[Federal Register Volume 60, Number 129 (Thursday, July 6, 1995)]
[Proposed Rules]
[Pages 35162-35166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16548]
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NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES
45 CFR Part 1160
RIN 3154-AAoo
Indemnities Under the Arts and Artifacts Indemnity Act
AGENCY: Federal Council on the Arts and the Humanities.
ACTION: Notice of Proposed Rulemaking.
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SUMMARY: This Notice of Proposed Rulemaking advises the public that the
Federal Council on the Arts and the Humanities is proposing to amend
the regulations implementing the Arts and Artifacts Indemnity Act, as
amended (20 U.S.C. 971-977) (the ``Act''). The principal change is to
permit the indemnification of eligible items from the United States
while on exhibition in this country in connection with an exhibition of
eligible items from outside of the United States. The proposed rule
also includes illustrations of exhibitions eligible for indemnification
which are intended to provide further guidance to persons considering
applying for the indemnification of an international exhibition. The
proposed amendment is not intended to bring about a major shift in
emphasis of the current policy or practice of the indemnity program.
This notice invites comments on the proposed amendment to the
regulations. The Federal Council particularly invites comments from
groups, individuals, and governmental agencies involved in the
exhibition process, including museums, private insurers, and
professional and scholarly organizations. The revised rules will be
published in the Federal Register and will be included in guideline
packages for prospective applicants and in Certificates of Indemnity.
DATES: Comments should be received by August 7, 1995.
ADDRESSES: Interested persons should submit ten copies of their written
comments to the Federal Council on the Arts and the Humanities, c/o
Alice M. Whelihan, Indemnity Administrator, National Endowment for the
Arts, 1100 Pennsylvania Avenue, N.W., Washington, D.C. 20506.
FOR FURTHER INFORMATION CONTACT:Alice Whelihan, 202-682-5442.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory Background
In 1975, the United States Congress enacted the Arts and Artifacts
Indemnity Act which established an indemnity program administered by
the Federal Council on the Arts and the Humanities (the ``Federal
Council''). 20 U.S.C. Sections 971-977. The Federal Council is composed
of the heads of nineteen federal agencies and was established by
Congress, among other things, to coordinate the policies and operations
of the National Endowment for the Arts, the National Endowment for the
Humanities, and the Institute of Museum Services, including the joint
support of activities. 20 U.S.C. Section 971.
Under the indemnification program, the United States Government
guarantees to pay loss or damage claims, subject to certain
limitations, arising out of exhibitions containing items determined by
the Federal Council to be of educational, cultural, historical or
scientific value the exhibition of which must be certified by the
Director of the United States Information Agency as being in the
national interest. In order to be eligible for indemnification, the
objects must be on exhibition in the United States, or if outside this
country preferably as part of an exchange of exhibitions.
B. Legislative History
On May 21, 1975, Senators Claiborne Pell (D, RI) and Jacob Javits
(R, NY) introduced the Arts and Artifacts Indemnity Act as an amendment
to the reauthorization of the National Foundation on the Arts and
Humanities Act of 1965. According to the House Committee report, the
purpose of the statute was ``to provide indemnities for exhibitions of
artistic and humanistic endeavors, and for other purposes.'' \1\ The
Senate Committee stated that it believed that this purpose could be
advanced ``through the exchange of cultural activities and sharing by
nations of the world of their cultural institutions and national wealth
and treasure.'' \2\
\1\ Id.
\2\ Id.
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The broad purpose of the Act is echoed throughout the Act's
language and legislative history. For example, in testifying at joint
hearings before the House Subcommittee on Select Education and the
Senate Special Subcommittee on Arts and Humanities, Nancy Hanks,
Chairman, National Endowment for the Arts, stated:
Cultural exhibitions and exchanges of high quality should be
encouraged by the laws and policies of the United States Government.
They are in the national interest because of the personal,
aesthetic, intellectual, and cultural benefits accruing to every
man, woman and child of this nation who has the opportunity to
experience these beautiful and enlightening presentations. We
believe that this country should do as much as any nation in the
world to insure that these vitally important programs are
strengthened.\3\
\3\ H.R. Rep. No. 680, 94th Cong., 1st Sess., at 5.
