[Federal Register Volume 68, Number 200 (Thursday, October 16, 2003)]
[Rules and Regulations]
[Pages 59684-59704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26217]



[[Page 59683]]

-----------------------------------------------------------------------

Part II





Department of Homeland Security





-----------------------------------------------------------------------



Office of the Secretary



6 CFR Part 25



Regulations Implementing the Support Anti-terrorism by Fostering 
Effective Technologies Act of 2002 (the SAFETY Act); Interim Rule

  Federal Register / Vol. 68, No. 200 / Thursday, October 16, 2003 / 
Rules and Regulations  

[[Page 59684]]


-----------------------------------------------------------------------

DEPARTMENT OF HOMELAND SECURITY

Office of the Secretary

6 CFR Part 25

[USCG-2003-15425]
RIN 1601-AA15


Regulations Implementing the Support Anti-terrorism by Fostering 
Effective Technologies Act of 2002 (the SAFETY Act)

AGENCY: Office of the Secretary, Department of Homeland Security.

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This interim rule implements Subtitle G of Title VIII of the 
Homeland Security Act of 2002--the Support Anti-terrorism by Fostering 
Effective Technologies Act of 2002 (``the SAFETY Act'' or ``the Act''), 
which provides critical incentives for the development and deployment 
of anti-terrorism technologies by providing liability protections for 
Sellers of ``qualified anti-terrorism technologies.'' This rule 
provides the application process by which a seller will apply for 
liability protections for anti-terrorism technologies. Its purpose is 
to facilitate and promote the development and deployment of anti-
terrorism technologies that will save lives.

DATES: This interim rule is effective October 16, 2003. Comments and 
related material must reach the Docket Management Facility on or before 
December 15, 2003. Comments sent to the Office of Management and Budget 
(OMB) on collection of information must reach OMB on or before December 
15, 2003.

ADDRESSES: Because the Department of Homeland Security does not yet 
have electronic docketing capability, for the purposes of this rule, we 
are using the Department of Transportation Docket Management System for 
the U.S. Coast Guard. You may submit comments identified by Coast Guard 
docket number USCG-2003-15425 to the Docket Management Facility at the 
Department of Transportation. To avoid duplication, please use only one 
of the following methods:
    (1) Web site: http://dms.dot.gov.
    (2) Mail: Docket Management Facility, U.S. Department of 
Transportation, 400 Seventh Street, SW., Washington, DC 20590-0001.
    (3) Fax: 202-493-2251.
    (4) Delivery: Room PL-401 on the Plaza level of the Nassif 
Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal holidays. The telephone 
number is 202-366-9329.
    (5) Federal eRulemaking portal: http://www.regulations.gov.
    You must also mail comments on collection of information to the 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, 725 17th Street, NW., Washington, DC 20503, ATTN: Desk Officer, 
Department of Homeland Security.
    Comments and materials received from the public, as well as 
documents mentioned in this preamble as being available in the docket, 
are part of docket USCG-2003-15425 and are available for inspection or 
copying from the Docket Management Facility, U.S. Department of 
Transportation, room PL-401, 400 Seventh Street, SW., Washington, DC, 
between 9 a.m. and 5 p.m., Monday through Friday except Federal 
holidays. You may also find this docket on the Internet at http://dms.dot.gov. You may also access the Federal eRulemaking Portal at 
http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: If you have questions on this interim 
rule, call Wendy Howe, Directorate of Science and Technology, 
Department of Homeland Security, telephone 202-772-9887. If you have 
questions on viewing or submitting material to the docket, call Dorothy 
Beard, Chief, Dockets, Department of Transportation, telephone 202-366-
5149.

SUPPLEMENTARY INFORMATION: 

Public Participation and Request for Comments

    We encourage you to participate in this rulemaking by submitting 
comments and related materials. All comments received will be posted, 
without change, to http://dms.dot.gov and will include any personal 
information you have provided.
    Submitting comments: If you submit a comment, please include your 
name and address, identify the docket number for this rulemaking (USCG-
2003-15425), indicate the specific section of this document to which 
each comment applies, and give the reason for each comment. You may 
submit your comments and material by electronic means, mail, fax, or 
delivery to the Docket Management Facility at the address under 
ADDRESSES; but please submit your comments and material by only one 
means. If you submit them by mail or delivery, submit them in an 
unbound format, no larger than 8\1/2\ by 11 inches, suitable for 
copying and electronic filing. If you submit them by mail and would 
like to know that they reached the Facility, please enclose a stamped, 
self-addressed postcard or envelope. We will consider all comments and 
material received during the comment period. We may change this rule in 
view of them.
    Viewing comments and document: To view comments, as well as 
documents mentioned in this preamble as being available in the docket, 
go to http://dms.dot.gov at any time and conduct a simple search using 
the docket number. You may also visit the Docket Management Facility in 
room PL-401 on the Plaza level of the Nassif Building, 400 Seventh 
Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through 
Friday, except Federal holidays.
    Privacy Act: Anyone can search the electronic form of all comments 
received in the docket by the name of the individual submitting the 
comment (or signing the comment, if submitted on behalf of an 
association, business, labor union, etc.).

Regulatory History

    On July 11, 2003, we published a notice of proposed rulemaking 
entitled ``Regulations Implementing the Support Anti-Terrorism by 
Fostering Effective Technologies Act of 2002 (the SAFETY Act)'' in the 
Federal Register (68 FR 41420). No public hearing was requested and 
none was held. As stated in the notice of proposed rulemaking, we 
intended to implement this interim rule as soon as possible. The 
Department of Homeland Security (Department) finds that the need to 
foster anti-terrorism technology by instituting liability protection 
measures, as soon as practicable, furnishes good cause for this interim 
rule to take effect immediately under both the Administrative Procedure 
Act, 5 U.S.C. 552(d)(3), and section 808 of the Congressional Review 
Act. The Department believes the current development of anti-terrorism 
technologies has been slowed due to the potential liability risks 
associated with their development and eventual deployment. In a fully 
functioning insurance market, technology developers would be able to 
insure themselves against excessive liability risk; however, the 
terrorism risk insurance market appears to be in disequilibrium. The 
attacks of September 11 fundamentally changed the landscape of 
terrorism insurance. Congress, in its statement of findings and purpose 
in the Terrorism Risk Insurance Act of 2002 (``TRIA''), concluded that 
temporary financial assistance in the insurance market is needed to 
``allow for a transitional

[[Page 59685]]

period for the private markets to stabilize, resume pricing of such 
insurance, and build capacity to absorb any future losses * * *.'' TRIA 
Sec.  101(b)(2).
    The United States remains at risk to terrorist attacks. It is in 
the public's interest to have this interim rule effective immediately 
because its aim is to foster the development and deployment of anti-
terrorism technologies. Additionally, this interim rule will clarify to 
the greatest extent possible the application of the liability 
protections created by the SAFETY Act, thus providing an instant 
incentive for prospective applicants to apply for its protections and 
for others to begin exploring new measures that will prevent or reduce 
acts of terrorism. The interim rule will also provide the Department 
with sufficient program flexibility to address the specific 
circumstances of each particular request for SAFETY Act coverage. The 
application process is interactive. Those persons availing themselves 
of the protections afforded in this interim rule will also be 
interacting with the Department in the application process. 
Furthermore, the Department will continue to consider comments on this 
interim rule. Since the use of the liability protections afforded in 
this interim rulemaking is voluntary, there are no mandatory costs or 
burdens associated with the immediate implementation of this rule.
    By having these provisions in place, the Department may begin 
processing applications for the liability protections and thus provide 
qualified Sellers of anti-terrorism technologies valuable incentives to 
develop and sell such technologies, as well as incentives for others to 
deploy such technologies. The purpose of those technologies is to 
detect, deter, mitigate, or assist in the recovery from a catastrophic 
act of terrorism. Thus, the Department finds that it is not only 
impracticable to delay an effective date of implementation, but it is 
also in the public's interest to make the interim rule effective upon 
publication in the Federal Register.
    As previously mentioned in the proposed rule, the Department does 
not intend to resolve every conceivable programmatic issue through this 
interim rule. Instead, this interim rule sets out a basic set of 
regulations that implements the SAFETY Act program. The Department will 
continue to consider public comments and determine whether possible 
supplemental regulations are needed as we gain experience with 
implementing the Act.

Discussion of Comments and Changes

    The Department received 43 different sets of comments on the 
proposed rule during the comment period. Two additional sets of 
comments were received on August 12, 2003, the day after the comment 
period ended, but in view of the relatively brief comment period (30 
days), the Department has decided to accept those comments as well. The 
Department has considered all of the aforementioned 45 sets of 
comments, and summaries of the comments and the Department's responses 
follow.

