning at takeoff could result in an extreme pitch oscillation and subsequent loss of control of the airplane and serious injury to passengers.

After Transport Canada AD CF-2023-48 was issued, Transport Canada notified the FAA that the required actions in Transport Canada AD CF-2023-48 did not adequately address the unsafe condition, and that they planned to revise their AD accordingly. Subsequently, Transport Canada issued Transport Canada AD CF-2023-48R1, dated September 29, 2023 (Transport Canada AD CF-2023-48R1) (referred to after this as the MCAI) as an interim solution while it further investigates the unsafe condition. The MCAI requires mandating new AFM procedures to ensure the flightcrew checks that the horizontal stabilizer is correctly configured to prevent misleading pitch trim indications, which could result in extreme pitch oscillation.

The FAA is issuing this AD to address the unsafe condition on these products. You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2023-2152.

The FAA reviewed the following Bombardier temporary revisions:

• Bombardier Challenger 300 Temporary Revision TR-94-1, to Airplane Flight Manual (AFM) CSP 100-1, dated February 6, 2023;

• Bombardier Challenger 300 Temporary Revision TR-94-1, to AFM CSP 100-1 (Metric), dated February 6, 2023; and

• Bombardier Challenger 350 Temporary Revision TR-25-1, to AFM CH 350, dated February 6, 2023.

This service information describes procedures for revising the Emergency Procedures and Normal Procedures of the existing AFM to ensure the horizontal stabilizer is correctly configured prior to takeoff. These documents are distinct since they apply to different airplane configurations.

The FAA also reviewed the following checklists:

• “Takeoff Configuration Warnings,” of Chapter 3, “Emergency Procedures,” of the Bombardier Challenger 350 AFM, Publication No. CH 350 AFM, Revision 38, dated May 11, 2023; and

• “Before Starting Engines,” of Chapter 4, “Normal Procedures,” of the Bombardier Challenger 350 AFM, Publication No. CH 350 AFM, Revision 38, dated May 11, 2023.

These checklists include the same information specified in Bombardier Challenger 350 Temporary Revision TR-25-1, to AFM CH 350, dated February 6, 2023, but with minor changes to text. (For obtaining the checklists for Bombardier Challenger 350 AFM, Publication No. CH 350 AFM, use Document Identification No. CH 350 AFM.)

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

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

This AD requires revising the Emergency Procedures and Normal Procedures of the existing AFM to ensure the horizontal stabilizer is correctly configured prior to takeoff.

Transport Canada AD CF-2023-48R1 requires operators to “advise all flight crews” of revisions to the AFM, and thereafter to “operate the aeroplane accordingly.” However, this AD does not specifically require those actions as those actions are already required by FAA regulations. FAA regulations require that operators furnish to pilots any changes to the AFM (for example, 14 CFR 121.137), and to ensure the pilots are familiar with the AFM (for example, 14 CFR 91.505). As with any other flightcrew training requirement, training on the updated AFM content is tracked by the operators and recorded in each pilot's training record, which is available for the FAA to review. FAA regulations also require pilots to follow the procedures in the existing AFM including all updates. 14 CFR 91.9 requires that any person operating a civil aircraft must comply with the operating limitations specified in the AFM. Therefore, including a requirement in this AD to operate the airplane according to the revised AFM would be redundant and unnecessary. Further, compliance with such a requirement in an AD would be impracticable to demonstrate or track on an ongoing basis; therefore, a requirement to operate the airplane in such a manner would be unenforceable.

The FAA considers this AD to be an interim action. Transport Canada and Bombardier are still investigating the unsafe condition to determine if additional actions are necessary. If additional actions are determined to be necessary, the FAA may issue additional rulemaking.

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

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies forgoing notice and comment prior to adoption of this rule because software errors in the avionic architecture of the pitch trim indication could generate misleading pitch trim indication to the crew, leading to incorrect horizontal stabilizer positioning at takeoff, which could result in an extreme pitch oscillation and subsequent loss of control of the airplane and serious injury to passengers. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b)(3)(B).