There was concern in Congress that such exchanges were impeded by
prohibitively high insurance costs. The Senate noted that ``anywhere
from half to two-thirds of the cost of an international exhibition is
the cost of insuring the material to be exhibited.'' \4\ Ronald Berman,
Chairman of the Federal Council, testified that without indemnification
provided in special legislation enacted by the 93rd Congress, the
insurance costs in connection with several widely attended exhibitions
would have been prohibitive.\5\
\4\ S. Rep. No. 289, 94th Cong., 1st Sess., at 1.
\5\ H.R. Rep. No. 680, 94th Cong., 1st Sess., at 5.
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C. Regulatory Background
The Federal Council is the agency charged by Congress with the
responsibility to administer the Arts and Artifacts Indemnity Act. In
practice, the Indemnity Program is administered for the Federal Council
by the Museum Program of the National Endowment for the Arts under the
``Indemnities Under the Arts and Artifacts Indemnity Act'' regulations
(the ``Regulations''), which are set forth at 45 CFR Part 1160.
These Regulations have been promulgated, and amended from time to
time, by the Federal Council pursuant to the express and implied
rulemaking authorities granted by Congress to make and amend rules
needed for the effective administration of the indemnity program. Among
other things, Congress expressly granted to the Federal Council the
authorities to establish the terms and conditions of indemnity
agreements; to set
[[Page 35163]]
application procedures; and to establish claim adjustment procedures.
20 U.S.C. Sections 971(a)(2), 973(a), 975(a).
For a number of years, the Federal Council has considered the
desirability of amending the Regulations to permit the indemnification
of U.S.-owned loans on exhibition in the United States in connection
with certified international exhibitions. As currently drafted, the
Regulations do not cover domestic objects on loan to an international
exhibition in the United States. The Regulations provide, in pertinent
part:
An indemnity agreement made under these regulations shall cover:
(1) Eligible items from outside the United States while on
exhibition in the United States or
(2) Eligible items from the United States while on exhibition
outside this country, preferably when they are part of an exchange
of exhibitions. 45 C.F.R. Section 1160.1
On February 25, 1993, during a lengthy discussion of the
application of the National Gallery of Art for the indemnification of
the exhibition ``Great French Paintings from the Barnes Foundation:
Impressionist, Post-Impressionist and Early Modern,'' the Federal
Council concluded that the eligibility criteria set forth in the
Regulations were more narrowly drawn then required under the Act. While
the Council approved the indemnification of the Barnes exhibition,
which consisted of one foreign-owned object and 80 domestically owned
objects, a Certificate of Indemnity ultimately did not issue because of
legal uncertainties related to the Council's action under its current
Regulations. To clarify eligibility issues for future actions, the
Federal Council voted to amend its regulations.
After extensive discussion of the issue, the Federal Council
resolved that the proposed amendment to the Regulations would
significantly enhance its ability to provide the American public with
the benefits of a high quality program of international exhibitions
while not significantly increasing the exposure of the Federal
government to pay loss or damage claims nor significantly adding to the
administrative burdens or costs of the program.
The Federal Council concluded that widening the eligibility
criteria under the Indemnity Program to include coverage of U.S.-owned
objects in exhibitions that also include foreign-owned loans would
provide an important benefit to U.S. cultural institutions and to the
American public. Under the current guidelines, U.S.-owned loans may be
indemnified only when exhibited abroad. The Federal Council concluded
that if items from abroad are of educational, cultural, historical or
scientific value, and their exhibition has been certified by the
Director of the United States Information Agency as being in the
national interest, thereby making them eligible for indemnification
coverage, the U.S.-owned loans to the exhibition also should be
eligible for indemnification.