Applicability and Use of Standards

    The Department received a total of 24 comments relating to 
references to standards in the proposed rule. A change in the term 
``safety and effectiveness standards,'' used in Section 25.3(c) of the 
proposed rule, to the industry accepted term ``technical standards,'' 
was suggested and has been implemented in Section 25.3(c) of the 
interim rule. A number of comments were made regarding the use of 
voluntary consensus technical standards and the advisability of 
ensuring that the Department provide for stakeholder participation in 
any standard development activities. The Department recognizes the 
advisability of such participation and has instituted a comprehensive 
program based on using the voluntary consensus process for the majority 
of its standard development activities. This process is designed to 
involve users, manufacturers, and private and public sector technical 
communities in all phases of standard development. The American 
National Standards Institute, numerous Standards Development 
Organizations, and the National Institute for Standards and Technology 
already have been actively involved in assisting the Department in 
accomplishing its standard development goals. Although the Department 
is vested with the authority to promulgate regulatory standards, the 
circumstances under which Department regulations governing anti-
terrorism technologies are likely to be required are unusual. 
Therefore, the Department does not believe that there is a need for 
specific language about rulemaking with respect to standards.
    One comment suggested postponing standard setting activities for 
two years in order to allow the market to stabilize. Other comments 
indicated a concern regarding possible prejudice against technologies 
that were not governed by formally accepted standards. The Department 
believes, however, that because of the rapidly evolving threat 
environment and the lack of basic standards for many classes of 
technologies, it is not in the best interest of the nation--and 
particularly of the emergency response community--to delay standard 
development activities. The Department also understands, however, that 
there is a continuing need for flexibility in the technical evaluation 
criteria under the SAFETY Act, and accordingly the Department will 
apply standards in SAFETY Act evaluations only to the extent that they 
are applicable to a particular technology and the circumstances of its 
proposed deployment. For those technologies without applicable 
standards (or with incomplete standards), additional methods of 
evaluation will be used, such as best practices, existing laboratory or 
field testing, etc. It will be highly desirable to use test 
information, where appropriate, from independent, accredited 
laboratories. The Department has also initiated a program to establish 
a network of certified labs that should address this need.
    It will be important for SAFETY Act applicants to identify 
applicable standards that are appropriate to the specific operating 
environment and threat conditions for any potential anti-terrorism 
technology. The degree to which a proposed technology meets applicable 
standards will certainly be used to inform the technical evaluation 
process. However, technical effectiveness is only one facet of the 
criteria for issuance of a Designation or a Certification. Therefore, 
prior approval or certification by a United States Government agency 
(such as the Food and Drug Administration) will not be sufficient to 
form the basis for a SAFETY Act Designation or Certification per se, 
although such approval or certification might constitute relevant 
evidence of utility, effectiveness, or safety, and of course prior use 
of a technology by the United States Government is expressly relevant 
to the first criterion in Section 862(b)(1) of the SAFETY Act and the 
corresponding provision of the interim rule (Sec.  25.3(b)(1)).
    Section 25.3(c) of the proposed rule stated that the Department 
will make available standards that are developed for anti-terrorism 
technologies. This service will apply only to potential regulatory 
criteria established by the Department. As noted by several commenters, 
many voluntary consensus technical standards are developed and owned by 
private sector entities. Where voluntary consensus standards are 
identified by the Department as being applicable to anti-terrorism

[[Page 59686]]

technologies, a summary of such standards may be published, along with 
a link to the appropriate site for the applicant to obtain or purchase 
the required or suggested standard. In preparing applications for 
SAFETY Act protections, however, applicants are encouraged not to limit 
themselves to standards previously promulgated or recognized by the 
Department, but rather to consider and reference any consensus 
technical standards that they believe to be applicable to technology.
    Several standards development organizations suggested that 
voluntary consensus standards themselves be designated as qualified 
anti-terrorism technologies under the SAFETY Act. Although the 
Department believes it is unlikely that standards themselves will 
qualify for a Designation because it is unlikely that a standard will 
fall within the definition of ``qualified anti-terrorism technology'' 
in the Act, the Department will fully evaluate all applications for 
SAFETY Act protections received from Sellers of standards.

Scope of Required Insurance Coverage

    Thirteen comments expressed concerns or confusion regarding the 
scope of required insurance coverage. Some commenters expressed 
uncertainty regarding the definition of the term ``Seller,'' the issue 
of who may be a defendant in the Federal cause of action prescribed in 
the SAFETY Act, and the nature of protection from liability afforded to 
entities other than the ``Seller'' in the manufacturing and 
distribution chains of the technology. In response, the Department has 
revised the definition of ``Seller'' in Section 25.9 of the interim 
rule in order to clarify that the ``Seller'' is the actual recipient of 
the Designation for a qualified anti-terrorism technology. The 
Department has also revised Section 25.4(a) of the interim rule to 
clarify that only the Seller is required to obtain the required 
liability insurance coverage.
    Concern was expressed regarding the availability of insurance 
covering all of the parties specified in Section 864(a)(3) of the 
SAFETY Act and the corresponding provision in the interim rule (Sec.  
25.4(c)). First, under the interpretation of Section 863 of the Act 
expressed by the Department in the preamble of the interim rule, (1) 
there is one exclusive Federal cause of action for claims relating to 
the deployment of a qualified anti-terrorism technology with respect to 
an act of terrorism, and (2) such cause of action may be brought only 
against the Seller, and only for injuries proximately caused by the 
Seller. Therefore, although other persons and entities must be covered 
by the required insurance coverage, the actuarial analyses of the 
insurance industry should focus mainly, if not exclusively, on the 
Seller's potential liability, which should facilitate the issuance of 
insurance policies. Moreover, in this context, the provisions of 
Section 864(a)(2) of the Act and the corresponding provision of the 
interim rule (Sec.  25.4(b)), which limit the required insurance to no 
more than the maximum amount reasonably available from private sources 
on the world market at prices and terms that will not unreasonably 
distort the sales price of Seller's anti-terrorism technologies (which 
the Department intends to interpret with regard to the effect of the 
insurance requirement on the price of the technology and ultimately on 
the demand for and deployment of the technology for anti-terrorism 
purposes), should be emphasized. It should also be noted that the 
Department has revised Section 25.4(a) of the interim rule to provide 
specifically for the possibility of self-insurance if the Under 
Secretary determines that insurance in appropriate amounts or of 
appropriate types is not available for a particular technology from 
third-party insurance carriers.

Term, Expiration, and Termination of Designation

    Twenty-four comments were made suggesting that SAFETY Act 
Designations either should not expire or should have a longer duration 
(10-20 years) than provided for in the proposed rule (five to eight 
years). In response, the Department notes that qualification for a 
SAFETY Act Designation depends on a combination of the ability of the 
technology to be effective in a specific threat environment, the nature 
and cost of available insurance, and other factors, all of which are 
subject to rapid and unpredictable change. At the same time, the 
Department is very cognizant of the need for a guaranteed period of 
protection for successful SAFETY Act applicants in order to achieve the 
main goal of the Act, which is to facilitate the commercialization of 
needed anti-terrorism technologies. The Department believes that 
mandatory reconsideration of Designations after five to eight years 
provides a fair balancing of public and private interests.
    Several comments suggested that SAFETY Act protections should have 
retroactive effect. There are two different senses of retroactivity 
that must be addressed. The first sense relates to the deployment of a 
technology. The Department believes that it would be inappropriate to 
apply SAFETY Act protections retroactively to deployments of a 
qualified anti-terrorism technology that occurred prior to the 
effective date of the Designation issued for such technology. The 
reasons are (1) there is no explicit authority to issue retroactive 
protections under the SAFETY Act, (2) a Designation with such 
retroactive effect would be potentially unlawful if it extinguishes an 
already accrued cause of action, (3) retroactive designation is not 
necessary to achieve, and does not further, the goals of the Act, and 
(4) there is no equitable method for determining the retroactivity of 
particular Designations. The Department believes that SAFETY Act 
protections should apply only to deployments of a qualified anti-
terrorism technology that occur on or after the effective date of the 
Designation issued for such technology.
    The second sense of retroactivity relates to the date of the sale 
of the qualified anti-terrorism technology by the Seller. The 
Department recognizes that, in some cases, technologies that qualify 
for SAFETY Act protections will have been sold by the Seller prior to 
the effective date of such protections. The Department believes that 
the date on which a technology was sold by a Seller, per se, is not 
necessarily relevant to the applicability of SAFETY Act protections to 
a deployment of the technology in defense against, response to, or 
recovery from an act of terrorism, provided that the technology is 
within the scope of a Designation and was originally sold by the Seller 
to which the Designation is issued. In other words, it might be 
appropriate for SAFETY Act protections to be applicable to any 
deployment of a qualified anti-terrorism technology that occurs on or 
after the effective date of the Designation issued for such technology 
even if such technology was originally sold by the Seller before the 
effective date of such Designation. The Department believes that any 
other interpretation would lead to anomalous and inequitable results. 
Therefore, provisions have been added to Sections 25.3(f), 25.4(f), 
25.6(b), and 25.7(g) of the interim rule to clarify this issue, and in 
particular to require the Under Secretary to specify in each 
Designation and Certification the earliest date of the sale of the 
technology to which the protections will apply.
    The Department notes that many qualified anti-terrorism 
technologies might be designed for continuous ``deployment'' (e.g., 
sensors). The fact that a qualified anti-terrorism technology was sold 
and ``deployed'' prior to the effective date of an applicable 
Designation or Certification, or is, in a sense, continuously

[[Page 59687]]

``deployed,'' should not prevent such protections from applying to any 
deployment of such technology that occurs on or after the effective 
date of the applicable Designation or Certification in defense against, 
response to, or recovery from any act of terrorism.