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

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

The FAA estimates that this AD affects 740 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

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

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

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

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

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

(2) Will not affect intrastate aviation in Alaska.

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

The Pension Benefit Guaranty Corporation (PBGC) administers the pension plan termination insurance program under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). PBGC's regulation on Allocation of Assets in Single-Employer Plans (29 CFR part 4044) sets forth (in subpart B) the methods for valuing plan benefits of terminating single-employer plans covered under title IV. Guaranteed benefits and benefit liabilities under a plan that is undergoing a distress termination must be valued in accordance with subpart B of part 4044. In addition, when PBGC terminates an underfunded plan involuntarily pursuant to ERISA section 4042(a), it uses the subpart B valuation rules to determine the amount of the plan's underfunding.

Under § 4044.51(b) of the asset allocation regulation, early retirement benefits are valued based on the annuity starting date, if a retirement date has been selected, or the expected retirement age, if the annuity starting date is not known on the valuation date. Sections 4044.55 through 4044.57 set forth rules for determining the expected retirement ages for plan participants entitled to early retirement benefits. Appendix D of part 4044 contains tables to be used in determining the expected early retirement ages.

Table I in appendix D (Selection of Retirement Rate Category) is used to determine whether a participant has a low, medium, or high probability of retiring early. The determination is based on the year a participant would reach “unreduced retirement age” (URA) ( i.e., the earlier of the normal retirement age or the age at which an unreduced benefit is first payable) and the participant's monthly benefit at the unreduced retirement age. The table applies only to plans with valuation dates in the current year and is updated annually by PBGC to reflect changes in the cost of living.

Tables II-A, II-B, and II-C (Expected Retirement Ages for Individuals in the Low, Medium, and High Categories respectively) are used to determine the expected retirement age after the probability of early retirement has been determined using table I. These tables establish, by probability category, the expected retirement age based on both the earliest age a participant could retire under the plan and the unreduced retirement age. This expected retirement age is used to compute the value of the early retirement benefit and, thus, the total value of benefits under the plan.

This document amends appendix D to replace table I-23 with table I-24 to provide an updated correlation, appropriate for calendar year 2024, between the amount of a participant's benefit and the probability that the participant will elect early retirement. Table I-24 will be used to value benefits in plans with valuation dates during calendar year 2024.

PBGC has determined that notice of, and public comment on, this rule are impracticable, unnecessary, and contrary to the public interest. PBGC's update of appendix D for calendar year 2024 is routine. If a plan has a valuation date in 2024, the plan administrator needs the updated table being promulgated in this rule to value benefits. Accordingly, PBGC finds that the public interest is best served by issuing this table expeditiously, without an opportunity for notice and comment, and that good cause exists for making the table set forth in this amendment effective less than 30 days after publication to allow the use of the proper table to estimate the value of plan benefits for plans with valuation dates in early 2024.

PBGC has determined that this action is not a “significant regulatory action” under the criteria set forth in Executive Order 12866.

Because no general notice of proposed rulemaking is required for this regulation, the Regulatory Flexibility Act of 1980 does not apply (5 U.S.C. 601(2)).

In consideration of the foregoing, 29 CFR part 4044 is amended as follows:

The satellite carrier compulsory license establishes a statutory copyright licensing scheme for the distant retransmission of television programming by satellite carriers. 17 U.S.C. 119. Congress created the license in 1988 and reauthorized the license for additional five-year periods until 2019 when it made the license permanent. 1

On August 31, 2010, the Copyright Royalty Judges (Judges) adopted rates for the section 119 compulsory license for the 2010-2014 term. See 75 FR 53198. The rates were proposed by Copyright Owners and Satellite Carriers  2 and were unopposed. Id. section 119(c)(2) of the Copyright Act provides that, effective January 1 of each year, the Judges shall adjust the royalty fee payable under section 119(b)(1)(B) “to reflect any changes occurring in the cost of living as determined by the most recent Consumer Price Index (for all consumers and for all items) [CPI-U] published by the Secretary of Labor before December 1 of the preceding year.” Section 119 also requires that “[n]otification of the adjusted fees shall be published in the Federal Register at least 25 days before January 1.” 17 U.S.C. 119(c)(2).