The Federal Council stressed that the proposed amendment is not
intended to bring about a major shift in the emphasis of the current
policy or practice of the indemnity program. Under the proposed amended
Regulations, indemnity coverage would continue to be available
primarily for the exhibition of items coming from outside the United
States. In determining whether to indemnify international exhibitions
that also include U.S. loans, the Federal Council would continue to
apply the same general standard of review--whether the exhibition taken
as a whole is of educational, cultural, historical or scientific
significance. However, to guard against potential abuses, the Federal
Council will require that the foreign loans be an integral or essential
component of the exhibition. Exhibitions consisting solely of domestic
items would continue to be ineligible for indemnification.
The Federal Council concluded that because of the overall statutory
cap on the program the proposed modification would not significantly
increase the exposure of the Federal government to claims for loss or
damage while providing important additional relief for U.S. borrowing
institutions. Under the statutory cap, the Federal Council may not
issue indemnity agreements covering losses of more than an aggregate of
$3,000,000,000 at any one time. The cap--and thereby the total
government exposure--remains the same whether the indemnity agreements
cover foreign or domestic content. Moreover, the fact that coverage
during international transit, the time of the greatest risk, would not
be required for loans from the U.S. lending institutions greatly
reduces the risk of additional losses.
The Federal Council further concluded that the proposed amendment
would not cause a significant increase in either the number
applications to the program or the administrative burdens associated
with applying reviewing indemnification applications. This is the case
because under the current practice, applicants already are required to
include information on domestic loans in their applications, and
indemnity panels consider the educational, cultural, historical or
scientific value of both the domestic and foreign items in determining
whether to indemnify an exhibition.
While the need to determine whether indemnification of the domestic
content is appropriate would require an additional judgment made by the
Federal Council, it is similar in character to the determinations
already made by the Federal Council in determining the appropriateness
of indemnification of foreign content moreover, the same options for
technical assistance and resubmission would be available for the
rejected applicant as are currently available.
On June 16, 1993, on the basis of these conclusions, the Federal
Council reaffirmed its vote of February 25, 1993 to amend the
Regulations to permit the coverage of domestic items in connection with
international exhibitions in the United States. Specifically, the
Federal Council approved a motion to promulgate regulations revising 45
CFR Part 1160.1 (``Purpose and Scope'') by adding the following
language:
(3) eligible items from the United States while on exhibition in
the United States if the exhibition includes other eligible items
from outside the United States.
On April 6, 1994, the Federal Council published in the Federal
Register an advance notice of proposed rulemaking (ANPR) regarding the
indemnification of eligible items from the United States while on
exhibition in this country in connection with an exhibition of items
from outside the United States. 59 FR 16162-64, April 6, 1994.
II. Discussion of Comments Received
In response to the ANPR, the Federal Council received thirty-four
(34) comments. Thirty-one (31) comments were received from
representatives of museums and galleries, both public and private, two
comments were received from representatives of museum service
organizations, and one comment was received from a federal agency. The
museums submitting comments are located in fifteen states and the
District of Columbia.
The vast majority of the commenters strongly supported the Federal
Council's proposal to extend indemnification to eligible items from the
United States while on exhibition in this country in connection with an
exhibition of foreign-owned items. While the public comments include a
broad range of issues, they can be
[[Page 35164]]
summarized under six general topics: (1) Scope of coverage of the
proposed amendments, (2) organizing international exhibitions, (3)
benefits to the museum community, (4) benefits to the public, (5)
further guidance on eligibility, and (6) the role of the United States
Information Agency.
(1) Scope of Coverage of Proposed Amendments
Two commenters requested that the Federal Council consider
extending the proposed changes to the indemnity program to include
indemnification of exhibitions even where there is no foreign loans,
so-called ``full domestic indemnity.'' The Federal Council decided
against pursuing full domestic indemnity at this time for a number of
reasons. The principal reason involves the availability of
administrative resources. Under a full domestic indemnity program, the
Federal Council anticipates a dramatic increase the number of eligible
exhibitions and, thereby, the number of applicants. Such an increase
could not be accommodated by the resources currently available for the
administration of the indemnity program.