Termination of a Designation Resulting From Significant Modification

    Several comments expressed concern regarding Section 25.5(i) of the 
proposed rule, which provided for automatic termination if a designated 
technology is significantly modified or changed as defined in that 
provision. The concern was essentially that the standard for 
termination is too vague, although at least one commenter opposed 
automatic termination for any reason.
    It is vital that the Department be able to ensure that technologies 
for which protections are granted are not changed in a way that will 
significantly affect their safety or effectiveness. The Department does 
not have the ability to monitor every change to a designated 
technology, however, and therefore the interim rule must place the 
burden on Sellers to submit proposed changes to the Department so that 
they may be properly evaluated.
    That said, the Department agrees with one of the comments that 
suggested that only changes that significantly reduce the safety or 
effectiveness of the technology should be subject to automatic 
termination, and Section 25.5(i) of the interim rule has been revised 
accordingly. In addition, that Section has been revised to authorize 
the Under Secretary, in lieu of issuing a modified Designation, to 
issue a certificate to a Seller that certifies that a proposed change 
or modification to a technology does not significantly reduce its 
safety or effectiveness and reaffirms the applicability of the existing 
Designation to the technology. That option should enable the Under 
Secretary to respond swiftly to submissions of relatively minor 
changes. The Department strongly encourages holders of Designations to 
submit to the Under Secretary any proposed modifications or changes 
that could significantly reduce the safety or effectiveness of the 
designated technology.
    One commenter wondered how the Department will evaluate a proposed 
change in advance when the factors to be evaluated would seem to 
require actual ``implementation'' of the change. The Department is 
confident that Sellers will have effective methods to evaluate the 
safety and effectiveness of changes to their technologies prior to 
actual commercialization, and the Department will take advantage of 
those same methods in its evaluation.

Confidentiality of Information

    Seventeen commenters indicated a concern regarding the Department's 
ability to protect the confidentiality of information that is provided 
in an application. In particular, there is apprehension that the 
Freedom of Information Act (FOIA) protections might be inadequate to 
guarantee nondisclosure of an applicant's trade secrets or confidential 
business information. It was suggested that explicit protections 
similar to those available for source selection or procurement 
information under FAR section 3, or a declaration that all financial 
information provided is deemed voluntary, or both, be included in the 
interim rule.
    The Department is committed to the protection of applicants' 
proprietary information to the fullest extent required or permitted by 
law. Although the interim rule does not establish any new special 
protections (such as those in section 3 of the FAR), there are multiple 
protections available for applicants' sensitive information. Those 
protections include the Trade Secrets Act (18 U.S.C. 1905), Exemption 1 
(``national security'') of FOIA, and Exemption 4 (``privileged or 
confidential information'') of FOIA. In particular, Federal employees 
are subject to criminal penalties for unauthorized disclosure of 
information qualifying under Exemption 4 of FOIA. All contractors or 
other agents of the Secretary will be required to enter into 
nondisclosure agreements, and each will be examined on an Application-
by-Application basis for potential conflicts of interest, before being 
granted access to any confidential information provided by applicants.

Services as Distinguished From Products

    Fourteen comments expressed concerns that the language in the 
proposed rule did not make clear how certain provisions of the SAFETY 
Act will apply to services, as opposed to physical products. The 
Department recognizes that the Act applies equally to product-based 
technologies and service-based technologies.
    The Department will evaluate services and products using the same 
seven non-exclusive criteria set forth in Section 862(b) and the 
corresponding provision in the interim rule (Sec.  25.3(b)), as 
required by the Act. These criteria include ``demonstrated substantial 
utility and effectiveness'' and ``studies * * * to assess the 
capability of the technology to substantially reduce risks of harm.'' 
Similarly, qualified Sellers of service-based technologies must satisfy 
the same post-Designation obligations as Sellers of products. These 
obligations include reporting insurance status, notifying the Secretary 
of any transfer or licensing of the designated technology, and applying 
for modification of a Designation prior to making any significant 
change to the designated technology. Appropriate revisions have been 
made to Section 25.5(i) and other provisions of the interim rule to 
clarify their applicability to services.
    Transfer or licensing of Designations for products and, in 
particular, services may not be appropriate, since the identity and 
established expertise of the Seller is often be an integral basis for a 
Designation. That issue will be addressed in appropriate cases in 
individual Designations, as provided in Section 25.3(f) of the interim 
rule.

Determining the Required Amount of Insurance

    A number of commenters discussed the potential difficulty of 
determining the amounts of insurance that must be carried to satisfy 
claims arising out of, relating to, or resulting from an act of 
terrorism with respect to which qualified anti-terrorism technologies 
have been deployed. Issues revolve around concern that most liability 
insurance is not purchased product-by-product, so that it might be 
difficult to estimate the ``price distortion'' caused by needing to 
insure a proposed new product or service. It was also suggested that 
there is a circular dependency between insurance costs and Designation: 
i.e., the cost of insurance depends on the liability exposure, which 
depends on the content of the Designation (if any), which in turn 
depends on the cost of insurance. There was also concern expressed that 
insurance is not available at any price for certain technologies.
    The Department is aware of the difficulties involved in quantifying 
the price impact of insuring (or self-insuring) against the specific 
potential liabilities addressed by the Act. The Department will rely on 
expert opinion and analysis in this area, as it will with technical 
determinations of safety and effectiveness. The Department will address 
the potential circularity issue by evaluating the need for SAFETY Act 
protections assuming the non-existence of such protections, and then 
setting the required amount of insurance by taking into account all 
relevant factors, including the cost and availability of

[[Page 59688]]

insurance coverage at different liability limitation levels.
    Regarding potential unavailability of insurance for certain 
technologies, the Department notes that the granting of a Designation 
may render a previously uninsurable technology insurable through 
reduction of liability exposure. Where necessary to address 
unavailability of insurance, however, Designations may be granted that 
permit the insurance requirement to be satisfied by self-insurance up 
to a specified limit of liability. A new Section 25.4(f) and other 
provisions have been inserted in the interim rule to address this 
issue, as well as the continuing applicability of SAFETY Act 
protections after the expiration or termination of a Designation (which 
had been addressed in the proposed rule only in the preamble).

Clarification of Government Contractor Defense (GCD)

    The precise nature and consequences of the GCD as applied by the 
Act were considered by 14 commenters to be unclear in the proposed 
rule. In particular, the interaction between the scope of the 
judicially derived GCD and the scope of the presumption defined in the 
Act was believed to be unclear.
    As defined in the Act, the rebuttable presumption of the 
applicability of the GCD is accorded to any Seller who (1) has received 
Certification as described in Section 863(d), and (2) is the defendant 
in the Federal cause of action arising in Section 863(a). Pursuant to 
Section 863(d)(1), the presumption may only be overcome by evidence 
showing that the Seller acted fraudulently or with willful misconduct 
in submitting information during the SAFETY Act application process.
    The view of the Department is that the GCD protections afforded by 
the SAFETY Act to recipients of Certifications are similar to those 
affirmed by the courts in Boyle v. United Technologies and its progeny 
as of the date of the enactment of the SAFETY Act. In applying those 
protections, the Department believes that Congress intended that, for 
purposes of applying the GCD, courts presume that all of the legal and 
factual requirements for establishment of the GCD by a government 
contractor are met by the existence of an applicable SAFETY Act 
Certification.
    The Department has added a new paragraph to Section 25.6 of the 
interim rule that corresponds to Section 863(d)(1) of the Act. Such new 
paragraph makes it clear that the presumption of the GCD will continue 
to apply in perpetuity to all deployments of technologies that receive 
a Certification, provided that the sale of the technology was 
consummated by the Seller prior to the expiration or termination of the 
applicable Certification.

Relationship of the SAFETY Act and Indemnification Under Public Law 85-
804

    Thirteen comments related to the relationship between SAFETY Act 
protections and indemnification under Public Law 85-804. The Department 
believes, however, that the language contained in part 8 of the 
``Special Issues'' section of the preamble of the interim rule 
adequately explains such relationship, and makes it clear that 
eligibility for a SAFETY Act Designation does not preclude the granting 
of indemnification under Public Law 85-804.

Detailed Specification of the Seller, Technology, and Scope of a 
Designation

    Twenty comments focused on the detailed specification of the 
Seller, technology, and scope of a Designation. Commenters suggested 
that there are advantages to the public, to industry, and to the 
application evaluation process in designating entire classes of 
technology, rather than designating each Seller of a technology 
individually.
    The Department seeks to balance the need for rapid deployment of 
anti-terrorism technologies with the need for careful evaluation of 
each technology and the need to avoid uncertainty in the marketplace 
concerning which specific product or service deployments are protected 
by Designation. In general, Designations will be restricted in scope to 
a particular Seller, a specific product or service, and delineated 
types of deployment or application. This approach addresses the comment 
that it is beneficial to the public to be able to learn precisely which 
Sellers and which of their products/services have been designated, and 
for what scope of deployment. At some in the near future, as relevant 
standards are adopted and the body of ``substantially equivalent'' 
technologies increases, the Department will revisit the advisability of 
awarding broader Designations (``Block Designations'') to classes of 
technology.

Definition of ``Act of Terrorism''

    Ten comments indicated a belief that the definition of ``act of 
terrorism'' in Section 865(2) of the Act (and in Section 25.9 of the 
interim rule) is ambiguous. One suggested that the definition coincide 
with other federal definitions of ``terrorism,'' such as the definition 
in 22 U.S.C. 2656f(d)(2). The Department notes that the definition of 
``act of terrorism'' was prescribed by Congress in the SAFETY Act. The 
Department believes that the definition in the Act provides an 
appropriate degree of flexibility in the evolving threat environment, 
including the use of the broad term ``harm.'' Regarding the comment 
concerning whether acts that occur on foreign territory are covered by 
the definition, the Department's view is that the term ``act of 
terrorism,'' as defined, potentially encompasses acts that occur 
outside the territory of the United States. The basis for that view is 
that there is no geographic requirement in the definition; rather, an 
act that occurs anywhere may be covered if it causes harm to a person, 
property, or an entity in the United States. The statutory definition 
of ``act of terrorism'' has been added to Section 25.9 of the interim 
rule.