The change in the cost of living as determined by the CPI-U during the period from the most recent index published before December 1, 2022, to the most recent index published before December 1, 2023, is 3.2%. 3 Application of the 3.2% COLA to the current rate for the secondary transmission of broadcast stations by satellite carriers for private home viewing—34 cents per subscriber per month—results in a rate of 35 cents per subscriber per month (rounded to the nearest cent). See 37 CFR 386.2(b)(1). Application of the 3.2% COLA to the current rate for viewing in commercial establishments—70 cents per subscriber per month—results in a rate of 72 cents per subscriber per month (rounded to the nearest cent). See 37 CFR 386.2(b)(2).

In consideration of the foregoing, the Judges amend part 386 of title 37 of the Code of Federal Regulations as follows:

The Pacific Coast Groundfish Fishery Management Plan (PCGFMP) and its implementing regulations at title 50 in the Code of Federal Regulations (CFR), part 660, subparts C through G, regulate fishing for over 90 species of groundfish in the exclusive economic zone (EEZ) off the coasts of Washington, Oregon, and California. The Pacific Fishery Management Council (Council) develops groundfish harvest specifications and management measures for 2 year periods ( i.e., a biennium). NMFS published the final rule to implement harvest specifications and management measures for the 2023-2024 biennium for most species managed under the PCGFMP on December 16, 2022 (87 FR 77007). In general, the management measures set at the start of the biennial harvest specifications cycle help the various sectors of the fishery attain, but not exceed, the catch limits for each stock. The Council, in coordination with Pacific Coast Treaty Indian Tribes and the States of Washington, Oregon, and California, recommends adjustments to the management measures during the fishing year to achieve this goal.

Pacific Coast groundfish fisheries are managed using harvest specifications or limits ( e.g., overfishing limits [OFL], acceptable biological catch [ABC], annual catch limits [ACL], and harvest guidelines [HG]) recommended biennially by the Council and based on the best scientific information available at that time (50 CFR 660.60(b)). During development of the harvest specifications, the Council also recommends management measures ( e.g., Annual Catch Targets [ACTs], trip limits, area closures, and bag limits) that are meant to mitigate catch so as not to exceed the harvest specifications. The harvest specifications and mitigation measures developed for the 2023-2024 biennium used data through the 2021 fishing year. Each of the adjustments to mitigation measures discussed below are based on updated fisheries information that was unavailable when the analysis for the current harvest specifications was completed. As new fisheries data becomes available, adjustments to mitigation measures are projected so as to help harvesters achieve but not exceed the harvest limits.

At its November 2023 meeting, the Council recommended that NMFS extend the duration of several measures implemented through an inseason published on October 2, 2023 (88 FR 67656), to continue the minimization of mortality of quillback rockfish off California for the 2024 fishing season. The Council also recommended NMFS reset trip limits for several species for the 2024 fishing season.

Under current management, quillback rockfish are a contributing species within the Minor Nearshore Rockfish complex north and south of 40°10′ N lat. The harvest specifications for this species (ACL, ABC, and OFL) contribute to the harvest specifications of the complex. Amendment 31 to the PCGFMP, which was approved on November 13, 2023, defined quillback rockfish as three separate stocks (Washington, Oregon, and California).