(2) Organizing International Exhibitions
A number of commenters noted that the ``internationalization'' of
collecting and exhibiting works of art has greatly increased. This
trend, in the words of one museum director, has greatly increased the
likelihood that ``major works by artists outside the United States will
be owned by major museums and private collectors in the U.S.'' These
commenters believed that indemnifying foreign works owned by American
museums was consistent with the goals of the indemnity program to
provide the public access to high quality international exhibitions.
Further, some commenters suggested that it may be necessary to include
items owned by U.S. institutions in order to organize a comprehensive
international exhibition. Another commenter described how the proposed
amendment might facilitate organizing international exhibitions: ``[B]y
securing fine domestic loans, potential foreign lenders are encouraged
to lend their works of art.''
(3) Benefits to U.S. Museums
Several commenters noted the proposed change would result in
significant savings for American museums and galleries which are
currently required to obtain private insurance for U.S. loans in
connection with an indemnified international exhibition. At least two
commenters stated that this benefit would come at little or no cost to
the taxpayers because technological advances are making the
preservation and transportation of art safer, thereby further reducing
the already extremely low risk of claims. According to some commenters,
the proposed change would not impose new administrative burdens on
applicants because, under current guidelines, all applicants already
must submit detailed information on both foreign and domestic loans.
Under the current system, many commenters noted, museums often must
expend scarce resources to prepare the same documentation for the
Federal Council and private insurers.
(4) Benefits to the Public
A few commenters anticipated that the change in the Regulations
would improve the quality of the exhibitions available to the public.
One commenter said that allowing the indemnification of limited
domestic content would remove any incentive for curators to choose an
inferior foreign-owned work over a superior U.S.-owned work in order to
effect a savings in insurance premiums. Thus, according to this
commenter, the proposed amendment would have the added benefit of
helping to ensure that all items selected for exhibition were chosen
solely on the basis of educational, cultural, historical or scientific
significance. Another museum director pointed out that providing
limited domestic content indemnification would bring the United States
closer to conformity with a number of other countries, such as Great
Britain, which provide full domestic indemnification.
(5) Further Guidance on Eligibility Criterion
While a number of commenters were able to identify examples of
exhibitions which, in all likelihood, would have qualified for
indemnification under the revised rules, two commenters suggested the
need for providing further guidance to persons considering applying for
the indemnification of an international exhibition under the new
eligibility criterion. Specifically, one commenter felt that the
Federal Council should clarify the amount and/or character of the
domestic items in an international exhibition that would be appropriate
for indemnification under the amended Regulations. Another commenter
stated that, without any additional guidance, the only exhibitions that
would appear to be ineligible for indemnification would be those that
do not include a single foreign-owned work. While this commenter did
not propose any specific changes, another suggested specifying that
only exhibitions which contain a ``majority'' of foreign-owned works
would be eligible.
The Federal Council considered at length the question of whether to
incorporate a strict percentage test within the new eligibility
criterion. The Federal Council decided not to incorporate such a
percentage test in the proposed rule. While the Federal Council
acknowledges that a number of commenters believe that the proposed
eligibility standard as published in the ANPR may be too nebulous, the
Council felt strongly that adopting a rigid percentage test for
domestic content in international exhibitions would prove to be too
inflexible a tool to carry out the broad objectives of the statute.
At the same time, the Federal Council recognized that the proposed
amendment, as published in the ANPR, may not provide sufficient
guidance regarding the eligibility for indemnification of international
exhibitions that incorporate U.S. loans. Accordingly, the eligibility
criterion for such exhibitions published in this notice has been
revised to provide that the foreign loans must be an integral or
essential component of the exhibition as a whole. Put another way, the
foreign loans must be necessary to accomplish the educational,
cultural, historical or scientific objectives of the exhibition. A
number of examples are included to clarify the application of this
standard by the Federal Council. These examples are included solely for
the purpose of providing general guidance, and applicants seeking
advice with respect to specific exhibitions are encouraged to consult
directly with the Administrator of the Indemnities Program early in the
planning process.