Determinations Not Subject to Review or Appeal

    Five commenters observed that the SAFETY Act Designation and 
Certification processes are complex and that many apparently subjective 
assessments will be made during the evaluation process. They were 
concerned that the Secretary's decision is final, without recourse or 
appeal. Some commenters suggested that the Administrative Procedures 
Act (APA) requires a formal review as part of the process.
    The Department is aware of the complexity of the review process and 
has made numerous allowances for exchange of information and concerns 
between evaluators and applicants at multiple points during the 
process, in order to clarify uncertainties and to give the applicant an 
opportunity to provide supplemental information and address issues. The 
Department believes that this interactive process provides sufficient 
recourse to applicants. The SAFETY Act is a discretionary authority 
accorded by Congress to the Secretary of Homeland Security in order to 
facilitate the commercialization and deployment of needed anti-
terrorism technologies. The exercise of that authority with respect to 
a particular technology requires that many discretionary judgments be 
made regarding the applicability and application of the SAFETY Act 
criteria to the technology and the weighting of the criteria in each 
case. It would be inappropriate to provide for what would amount to the 
second-guessing of the Secretary's discretionary judgment by empowering 
another entity to substitute its own discretionary judgment for that of 
the Secretary.

[[Page 59689]]

    SAFETY Act protections are not required to market any technology, 
and therefore the absence of a grant of protection under the SAFETY Act 
will not prevent any person or entity from doing business. The 
Department also notes that a SAFETY Act Designation is not a ``license 
required by law'' within the meaning of Section 558(c) of the APA, and 
thus is not covered by the APA.

Allowability of Insurance Costs

    Four comments questioned whether the cost of maintaining the 
insurance required by a SAFETY Act Designation is an ``allowable cost'' 
under Federal contracting practices. The Department notes that each 
Federal procurement and contracting arrangement is unique to the 
Federal agency involved. When an applicant has questions regarding 
allowability for a specific case involving Federal procurements, the 
applicant should consult with the procuring agency and, if appropriate, 
with the applicant's legal counsel.

Burden of Proof With Regard to Evaluation Criteria

    Three commenters asked, in essence, if the applicant bears the 
responsibility for demonstrating the applicability of each of the seven 
evaluation criteria. In particular, it was asked whether the applicant 
must establish the existence of an extraordinarily large or 
unquantifiable potential risk exposure (criterion 3), or the magnitude 
of risk exposure to the public if applicant's technology were not 
deployed (criterion 5). It was also asked whether applicants will bear 
the cost of scientific studies (criterion 6).
    An application for a Designation or a Certification is a positive 
assertion on the applicant's part that the technology in question 
deserves special protections under the law in order to promote a public 
good. It is the applicant's responsibility to make a persuasive and 
defensible case. This will involve, at a minimum, submitting evidence 
that the technology satisfies the criteria in Section 862(b) of the 
SAFETY Act and the corresponding provision of the interim rule (Sec.  
25.3(b)). To that end, an application that contains the most complete 
suite of supporting information regarding concrete evidence of proven 
or potential effectiveness will be more persuasive than an application 
that relies solely on the applicant's personal effectiveness estimates 
and a priori threat and liability assessments. Any evaluations needed 
to address the criteria will be the financial responsibility of the 
applicant.

Relationship of Designation and Certification Processes

    Three comments addressed the linkage of the Designation and 
Certification processes. The Department believes that it is appropriate 
for these two aspects of the Act to remain closely aligned, and that 
the SAFETY Act indeed requires the issuance of a Designation for a 
technology to be a prerequisite (but not sufficient in itself) for 
issuance of a Certification. The same high standard of review will be 
applied to evaluations for Designations and Certifications, and a 
substantial amount of the information that is needed to evaluate 
applications for Designations is also integral to the Certification 
process (although there is additional information required to support 
the evaluation for a Certification). The Designation and the 
Certification are two separate protections with separate (but 
overlapping) criteria, and therefore they require two discrete 
application processes. The Department notes again, however, that 
applications for both protections may be considered in parallel, and 
that both protections may be granted simultaneously.

Multi-use Technologies and ``Specific Purpose''

    Four commenters noted that the proposed rule stated that a 
technology must be ``designed, developed, modified, or procured for the 
specific purpose of preventing, detecting, identifying or deterring 
acts of terrorism * * *.'' They stated that the word ``specific,'' as 
used in this context, seems overly restrictive. They believe that this 
narrow reading could exclude from designation any product originally 
developed for another use.
    The ``specific purpose'' clause was prescribed by Congress in 
Section 865(1) of the Act, and the Department does not have the 
authority to change that definition. The Department believes, however, 
that Congress did not intend for ``specific purpose'' to mean 
``exclusive purpose.'' An applicant need only show that one specific 
purpose of the subject technology is to prevent, detect, identify, or 
deter acts of terrorism or limit the harm such acts might otherwise 
cause; it is irrelevant for purposes of the definition of ``qualified 
anti-terrorism technology'' that a technology might have other purposes 
or uses. Applications for SAFETY Act protections, and their component 
parts, should, of course, focus on the specific purpose(s) of the 
technology for which the applicant is seeking protection.

Expedited Reviews

    Thirteen comments expressed a desire for the Department to provide 
expedited reviews for specific technologies based on various criteria. 
The approach of the Department will be to prioritize and expedite 
SAFETY Act applications in order to ensure that the highest risk 
vulnerabilities to the highest consequence threats are addressed first. 
In general, the Department will expedite reviews of SAFETY Act 
applications as its resources allow.

Reciprocal Waivers

    Several comments stated that reciprocal waivers of the type 
described in the Act (reciprocal waivers of claims by the specified 
parties for losses sustained by them or their employees arising from an 
act of terrorism with respect to which a qualified anti-terrorism 
technology is deployed) are not standard practice in most industries, 
and that some customers, vendors, and suppliers may be unwilling to 
enter into such reciprocal agreements. The Department will not withhold 
or revoke a Designation based on the failure to obtain one or more 
required reciprocal waivers, provided that the Seller shows that it 
made diligent efforts in good faith to obtain such waivers.
    The Department's view is that such waivers are not an absolute 
condition (precedent or subsequent) for the issuance, validity, 
effectiveness, duration, or applicability of a Designation, because (1) 
obtaining such waivers often will be beyond the control of SAFETY Act 
applicants, (2) requiring all of such waivers as such a condition would 
thwart the intent of Congress in enacting the SAFETY Act by rendering 
the benefits of the SAFETY Act inapplicable in many otherwise 
appropriate situations, and (3) the consequences of failing to obtain 
the waivers are not specified in the Act. Section 25.4(e) of the 
interim rule has been revised accordingly.

Mass Casualty Data

    Four comments expressed concern over the use of mass casualty data. 
In particular, the proposed rule stated that the Secretary's inquiry 
concerning an application ``may involve * * * data and history 
regarding mass casualty losses.'' It was noted that, in the case of 
past mass tort settlements, such data may exist but be confidential. 
Questions were asked regarding whether providing such data (where it 
exists) would be mandatory for a Designation or a Certification, even 
when restricted by prior court-ordered confidentiality agreements, and 
whether special

[[Page 59690]]

protections would exist to prevent unauthorized disclosure.
    The Department will not ask applicants to violate court ordered 
confidentiality agreements, but will expect that every reasonable 
effort will be made to extract relevant non-protected information or to 
provide equivalent information--e.g., from industry aggregate data or 
summaries, etc.

Multiple Sellers

    Questions were posed regarding whether it will be possible for 
joint ventures or other multi-party arrangements to receive SAFETY Act 
protections, and who will be responsible for obtaining insurance for 
such a multi-Seller Designation. A joint venture may take many forms. A 
joint venture that takes the form of a recognized business association 
with legal personality will be treated as a single Seller, and will be 
required to obtain insurance coverage itself.
    As specified in the proposed rule, SAFETY Act protections may be 
issued to multiple Sellers (e.g., a situation in which the owner of a 
technology and one or more of its licensees are to be covered by a 
single Designation). In that situation, the parties' respective 
obligations to obtain insurance will be specified in the Designation.

Discussion of Interim Rule

    As part of the Homeland Security Act of 2002, Public Law 107-296, 
Congress enacted several liability protections for providers of anti-
terrorism technologies. The SAFETY Act provides incentives for the 
development and deployment of anti-terrorism technologies by creating a 
system of ``risk management'' and a system of ``litigation 
management.'' The purpose of the Act is to ensure that the threat of 
liability does not deter potential manufacturers or Sellers of anti-
terrorism technologies from developing and commercializing technologies 
that could save lives. The Act thus creates certain liability 
limitations for ``claims arising out of, relating to, or resulting from 
an act of terrorism'' where qualified anti-terrorism technologies have 
been deployed. The Act does not limit liability for harms caused by 
anti-terrorism technologies when no act of terrorism has occurred.
    Together, the risk and litigation management provisions provide the 
following protections:
    [sbull] Exclusive jurisdiction in Federal court for suits against 
the Sellers of ``qualified anti-terrorism technologies'' (Sec.  
863(a)(2));
    [sbull] A limitation on the liability of Sellers of qualified anti-
terrorism technologies to an amount of liability insurance coverage 
specified for each individual technology, provided that Sellers will 
not be required to obtain any more liability insurance coverage than is 
reasonably available ``at prices and terms that will not unreasonably 
distort the sales price'' of the technology (Section 864(a)(2));
    [sbull] A prohibition on joint and several liability for 
noneconomic damages, so that Sellers can only be liable for that 
percentage of noneconomic damages proportionate to their responsibility 
for the harm (Sec.  863(b)(2));
    [sbull] A complete bar on punitive damages and prejudgment interest 
(Sec.  863(b)(1));
    [sbull] A reduction of plaintiffs' recovery by amounts that 
plaintiffs received from ``collateral sources,'' such as insurance 
benefits or other government benefits (Sec.  863(c)); and
    [sbull] A rebuttable presumption that the Seller is entitled to the 
``government contractor defense'' (Sec.  863(d)).
    The Act provides that these liability protections are conferred by 
two separate actions by the Secretary. The Secretary's designation of a 
technology as a ``qualified anti-terrorism technology'' confers all of 
the liability protections except the rebuttable presumption in favor of 
the government contractor defense. The presumption in favor of the 
government contractor defense requires an additional ``approval'' by 
the Secretary under Section 863(d) of the Act. In many cases, however, 
the designation and the approval can be conferred simultaneously.