In an analysis for the November 2021 Council meeting, a report by the Groundfish Management Team (GMT) showed continued exceedances of the OFL contribution of quillback rockfish to the nearshore rockfish complex every year in all 4 years between 2017 and 2020 (Agenda Item E.3.a GMT Report 2, November 2021). Additionally, the Council noted that quillback rockfish has a 2.22 vulnerability score, making it one of the most vulnerable rockfishes in the PCGFMP. For these reasons, the Council recommended species-specific ACTs for quillback rockfish off the coast of California as part of the 2023-24 harvest specifications and management measures (87 FR 77007, December 16, 2022) to support better tracking of mortality in light of the depleted nature of quillback off California.

Quillback rockfish have a shared commercial and recreational species-specific ACT of 0.87 metric tons (mt) for the area between 42° N lat. and 40°10′ N lat. and 0.89 mt for south of 40°10′ N lat. (see 50 CFR part 660, tables 1a and 2a to subpart C). The ACTs were set under the 2023-24 Groundfish Harvest Specifications and Management Measures action in response to the 2021 stock assessment for quillback rockfish off the coast of California, which has been deemed the best scientific information available by NOAA Fisheries and the scientific advisors to the Council. Given quillback rockfish are currently managed in a stock complex, the new ACT was meant to formalize the ACL contributions for management purposes. Setting the ACTs equal to the ACL contributions allows the Council to recommend necessary management measures inseason when the ACL contribution is met or projected to be met.

At the November 2023 Council meeting, the PFMC recommended inseason changes to commercial fisheries in order to limit the mortality of quillback rockfish off California for 2024. The ACTs, and OFL contributions for the stock of quillback rockfish off California were estimated to be significantly exceeded in 2023 (see 88 FR 67656, October 2, 2023, for more information). Further action relative to mortality of quillback rockfish off California in the recreational fisheries is expected at the March 2024 PFMC meeting.

At the November 2023 meeting, the Council's GMT conducted analysis to see if there were any particular aspects of the fishery (by sector, location, gear type, etc. ) where quillback were most commonly encountered, in order to narrow the scope of potential restrictions that may be most effective at reducing further impacts to quillback rockfish for 2024.

The limited available spatial data indicated that quillback rockfish are very rarely encountered south of 36° N latitude. Additionally, the data available suggest that quillback rockfish off California north of 36° N latitude are rarely encountered in waters deeper than 50 fathoms (fm) (91.4 meters (m)) but that the depth ranges where they are most commonly encountered varies somewhat by latitude with more attributed catches in shallower depths ( e.g., 11-30 fathoms, 20.1-54.9 m) in the more northern areas and deeper than 20 fathoms (36.6 m) in southern parts of the California coast.

The GMT also looked at whether the legal non-bottom contact hook-and-line gear allowed in the non-trawl rockfish conservation area (RCA) (50 CFR 660.330(b)(3)) has been encountering quillback rockfish. This gear was a new management measure under the 2023-24 harvest specifications and management measures (87 FR 77007, December 16, 2022) within the non-trawl RCA in order to provide additional opportunity to commercial non-trawl fisheries to target healthy stocks while relieving pressure on depleted or constraining nearshore stocks. While data is limited so far, the gear configurations have shown to have relatively low bycatch of groundfish species of concern while being able to harvest healthy midwater rockfish. In the 14 years the three Experimental Fishing Permits (EFPs) operated that used similar gear (Emley-Platt, Real Good Fish, and Oregon Cook EFP), a total of only three quillback rockfish were caught. Further analysis showed that of the 108 mt of total catch in all three EFPs combined, approximately only 3 percent was quillback rockfish.

In light of this new information, the Council recommended limiting the reductions in trip limits by gear type and by area in order to maintain some fishing opportunity with limited quillback rockfish impacts, and focusing action on the sectors with greater quillback impacts. The recommendations from the Council are projected to reduce discard mortality of quillback rockfish in order to address depletion while minimizing the economic impact to fishing communities to the extent possible.