(6) United States Information Agency
The United States Information Agency (``USIA'') commented that it
had no objection in principle to extending indemnification to eligible
items from the United States while on exhibition in this country in
connection with foreign items if indemnifying such objects would not
adversely effect the ability of the Federal Council to indemnify the
foreign works. However, USIA questioned whether the Arts and Artifacts
Indemnity Act permitted the Federal Council to enter into indemnity
agreements for such exhibitions and the USIA to issue national interest
certifications in connection with such exhibitions. After extensive
discussions between the USIA and the Federal Council, USIA ultimately
concluded that there was a reasonable basis for the Federal Council's
position and that it
[[Page 35165]]
would defer to the Federal Council's interpretation of the Act. USIA
also stated that it would issue national interest certifications
consistent with its statutory responsibilities and the amended
Regulations.
III. Section-by-Section Analysis
Section 1160.1 Purpose and Scope
The eligibility criteria, which currently appear in subparagraph
(a) of Section 1160.1, have been moved to a new Section 1160.4. This
change has been made because the Federal Council believed that the
revised eligibility standards could be more accurately addressed and
more easily located within a new, separate section rather than within
the existing scope and purpose section.
Section 1160.4 Eligibility
Subparagraphs (a) and (b) are identical to the paragraphs as they
appeared in the prior Sec. 1160.1. Subparagraph (c), and the examples
that follow, are new. As discussed more fully above, the proposed
amendment would permit the indemnification of U.S. loans in connection
with an international exhibition. The examples that follow are intended
solely to provide general guidance to applicants regarding the scope of
the proposed eligibility standard. However, the Federal Council will
continue its practice of determining the eligibility for
indemnification of specific exhibitions on the basis of a case-by-case
review by an expert Indemnity Panel.
In general, coverage is available primarily for the exhibition of
items coming from outside the United States. Under the proposed
amendment, some items from the United States in such exhibitions may
also be eligible for indemnification. For exhibitions in which items
from outside the United States appear to have been included merely to
obtain insurance relief for an exhibition consisting predominantly of
items from the United States, coverage will be denied. In all cases,
the foreign loans must be an integral or essential component of the
exhibition as a whole.
IV. Regulatory Analyses
This rule is not a significant regulatory action for the purposes
of Executive Order 12866 of September 20, 1993.
As required by the Regulatory Flexibility Act, it is hereby
certified that this rule will not have a significant impact on small
business entities.
The Catalogue of Federal Domestic Assistance number for the Arts
and Artifacts Indemnity Program is 45-201.
List of Subjects in 45 CFR Part 1160
Indemnity payments, National Foundation on Arts and Humanities.
For the Federal Council on the Arts and the Humanities.
Michael S. Shapiro,
Counsel to the Federal Council on the Arts and the Humanities.
For the reasons set forth in the preamble, 45 CFR Part 1160 is
proposed to be amended as follows:
PART 1160--INDEMNITIES UNDER THE ARTS AND ARTIFACTS INDEMNITY ACT
1. The authority citation for part 1160 continues to read as
follows:
Authority: 20 U.S.C. 971-977.
2. Section 1160.1 is amended by revising paragraph (a) as follows:
Sec. 1160.1 Purpose and scope.
(a) This part sets forth the exhibition indemnity procedures of the
Federal Council on the Arts and Humanities under the Arts and Artifacts
Indemnity Act (Pub. L. 94-158) as required by section 2(a)(2) of the
Act.
* * * * *
Secs. 1160.4-1160.11 [Redesignated as Secs. 1160.5-1160.12]
3. Sections 1160.4 through 1160.11 are redesignated as Secs. 1160.5
through 1160.12 and a new Sec. 1160.4 is added to read as follows:
Sec. 1160.4 Eligibility.
An indemnity agreement made under this part shall cover:
(a) Eligible items from outside the United States while on
exhibition in the United States;
(b) Eligible items from the United States while on exhibition
outside this country, preferably when they are part of an exchange of
exhibitions; and
(c) Eligible items from the United States while on exhibition in
the United States, in connection with other eligible items from outside
the United States which are integral to the exhibition as a whole.