Analysis

    This preamble to the interim rule first addresses the two major 
aspects of the Act--the designation of qualified anti-terrorism 
technologies and the approval of technologies for purposes of the 
government contractor defense. Following that discussion, the preamble 
addresses specific issues regarding the interim rule and the 
Department's interpretation of the Act.

Designation of Qualified Anti-Terrorism Technologies

    As noted above, the designation of a technology as a qualified 
anti-terrorism technology confers all of the liability protections 
provided in the Act, except for the presumption in favor of the 
government contractor defense. The Act gives the Secretary broad 
discretion in determining whether to designate a particular technology 
as a ``qualified anti-terrorism technology,'' although the Act sets 
forth the following criteria that must be considered to the extent that 
they are applicable to the technology: (1) Prior United States 
Government use or demonstrated substantial utility and effectiveness; 
(2) availability of the technology for immediate deployment; (3) the 
potential liability of the Seller; (4) the likelihood that the 
technology will not be deployed unless the SAFETY Act protections are 
conferred; (5) the risk to the public if the technology is not 
deployed; (6) evaluation of scientific studies; and (7) the 
effectiveness of the technology in defending against acts of terrorism. 
These criteria are not exclusive--the Secretary may consider other 
factors that he deems appropriate. The Secretary has discretion to give 
greater weight to some factors over others, and the relative weighting 
of the various criteria may vary based upon the particular technology 
at issue and the threats that the technology is designed to address. 
The Secretary may, in his discretion, determine that failure to meet a 
particular criterion justifies denial of an application under the 
SAFETY Act. However, the Secretary is not required to reject an 
application that fails to meet one or more of the criteria. Rather the 
Secretary, after considering all of the relevant criteria, may conclude 
that a particular technology merits designation as a ``qualified anti-
terrorism technology'' even if a particular criterion is not satisfied. 
The Secretary's considerations will also vary with the constantly 
evolving threats and conditions that give rise to the need for the 
technologies. The interim rule provides for designation as a qualified 
anti-terrorism technology for five to eight years.
    The SAFETY Act applies to a very broad range of technologies, 
including products, services, software, and other forms of intellectual 
property, as long as the Secretary, as an exercise of discretion and 
judgment, determines that a technology merits designation under the 
statutory criteria. Further, as the statutory criteria suggest, a 
``qualified anti-terrorism technology'' is not necessarily required to 
be newly developed--it may have already been employed (e.g. ``prior 
United States government use'') or may be a new application of an 
existing technology.
    The Act also provides that, before designating a ``qualified anti-
terrorism technology,'' the Secretary will examine the amount of 
liability insurance the Seller of the technology proposes to maintain 
for coverage of the technology at issue. Under Sec.  864(a), the 
Secretary must certify that the coverage level is appropriate ``to 
satisfy otherwise

[[Page 59691]]

compensable third-party claims arising out of, relating to, or 
resulting from an act of terrorism when qualified anti-terrorism 
technologies have been deployed.'' Section 864(a)(1). The Act further 
provides that ``the Seller is not required to obtain liability 
insurance of more than the maximum amount of liability insurance 
reasonably available from private sources on the world market at prices 
and terms that will not unreasonably distort the sales price of 
Seller's anti-terrorism technologies'' (which the Department intends to 
interpret with regard to the effect of the insurance requirement on the 
price of the technology and ultimately on the demand for and deployment 
of the technology for anti-terrorism purposes). Section 864(a)(2).
    The Secretary does not intend to set a ``one-size-fits-all'' 
numerical requirement regarding required insurance coverage for all 
technologies. Instead, as the Act suggests, the inquiry will be 
specific to each application and may involve an examination of several 
factors, including the following: the amount of insurance the Seller 
has previously maintained; the amount of insurance maintained by the 
Seller for other technologies or for the Seller's business as a whole; 
the amount of insurance typically maintained by sellers of comparable 
technologies; data and history regarding mass casualty losses; and the 
particular technology at issue. The Secretary will not require 
insurance beyond the point at which the cost of coverage would 
``unreasonably distort'' the price of the technology. Once the 
Secretary concludes the analysis regarding the appropriate level of 
insurance coverage (which might include discussions with the Seller in 
appropriate cases), the Secretary will identify in a short 
certification a description of the coverage appropriate for the 
particular qualified anti-terrorism technology. If, during the term of 
the designation, the Seller would like to request reconsideration of 
that insurance certification due to changed circumstances or for other 
reasons, the Seller may do so. If the Seller fails to maintain coverage 
at the certified level during that time period, the liability 
protections of the Act will continue to apply, but the Seller's 
liability limit will remain at the certified insurance level. Such 
failure, however, will be regarded as a negative factor in the 
consideration of any future application by the Seller for renewal of 
the applicable designation, and perhaps in any other application by the 
Seller.
    The Department solicits comment on the designation of qualified 
anti-terrorism technologies, including whether the five to eight year 
period is an appropriate length of time for such a designation.

Government Contractor Defense

    The Act creates a rebuttable presumption that the government 
contractor defense applies to qualified anti-terrorism technologies 
``approved by the Secretary'' in accordance with certain criteria 
specified in Section 863(d)(2). The government contractor defense is an 
affirmative defense that immunizes Sellers from liability for certain 
claims brought under Section 863(a) of the Act. See Sec.  863(d)(1). 
The presumption of this defense applies to all ``approved'' qualified 
anti-terrorism technologies for claims brought in a ``product liability 
or other lawsuit'' and ``arising out of, relating to, or resulting from 
an act of terrorism when qualified anti-terrorism technologies * * * 
have been deployed in defense against or response or recovery from such 
act and such claims result or may result in loss to the Seller.'' Id. 
While the government contractor defense is a judicially-created 
doctrine, Section 863's express terms supplant many of the requirements 
in the case law for application of the defense.
    First, and most obviously, the Act expressly provides that the 
government contractor defense is available not only to government 
contractors, but also to those who sell to state and local governments 
and the private sector. See Sec.  863(d)(1) (``This presumption of the 
government contractor defense shall apply regardless of whether the 
claim against the Seller arises from a sale of the product to federal 
government or non-federal government customers.'').
    Second, Sellers of qualified anti-terrorism technologies need not 
design their technologies to federal government specifications in order 
to obtain the government contractor defense under the SAFETY Act. 
Instead, the Act sets forth criteria for the Department's ``approval'' 
of technologies. Specifically, the Act provides that during the process 
of approval for the government contractor defense the Secretary will 
conduct a ``comprehensive review of the design of such technology and 
determine whether it will perform as intended, conforms to the Seller's 
specifications, and is safe for use as intended.'' Section 863(d)(2). 
The Act also provides that the Seller will ``conduct safety and hazard 
analyses'' and supply such information to the Secretary. Id. This 
express statutory framework thus governs in lieu of the requirements 
developed in case law for the application of the government contractor 
defense.
    Third, the Act expressly states the limited circumstances in which 
the applicability of the defense can be rebutted. The Act provides 
expressly that the presumption can be overcome only by evidence showing 
that the Seller acted fraudulently or with willful misconduct in 
submitting information to the Secretary during the course of the 
Secretary's consideration of such technology. See Sec.  863(d)(1) 
(``This presumption shall only be overcome by evidence showing that the 
Seller acted fraudulently or with willful misconduct in submitting 
information to the Secretary during the course of the Secretary's 
consideration of such technology under this subsection.'').
    The applicability of the government contractor defense to 
particular technologies is thus governed by these express provisions of 
the Act, rather than by the judicially-developed criteria for 
applicability of the government contractor defense outside the context 
of the SAFETY Act.
    While the Act does not expressly delineate the scope of the defense 
(i.e., the types of claims that the defense bars), the Act and the 
legislative history make clear that the scope is broad. For example, it 
is clear that any Seller of an ``approved'' technology cannot be held 
liable under the Act for design defects or failure to warn claims, 
unless the presumption of the defense is rebutted by evidence that the 
Seller acted fraudulently or with willful misconduct in submitting 
information to the Secretary during the course of the Secretary's 
consideration of such technology.
    The government contractor defense under Boyle and its progeny bars 
a broad range of claims. The Supreme Court in Boyle concluded that 
``state law which holds government contractors liable for design 
defects'' can present a significant conflict with Federal policy 
(including the discretionary function exception to the Federal Tort 
Claims Act) and therefore ``must be displaced.'' Boyle v. United 
Technologies Corp., 487 U.S. 500, 512 (1988). The Department believes 
that Congress incorporated the Supreme Court's Boyle line of cases as 
it existed on the date of enactment of the SAFETY Act, rather than 
incorporating future developments of the government contractor defense 
in the courts. Indeed, it is hard to imagine that Congress would have 
intended a statute designed to provide certainty and protection to 
Sellers of anti-terrorism technologies to be subject to future 
developments of a judicially-created doctrine. In fact, there is 
evidence that Congress rejected such a construction. See, e.g., 148 
Cong. Rec.