The Council recommended and, by revising tables 2 North and South to part 660, subpart E, and tables 3 North and South to part 660, subpart F, NMFS is implementing an expansion of the shoreward extent of the non-trawl RCA off California. Currently, the shoreward boundary off California is either 40 or 50 fathoms (73 meters (m) or 91 m), depending on latitude. This action moves the boundary to the shoreward boundary of the EEZ (3 nautical miles (5556 m) from shore). This closure reduces access to demersal co-occurring targets in the range of quillback rockfish. While new area will be closed to bottom-contact gears, legal non-bottom contact hook-and-line gear are allowed in the non-trawl RCA (50 CFR 660.330(b)(3)). This change to the shoreward extent of the non-trawl RCA allows fishery participants to continue to access healthy midwater stocks inside the non-trawl RCA, consistent with § 660.330(b)(3).

Additionally, the Council recommended and, by revising tables 2 North and South to part 660, subpart E, and tables 3 North and South to part 660, subpart F, NMFS is extending the non-trawl RCA south of 34° 27′ N lat. in the 100-150 fm (183 m-274 m) depths to include additional islands and banks that were formerly in the Cowcod Conservation Area (CCA) (for more information see 88 FR 59838, August 30, 2023). This change, which expands the non-trawl RCA, is being promulgated as a precautionary measure because recreational fishing may increase fishing pressure in areas which were historically closed for some or all of the year, and this anticipated increase in anglers may increase catch of constraining species such as copper rockfish, vermilion/sunset rockfish and/or species with prohibited retention such as bronzespotted rockfish and cowcod. Similarly, commercial fisheries operating in these depths around the islands and banks may increase the likelihood of interactions with prohibited species ( e.g., cowcod and bronzespotted rockfish). Additionally, the consistency in areas formerly closed by the CCA with the RCA lines in use along the mainland coast and Channel Islands south of Point Conception (34° 27′ N lat.) will reduce regulatory complexity for stakeholders.

The Council also recommended and, by modifying tables 2 North and South to part 660, subpart E, and tables 3 North and South to part 660, subpart F, NMFS is implementing a zero pound trip limit for limited entry (LE) and open access (OA) fisheries between 42° N latitude and 36° N latitude for the following targets for all cumulative periods in 2024: Nearshore Rockfish complex and cabezon. These targets are only found in depths co-occurring with quillback rockfish, so in order to reduce quillback discard mortality, fishing on these targets is not allowed.

The Council recommended and, by modifying tables 2 North and South to part 660, subpart E, and tables 3 North and South to part 660, subpart F, NMFS is implementing an area-based trip limit for LE and OA fisheries between 42° N latitude and 36° N latitude seaward of the non-trawl RCA for the following targets for all cumulative periods in 2024: lingcod and other flatfish. Inside of the non-trawl RCA, the trip limit is zero pounds for LE and OA fisheries for both lingcod and other flatfish, which co-occur with quillback rockfish, in order to reduce quillback discard mortality. The area-based trip limits will allow access to these stocks in deeper waters, seaward of the non-trawl RCA, where they do not co-occur with quillback rockfish, providing fishing opportunity in this area.

Vermilion/Sunset rockfish off California are currently managed as part of the Minor Shelf Rockfish complex, south of 40°10′ N latitude; as well as the Minor Shelf Rockfish complex north of 40°10′ N latitude, but only in the area between 42° and 40°10′ N lat. For 2024, the southern complex has an ACL of 1,469 metric tons (mt), and vermilion/sunset rockfish has an ACL contribution of 281.29 mt; the northern complex has an ACL of 1,278 mt, and vermilion/sunset rockfish has an ACL contribution of 6.62 mt within it.

With the changes described above, which will shift fishing effort from the nearshore out to the shelf, concerns about limiting shelf stocks, specifically minor shelf rockfish and vermilion/sunset rockfish, arose. The GMT analyzed reductions to the trip limits for Minor Shelf Rockfish in the LE and OA sectors off California. Based on the GMT analysis, the Council recommended reducing the trip limits, in anticipation of increased effort. The expected mortality by sector under current limits and under the recommended changes are shown in table 1.