Example 1: Museum A, an American art museum, is organizing a
retrospective exhibition which will include more than 150 works of
art by the Impressionist painter Auguste Renoir. The exhibition will
present the full range of Renoir's production for the first time
ever in an American museum. Museums B and C, large national museums
in Paris and London, have agreed to lend 125 major works of art
illustrating every aspect of Renoir's career. Museum A is also
planning to include related works from other American public and
private collections which have not been seen together since the
artist's death in 1919. Museums D and E, major each coast American
art museums, have agreed to lend 25 masterworks by Renoir. The
exhibition will open in Chicago and travel to San Francisco and
Washington.
Discussion: Example 1 is a straightforward application of the
amended indemnity regulations. Under the old regulations, only the
works of art from Museums B and C, the foreign museums, would have
been eligible for indemnification. Under the proposed Regulations,
the works of art from American museums and other public and private
collections also would be eligible for indemnification. In
determining whether to indemnify the entire exhibition, the Federal
Council will evaluate the exhibition as a whole and whether the
foreign loans are integral to the educational, cultural, historical
or scientific significance of the exhibition. In this example, the
Federal Council would likely approve indemnification of the entire
exhibit.
Example 2: Museum A in Massachusetts is organizing an exhibition
celebrating 250 Years of Decorative Arts in America, to be held in
conjunction with the state's celebration of the millennium. Included
among the objects to be borrowed from museums and historical
societies in the United States are furniture, textiles, metalwork,
ceramics, glass and jewelry, illustrating the best examples of
American design from colonial times to the present. The curator
traveled abroad recently and saw an exhibition of American quilts
which have been acquired by a British decorative arts museum. He
intends to borrow several of the quilts for the exhibition.
Discussion: Example 2 raises the question as to whether the
American museum organizing the exhibition has included the British-
owned American quilts merely to obtain insurance relief. In
determining whether to indemnify the entire exhibition, the Federal
Council will evaluate the exhibition as a whole and whether the
foreign loans are integral to achieving its educational, cultural
and historical purposes. Here, it is likely that the Federal Council
will conclude that the foreign works are not an essential component
of the exhibition. The Federal Council also may seek additional
information from the applicant to determine whether the objectives
of the exhibition could have been accomplished as satisfactorily by
borrowing American quilts from U.S. collections. On these facts, the
Federal Council in all likelihood would deny indemnification for the
entire exhibition.
Example 3: Museum A, an American museum, is organizing an
exhibition of the works of James Watkins, a nineteenth century
American painter, focusing on his studies of human anatomy. Museum A
has the foremost collection of preparatory drawings related to
Watkins' major painting, ``The Surgeon and His Students.'' The
painting is in the permanent collection of Museum B, located in the
south of France, which has agreed to lend the painting for the
exhibition. The exhibition will be shown at Museum B after the U.S.
tour. American Universities, C and D, have also agreed to lend
anatomical illustrations and drawings which show Watkins'
development as a draughtsman. The exhibition and accompanying
catalogue are
[[Page 35166]]
expected to shed new light on Watkins contributions to art and
scientific history.
Discussion: Example 3 addresses the issue of whether the Federal
Council will indemnify an exhibition even where the U.S. objects
outnumber the foreign works. In determining whether to indemnify the
entire exhibition, the Federal Council will evaluate the exhibition
as a whole and the relationship of the foreign loans to the
educational, cultural, historical and scientific significance of the
exhibition. In this example, the exhibition promises to make import
ant contributions not only to the history of art but also to the
history of science. While there is only a single foreign work of
art, it is clearly an essential component of the exhibition as a
whole. The case for indemnification of the entire exhibition is
further strengthened by the fact that a foreign masterpiece, which
is closely related to the preparatory drawings and anatomical
illustrations and drawings owned by American institutions, will be
made available to the American public. Thus, the mere fact that the
U.S. loans outnumber the foreign works will not in itself disqualify
the entire exhibition for indemnification.
[FR Doc. 95-16548 Filed 7-5-95; 8:45 am]
BILLING CODE 7536-01-M