[[Page 59692]]

E2080 (November 13, 2001) (statement of Rep. Armey) (''[Companies] will 
have a government contractor defense as is commonplace in existing 
law.'') (emphasis added).
    Procedurally, the presumption of applicability of the government 
contractor defense is conferred by the Secretary's ``approval'' of a 
qualified anti-terrorism technology specifically for the purposes of 
the government contractor defense. This approval is a separate act from 
the Secretary's ``designation'' of a qualified anti-terrorism 
technology. Importantly, the Seller may submit applications for both 
designation as a qualified anti-terrorism technology and approval for 
purposes of the government contractor defense at the same time, and the 
Secretary may review and act upon both applications simultaneously. The 
distinction between the Secretary's two actions is important, however, 
because the approval process for the government contractor defense 
includes a level of review that is not required for the designation of 
a qualified anti-terrorism technology. Specifically, the Act provides 
that during the process of approval for the government contractor 
defense the Secretary will conduct a ``comprehensive review of the 
design of such technology and determine whether it will perform as 
intended, conforms to the Seller's specifications, and is safe for use 
as intended.'' Section 863(d)(2). The Department believes that certain 
Sellers will be able to obtain the protections that come with 
designation as a qualified anti-terrorism technology even if they have 
not satisfied the requirements for the government contractor defense. 
Similarly, even if the applicability of the government contractor 
defense were rebutted under the test set forth in Section 863(d)(1) of 
the Act, the technology may still retain the designation and 
protections as a qualified anti-terrorism technology. Fraud or willful 
misconduct in the submission of information to the Department in 
connection with an application under the Act may result not only in 
rebuttal of the presumed application of the government contractor 
defense, but may also prompt the Department to refer the matter to the 
Department of Justice for pursuit of criminal or civil penalties.
    The Department invites comment regarding the government contractor 
defense.

Specific Issues Regarding the Act and This Interim Rule

    1. Definition of Anti-Terrorism Technologies. The Department 
recognizes that the universe of technologies that can be deployed 
against terrorism includes far more than physical products. Rather, the 
defense of the homeland will require deployment of a broad range of 
technologies that includes services, software, and other forms of 
intellectual property. Thus, consistent with Section 865 of the Act, 
Section 25.3(a) of the interim rule defines qualified anti-terrorism 
technologies very broadly to include ``any qualifying product, 
equipment, service (including support services), device, or technology 
(including information technology)'' that the Secretary, as an exercise 
of discretion and judgment, determines to merit designation under the 
statutory criteria.
    2. Development of New Technologies. The Act's success depends not 
only upon encouraging Sellers to provide existing anti-terrorism 
technologies, but also upon encouraging Sellers to develop new and 
innovative technologies to respond to the ever-changing threats to the 
American people. The interim rule is thus designed to allow the 
Department to assist would-be Sellers during the invention, design, and 
manufacturing phases in two important respects. First, Section 25.3(h) 
of the proposal makes clear that the Department, within its discretion 
and where feasible, may provide feedback to inventors and manufacturers 
regarding whether proposed or developing anti-terrorism technologies 
might meet the qualification factors under the Act. The Department has 
developed a pre-application submission process in order to facilitate 
the procurement of such feedback. To be sure, the Department cannot 
provide advance designation, as some of the factors for the Secretary's 
consideration cannot be addressed in advance. The Department may, 
however, provide feedback regarding other factors, with the goal of 
giving potential Sellers some understanding of whether it might be 
advantageous to proceed with further development of the technology. 
Departmental feedback at the design, prototyping, or testing stage of 
development, to the extent feasible, may provide manufacturers with 
added incentive to commence and/or complete production of cutting-edge 
anti-terrorism technology that otherwise might not be produced or 
deployed in the absence of the risk and litigation management 
protections in the Act. The Department will perform these consultations 
with potential Sellers in a manner consistent with the protection of 
intellectual property and trade secrets, as discussed below.
    Second, Section 25.3(g) of the interim rule recognizes that 
Federal, state, and local government agencies will often be the 
purchasers of anti-terrorism technologies. The Department recognizes 
that terms on which Sellers are able to provide anti-terrorism 
technologies to government agencies may vary depending on whether the 
technologies receive SAFETY Act coverage or not. The interim rule thus 
provides that the Department may coordinate SAFETY Act reviews with 
government agency procurements. The Department also intends to review 
SAFETY Act applications relating to technologies that are the subject 
of government agency procurements on an expedited basis.
    The Department requests public comments regarding the best way for 
the Department to provide feedback to potential Sellers regarding 
SAFETY Act coverage and the best way for the Department to coordinate 
SAFETY Act review with agency procurements.
    3. Protection of Intellectual Property and Trade Secrets. The 
Department believes that successful implementation of the Act requires 
that applicants' intellectual property interests and trade secrets 
remain protected in the application process and beyond. Toward that 
end, the Department will create an application and review process in 
which the Department maintains the confidentiality of an applicant's 
proprietary information. The Department notes that laws mandating 
disclosure of information submitted to the government generally contain 
exclusions or exceptions for such information. The Freedom of 
Information Act, for instance, provides specific exceptions for 
proprietary information submitted to Federal agencies.
    4. Evaluation of Scientific Studies; Consultation with Scientific 
and Technical Experts. Section 862(b)(6) of the Act provides that, as 
one of many factors in determining whether to designate a particular 
technology under the Act, the Secretary shall consider evaluation of 
all scientific studies ``that can be feasibly conducted'' in order to 
assess the capability of the technology to substantially reduce the 
risks of harm. An important part of this provision is that it 
contemplates review only of such studies as can ``feasibly'' be 
conducted. The Department believes that the need to protect the 
American public by facilitating the manufacture and marketing of anti-
terrorism technologies might render it infeasible to defer a 
designation decision until after every conceivable scientific study is 
completed. In many cases, existing

[[Page 59693]]

information (whether based on scientific studies, experience with the 
technology or a related technology, or other factors) might enable the 
Secretary to perform an appropriate assessment of the capability of the 
technology to reduce risks of harm. In other cases, even where less 
information is available about the capability of a technology to reduce 
risks of harm, the public interest in making the technology available 
as soon as practicable may render it infeasible to await the conduct of 
further scientific studies on that issue. In considering whether or to 
what extent it is feasible to defer a designation decision until 
additional scientific studies can be conducted, the Department will 
bring to bear its expertise concerning the protection of the American 
homeland and will consider the urgency of the need for the technology 
and other relevant factors and circumstances.
    5. ``Exclusive Federal Jurisdiction'' and ``Scope'' of Insurance 
Coverage under Section 864(a)(3). The Act creates an exclusive Federal 
cause of action ``for any claim for loss of property, personal injury, 
or death arising out of, relating to, or resulting from an act of 
terrorism when qualified anti-terrorism technologies have been deployed 
in defense against or response or recovery from such act and such 
claims result or may result in loss to the Seller.'' Section 863(a)(2); 
see also section 863(a)(1). This exclusive ``Federal cause of action 
shall be brought only for claims for injuries that are proximately 
caused by sellers that provide qualified anti-terrorism technology.'' 
Section 863(a)(1). The best reading of Section 863(a), and the reading 
the Department hereby adopts, is that (1) only one Federal cause of 
action exists for loss of property, personal injury, or death when a 
claim relates to the deployment (performance or non-performance) of the 
Seller's qualified anti-terrorism technology in defense against, 
response to, or recovery from an act of terrorism, and (2) such cause 
of action may be brought only against the Seller.
    The exclusive Federal nature of this cause of action is evidenced 
in large part by the exclusive jurisdiction provision in Section 
863(a)(2). That subsection states: ``Such appropriate district court of 
the United States shall have original and exclusive jurisdiction over 
all actions for any claim for loss of property, personal injury, or 
death arising out of, relating to, or resulting from an act of 
terrorism when qualified anti-terrorism technologies have been deployed 
in defense against or response or recovery from such act and such 
claims result or may result in loss to the Seller.'' Id. Any 
presumption of concurrent causes of action (between State and Federal 
law) is overcome by two basic points. First, Congress would not have 
created in this Act a Federal cause of action to complement State law 
causes of action. Not only is the substantive law for decision in the 
Federal action derived from State law (and thus would be surplusage), 
but in creating the Act Congress plainly intended to limit rather than 
increase the liability exposure of Sellers. Second, the granting of 
exclusive jurisdiction to the Federal district courts provides further 
evidence that Congress wanted an exclusive Federal cause of action. 
Indeed, a Federal district court (in the absence of diversity) does not 
have jurisdiction over state law claims, and the statute makes no 
mention of diversity claims anywhere in the Act.
    Further, it is clear that the Seller is the only appropriate 
defendant in this exclusive Federal cause of action. First and 
foremost, the Act unequivocally states that a ``cause of action shall 
be brought only for claims for injuries that are proximately caused by 
sellers that provide qualified anti-terrorism technology.'' Section 
863(a)(1) (emphasis added). Second, if the Seller of the qualified 
anti-terrorism technology at issue was not the only defendant, would-be 
plaintiffs could, in an effort to circumvent the statute, bring claims 
(arising out of or relating to the performance or non-performance of 
the Seller's qualified anti-terrorism technology) against arguably less 
culpable persons or entities, including but not limited to contractors, 
subcontractors, suppliers, vendors, and customers of the Seller of the 
technology. Because the claims in the cause of action would be 
predicated on the performance or non-performance of the Seller's 
qualified anti-terrorism technology, those persons or entities, in 
turn, would file a third-party action against the Seller. In such 
situations, the claims against non-Sellers thus ``may result in loss to 
the Seller'' under section 863(a)(2). The Department believes Congress 
did not intend through the Act to increase rather than decrease the 
amount of litigation arising out of or related to the deployment of 
qualified anti-terrorism technology. Rather, Congress balanced the need 
to provide recovery to plaintiffs against the need to ensure adequate 
deployment of anti-terrorism technologies by creating a cause of action 
that provides a certain level of recovery against Sellers, while at the 
same time protecting others in the supply chain.
    The scope of Federal preemption of state laws is highly relevant to 
the Department's implementation of the Act, as the Department will have 
to determine the amount of insurance that Sellers must obtain. 
Accordingly, the Department seeks comment on that matter.
    6. Amount of Insurance. The Act requires that Sellers obtain 
liability insurance ``of such types and in such amounts'' certified by 
the Secretary ``to satisfy otherwise compensable third-party claims 
arising out of, relating to, or resulting from an act of terrorism when 
qualified anti-terrorism technologies have been deployed.'' Section 
864(a)(1). However, the Act makes clear that Sellers are not required 
to obtain liability insurance beyond ``the maximum amount of liability 
insurance reasonably available from private sources on the world market 
at prices and terms that will not unreasonably distort the sales price 
of Seller's anti-terrorism technologies.'' Section 864(a)(2).
    As explained above, the Department eschews any ``one-size-fits-
all'' approach to the insurance coverage requirement. Instead, the 
Department construes the Act as contemplating the examination of 
several factors. Section 25.4(b) of the interim rule therefore sets 
forth a nonexclusive list of several factors that the Department may 
consider. These include the amount of insurance the Seller has 
previously maintained; the amount of insurance maintained by the Seller 
for other technologies or for the Seller's business as a whole; the 
amount of insurance typically maintained by sellers of comparable 
technologies; data and history regarding mass casualty losses; 
information regarding the amount of liability insurance offered on the 
world market; the particular technology at issue and its intended use; 
and the point at which the cost of coverage would ``unreasonably 
distort'' the price of the technology.
    In the course of determining the amount of insurance required under 
the Act for a particular technology, the Department may consult with 
the Seller, the Seller's insurer, and others. While the decision 
regarding the amount of insurance required will generally be specific 
to each Seller or each technology, the Department recognizes that the 
incentive-based purposes of the Act may be furthered if the Department 
provides information to potential Sellers regarding the types and 
amounts of insurance that they will likely be required to obtain. Thus 
the Secretary may, where appropriate, give guidance to potential 
Sellers regarding the type and amounts of insurance that may be 
sufficient under the Act for particular