Additionally, within the Minor Shelf Rockfish Complex, vermilion rockfish south of 40°10′ ACL contribution is projected to be exceeded in 2023 and therefore the Council determined that additional trip limit reductions should be taken for 2024. Consequently, the Council recommended and NMFS is approving this change by modifying tables 2 and 3 North and South for all cumulative periods in 2024. The expected mortality by sector under current limits and under the recommended changes are shown in table 2.

Bocaccio on the West Coast is managed as a separate stock south of 40°10′ N lat., while bocaccio north of 40°10′ N lat. is managed as part of the minor shelf rockfish complex north of 40°10′ N lat. Bocaccio south of 40°10′ N lat., the subject of this action, is caught both commercially and recreationally, with commercial vessels harvesting it with both trawl and fixed gear (longlines and pots/traps) in the bottom trawl, nearshore, limited entry, and open access fixed gear fisheries. It is caught in shelf and nearshore areas, often together with chilipepper rockfish. The 2024 ACL and harvest guideline for bocaccio south of 40°10′ N lat. are 1,828 mt, and 1,779.9 mt, respectively.

Subsequent to the June 2023 Council meeting, the Council recommended and NMFS implemented increases to the bocaccio trip limits for the LE and OA sectors through table 2 South and table 3 South such that the new limits were set at 8,000 lb (3,629 kg) per period for LE and 6,000 pounds (2,721 kg) per period for OA. Subsequent to the September 2023 Council meeting, the Council recommended revising the bocaccio trip limits between 40°10 ′ and 34°27′ N lat. for both sectors due to concerns due to quillback rockfish off California. NMFS implemented via inseason action a zero bag limit for bocaccio in the LE sector for period 6 in 2023 and a gear restriction for the existing bag limit for bocaccio in the OA sector (see 88 FR 67656, October 2, 2023). As part of the November 2023 analysis, the GMT concluded that there is minimal expected impact of target fishing for bocaccio on quillback rockfish as bocaccio is a midwater species and quillback rockfish are demersal and therefore they are not co-occurring. Therefore, the Council recommended applying the trip limits in place for each sector for periods 1-5 to period 6 for 2024. NMFS is implementing this change through revisions to table 2 South and table 3 South.

Fishing for “other flatfish ” off California as defined at § 660.11 General definitions (between 42° N lat. south to the U.S./Mexico border) is allowed within the non-trawl RCA with hook and line gear only (§ 660.330(d)(12)(iv)). To prevent the possible interaction with quillback rockfish within the RCA, the Council recommended reducing the “other flatfish” trip limit to 0 lbs./2 months between 42° N lat. to 36° N lat. inside the Non-Trawl RCA, and maintaining the current trip limits seaward of the Non-Trawl RCA. This modification would allow for the opportunity to land other flatfish caught seaward of the RCA while preventing interactions with quillback rockfish.

Prior to the November 2023 meeting, the GMT received a request to increase the lingcod trip limits north of 42° N lat. to reduce regulatory discarding and increase economic opportunity. Status quo is currently resulting in regulatory discard for certain participants in the fishery. Lingcod is managed with an ACL north of 40°10′ N lat. and an ACL south of 40°10′ N lat. The 2024 ACL for lingcod north of 40°10′ N lat. is 3,854 mt.

To evaluate potential increases to lingcod trip limits north of 42° N lat., the GMT made model-based landings projections under current regulations and alternative trip limits, including the limits ultimately recommended by the Council, for the LE and OA fisheries through the remainder of the year. Table 3 shows the projected lingcod landings, the lingcod allocations, and the projected attainment percentage by fishery under both the current trip limits and the Council's recommended adjusted trip limits for north of 42° N lat. These projections were based on the most recent catch information available through late October 2023.