[[Page 59694]]

technologies or categories of technologies.
    The Department also recognizes that the amount of insurance 
available at prices that will not unreasonably distort the price of the 
anti-terrorism technology may vary over time. Thus, the interim rule is 
written to give the Department flexibility to address fluctuating 
insurance prices by providing that, during the term of the designation, 
the Seller may request reconsideration of the insurance certification 
due to changed circumstances or other reasons.
    The interim rule provides that the Seller shall certify on an 
annual basis that the Seller has maintained the insurance required by 
the Under Secretary's certification. It further provides that the Under 
Secretary may terminate the designation as a qualified anti-terrorism 
technology if the Seller fails to provide the certification or provides 
a false certification. Termination of the designation would mean that 
the Seller would not be able to sell the technology as a qualified 
anti-terrorism technology after the date of the termination. The 
Seller's failure to maintain the insurance also may adversely affect 
the Seller's ability to obtain a renewal of the designation for the 
technology, and may even adversely affect the Seller's ability to 
obtain future designations of ``qualified anti-terrorism 
technologies.'' Finally, a false certification may result in criminal 
or other penalties under existing laws.
    The liability protections of the Act will continue to apply to 
technologies sold while the SAFETY Act designation was effective, 
regardless of whether the seller maintains the required insurance. This 
is necessary because the SAFETY Act protects not only the Seller, but 
also others in the manufacturing and distribution chains. For example, 
a buyer who purchases the technology while the SAFETY Act designation 
is still in effect should not be punished for the Seller's failure to 
maintain the insurance. The Seller, however, will face potential 
uninsured liability, because the Seller's liability limit will remain 
at the certified insurance level. This is because subsection (c) of 
Section 864 makes clear that the Seller's liability is capped at the 
amount of insurance ``required'' to be maintained under Section 864, 
rather than the amount of coverage actually obtained. The limitation of 
liability thus relates entirely to the amount of insurance required and 
makes no reference to whether such insurance is, in fact, maintained by 
the Seller.
    The Department, as part of each certification, will specify the 
Seller or Sellers of the anti-terrorism technology for purposes of 
SAFETY Act coverage. The Department may, but need not, specify in the 
certification the others who are covered by the liability insurance 
required to be purchased by the Seller.
    7. Use of Standards. Section 25.3(c) of the interim rule provides 
that the Under Secretary may issue technical standards for categories 
of anti-terrorism technologies, and that the Under Secretary may 
consider compliance with any such applicable standards in determining 
whether to grant a designation under the Act.
    8. Relationship of the SAFETY Act to Indemnification under Public 
Law 85-804. The Department recognizes that Congress intended that the 
SAFETY Act's liability protections would substantially reduce the need 
for the United States to provide indemnification under Public Law 85-
804 to Sellers of anti-terrorism technologies. Where applicable, the 
strong liability protections of the SAFETY Act should, in most 
circumstances, make it unnecessary to provide indemnification to 
Sellers. The Department recognizes, however, that there might be, in 
some limited circumstances, technologies or services with respect to 
which both SAFETY Act coverage and indemnification might be warranted. 
See 148 Cong. Rec. E2080 (statement by Rep. Armey) (November 13, 2002) 
(stating that in some situations the SAFETY Act protections will 
``complement other government risk-sharing measures that some 
contractors can use such as Public Law 85-804'').
    In recognition of this close relationship between the SAFETY Act 
and indemnification authority, in Section 73 of Executive Order 13286 
of February 28, 2003, the President recently amended the existing 
Executive Order on indemnification--Executive Order 10789 of November 
14, 1958, as amended. The amendment granted the Department of Homeland 
Security authority to indemnify under Public Law 85-804. At the same 
time, it requires that all agencies--not just the Department of 
Homeland Security--follow certain procedures to ensure that the 
potential applicability of the SAFETY Act is considered before any 
indemnification is granted for an anti-terrorism technology. 
Specifically, the amendment provides that Federal agencies cannot 
provide indemnification ``with respect to any matter that has been, or 
could be, designated by the Secretary of Homeland Security as a 
qualified anti-terrorism technology'' unless the Secretary of Homeland 
Security has advised whether SAFETY Act coverage would be appropriate 
and the Director of the Office and Management and Budget has approved 
the exercise of indemnification authority. The amendment includes an 
exception for the Department of Defense where the Secretary of Defense 
has determined that indemnification is ``necessary for the timely and 
effective conduct of United States military or intelligence 
activities.''

Application of Various Laws and Executive Orders to This Interim 
Rulemaking

Executive Order 12866--Regulatory Planning and Review

    The Department has examined the economic implications of this 
interim rule as required by Executive Order 12866. Executive Order 
12866 directs agencies to assess all costs and benefits of available 
regulatory alternatives and, when regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity). Executive Order 12866 
classifies a rule as significant if it meets any one of a number of 
specified conditions, including: having an annual effect on the economy 
of $100 million, adversely affecting a sector of the economy in a 
material way, adversely affecting competition, or adversely affecting 
jobs. A regulation is also considered a significant regulatory action 
if it raises novel legal or policy issues.
    The Department did not receive any comments on our economic 
analysis.
    The Department concludes that this interim rule is a significant 
regulatory action under the Executive Order because it will have a 
positive, material effect on public safety under Section 3(f)(1), and 
it raises novel legal and policy issues under Section 3(f)(4). The 
Department concludes, however, that this interim rule does not meet the 
significance threshold of $100 million effect on the economy in any one 
year under Section 3(f)(1), due to the relatively low estimated burden 
of applying for this technology program, the unknown number of 
certifications and designations that the Department will dispense, and 
the unknown probability of a terrorist attack that would have to occur 
in order for the protections put in place in this interim rule to have 
a large impact on the public.

[[Page 59695]]

Need for the Regulation and Market Failure

    This regulation implements the SAFETY Act and is intended to 
implement the provisions set forth in that Act. The Department believes 
the current development of anti-terrorism technologies has been slowed 
due to the potential liability risks associated with their development 
and eventual deployment. In a fully functioning insurance market, 
technology developers would be able to insure themselves against 
excessive liability risk; however, the terrorism risk insurance market 
appears to be in disequilibrium. The attacks of September 11 
fundamentally changed the landscape of terrorism insurance. Congress, 
in the findings of TRIA, concluded that temporary financial assistance 
in the insurance market is needed to ``allow for a transitional period 
for the private markets to stabilize, resume pricing of such insurance, 
and build capacity to absorb any future losses.'' TRIA Sec.  101(b)(2). 
This interim rulemaking addresses a similar concern, to the extent that 
potential technology developers are unable to efficiently insure 
against large losses due to an ongoing reassessment of terrorism issues 
in insurance markets.
    Even after a temporary insurance market adjustment, purely private 
terrorism risk insurance markets may exhibit negative externalities. 
Because the risk pool of any single insurer may not be large enough to 
efficiently spread and therefore insure against the risk of damages 
from a terrorist attack, and because the potential for excessive 
liability may render any terrorism insurance prohibitively expensive, 
society may suffer from less than optimal technological protection 
against terrorist attacks. The measures set forth in this interim rule 
are designed to meet this goal; they will provide certain liability 
protection from lawsuits and consequently will increase the likelihood 
that businesses will pursue important technologies that may not be 
pursued without this protection.

Costs and Benefits to Technology Development Firms

    Since this interim rulemaking puts in place an additional voluntary 
option for technology developers, the expected direct net benefits to 
firms of this interim rulemaking will be positive; companies presumably 
will not choose to pursue the designation of ``anti-terrorism 
technology'' unless they believe it to be a profitable endeavor. The 
Department cannot predict with certainty the number of applicants for 
this program. An additional source of uncertainty is the reaction of 
the insurance market to this designation. As mentioned above, insurance 
markets appear currently to be adjusting their strategy for terrorism 
risk, so little market information exists that would inform this 
estimate. The Department invites comments on these issues.
    If a firm chooses to invest effort in pursuing SAFETY Act liability 
protection, the direct costs to that firm will be the time and money 
required to submit the required paperwork and other information to the 
Department. Only companies that choose to request this protection will 
incur costs. Please see the accompanying PRA analysis for an estimate 
of these costs.
    The direct benefits to firms include lower potential losses from 
liability for terrorist attacks, and as a consequence a lower burden 
from liability insurance for this type of technology. In this 
assessment, we were careful to only consider benefits and costs 
specifically due to the implementation of the interim rule and not 
costs that would have been incurred by companies absent any interim 
rulemaking. The SAFETY Act requires the sellers of the technology to 
obtain liability insurance ``of such types and in such amounts'' 
certified by the Secretary. The entire cost of insurance is not a cost 
specifically imposed by the proposed rulemaking, as companies in the 
course of good business practice routinely purchase insurance absent 
Federal requirements to do so. Any difference in the amount or price of 
insurance purchased as a result of the SAFETY Act would be a cost or 
benefit of this interim rule for firms.
    The wording of the SAFETY Act clearly states that sellers are not 
required to obtain liability insurance beyond the maximum amount of 
liability insurance reasonably available from private liability sources 
on the world market at prices and terms that will not unreasonably 
distort the sales price of the seller's anti-terrorism technologies. We 
tentatively conclude, however, that this interim rulemaking will impact 
both the prices and terms of liability insurance relative to the amount 
of insurance coverage absent the SAFETY Act. The probable effect of 
this interim rule is to lower the quantity of liability coverage needed 
in order for a firm to protect itself from terrorism liability risks, 
which would be considered a benefit of this interim rule to firms. This 
change will most likely be a shift back in demand that leads to a 
movement along the supply curve for technology firms already in this 
market; they probably will buy less liability coverage. This will have 
the effect of lowering the price per unit of coverage in this market.
    The Department also expects, however, that this interim rulemaking 
will lead to greater market entry, which will generate surplus for both 
technology firms and insurers. Again, this market is still in 
development, and the Department solicits comments on exactly how to 
predict the effect of this interim rulemaking on technology 
development.

Costs and Benefits to Insurers

    The Department has little information on the future structure of 
the terrorism risk insurance market, and how this interim rulemaking 
will affect that structure. As stated above, this type of intervention 
could serve to lower the demand for insurance in the current market, 
thus the static effect on the profitability of insurers is negative. 
The benefits of the lower insurance burden to technology firms would be 
considered a cost to insurers; the static changes to insurance coverage 
would cause a transfer from insurers to technology firms. On the other 
hand, this type of intervention should serve to increase the surplus of 
insurers by making some types of insurance products possible that would 
have been prohibitive to customers or impossible for insurers to design 
in the absence of this interim rulemaking. The Department is interested 
in public comment on any possible negative or positive impacts to 
insurers caused by the SAFETY Act and this interim rulemaking, and 
whether these impacts would result in transfers within this market or 
an efficiency change not captured by another party. We encourage 
commenters to be as specific as possible.

Costs and Benefits to the Public

    The benefits to the public of this interim rulemaking are very 
difficult to put in dollar value terms since its ultimate objective is 
the development of new technologies that will help prevent or limit the 
damage from terrorist attacks. It is not possible to even determine 
whether these technologies could help prevent large or small scale 
attacks, as the SAFETY Act applies to a vast range of technologies, 
including products, services, software, and other forms of intellectual 
property that could have a widespread impact. In qualitative terms, the 
SAFETY Act removes a great deal of the risk and uncertainty associated 
with product liability and in the process creates a powerful incentive 
that will help fuel the development of critically needed anti-terrorism

[[Page 59696]]

technologies. Additionally, we expect the SAFETY Act to reduce the 
research and development costs of these technologies.
    The tradeoff, however, may be that a greater number of technologies 
may be developed and qualify for this program that have a lower average 
effectiveness against terrorist attacks than technologies currently on 
the market, or technologies that would be developed in the absence of 
this interim rulemaking. In the absence of this rulemaking, strong 
liability discouragement implies that the fewer products that are 
deployed in support of anti-terrorist efforts may be especially 
effective, since profit maximizing firms will always choose to develop 
the technologies with the highest demand first. It is the tentative 
conclusion of the Department that liability discouragement in this 
market is too strong or prohibitive, for the reasons mentioned above. 
The Department tentatively concludes that this interim rule will have 
positive net benefits to the public, since it serves to strike a better 
balance between consumer protection and technological development. The 
Department welcomes comments informing this tradeoff argument, and 
public input on whether this interim rulemaking does strike the correct 
balance.

Collection of Information

Paperwork Reduction Act of 1995
    This interim rule includes collection of information under the 
Paperwork Reduction Act of 1995 (Paperwork Reduction Act) (44 U.S.C. 
3501-3520). As defined in 5 CFR 1320(c), ``collection of information'' 
comprises reporting, recordkeeping, monitoring, posting, labeling, and 
other similar actions. The title and description of the information 
collections, a description of those who must collect the information, 
and an estimate of the total annual burden follow. The estimate covers 
the time for reviewing instructions, searching existing sources of 
data, gathering and maintaining the data needed, and completing and 
reviewing the collection.
    The Department submitted the following information collection 
requests to the Office of Management and Budget (OMB) for emergency 
review with an expiration of six months from the date of publication of 
this interim rule in accordance with procedures of the Paperwork 
Reduction Act of 1995. The proposed information collection will be 
published to obtain comments from the public and affected agencies.
    The Department requests comments on at least the following four 
points:
    (1) Whether the proposed collection of information is necessary for 
the proper performance of the functions of the agency, including 
whether the information will have practical utility;
    (2) The accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used;
    (3) The quality, utility, and clarity of the information to be 
collected; and
    (4) The burden of the collection of information on those who are to 
respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.
    For the purpose of each analysis described below and associated 
with each collection of information, the Department assumes a loaded 
labor rate of the personnel preparing each collection of information to 
be $100 per hour. The Department does not have sufficient information 
to provide a known number of applicants or submitters of information. 
All numbers are estimates.
    This rule requires persons to conduct safety, effectiveness, 
utility, and hazard analyses and provide them to the Under Secretary in 
the course of applying for Designation of qualified anti-terrorism 
technology. We do not have quantified estimates of the impact of this 
provision, but we expect that much of the safety, effectiveness, 
utility, and hazard analysis activity will already take place in the 
normal course of technology development, since those matters are 
fundamental characteristics of a product. The Department acknowledges 
considerable uncertainty in these estimates, but even if the estimates 
were considerably higher, this does not represent a large investment by 
firms relative to overall development costs.
Overview of Requests for Collection of Information
    (a) Collection of Information Form No. DHS-S&T-I-SAFETY-001.
    (1) Type of Information Collection: New Collection.
    (2) Title of the Form/Collection: Pre-Application for Designation 
of Qualified Anti-terrorism Technology.
    (3) Agency form numbers and applicable component sponsoring the 
collection: Form Number: DHS-S&T-I-SAFETY-001, Directorate of Science 
and Technology, Department of Homeland Security.
    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary: Sellers and potential Sellers of 
qualified anti-terrorism technology. Abstract: The Pre-Application Form 
for Designation of Qualified Anti-Terrorism Technology will be used to 
provide information to the Under Secretary for Science and Technology 
of the Department of Homeland Security in determining whether Sellers 
pre-qualify for risk and litigation management protections under the 
SAFETY Act.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: 1,000 
applicants annually; 14 to 72 hours per application.
    (6) An estimate of the total public burden (in hours) associated 
with the collection: 14,000 to 72,000 hours.
    (b) Collection of Information Form No. DHS-S&T-I-SAFETY-002.
    (1) Type of Information Collection: New Collection.
    (2) Title of the Form/Collection: Application for Designation of 
Qualified Anti-Terrorism Technology.
    (3) Agency form numbers and applicable component sponsoring the 
collection: Form Number: DHS-S&T-I-SAFETY-002, Directorate of Science 
and Technology, Department of Homeland Security.
    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary: Sellers and potential Sellers of 
qualified anti-terrorism technology. Abstract: The Application Form for 
Designation of Qualified Anti-Terrorism Technology will be used to 
provide information to the Under Secretary for Science and Technology 
of the Department of Homeland Security in determining whether Sellers 
qualify for risk and litigation management protections under the SAFETY 
Act.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: 1,000 
applicants annually; 36 to 180 hours per application.
    (6) An estimate of the annual total public burden associated with 
the collection: 36,000 to 180,000 hours.
    (c) Collection of Information Form No. DHS-S&T-I-SAFETY-003.
    (1) Type of Information Collection: New Collection.
    (2) Title of the Form/Collection: Application of Transfer of 
Designation.
    (3) Agency form numbers and applicable component sponsoring the 
collection: Form Number: DHS-S&T-I-SAFETY-003, Directorate of Science 
and Technology, Department of Homeland Security.

[[Page 59697]]

    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary: Sellers of qualified anti-terrorism 
technology. Abstract: The Application Form for Transfer of Designation 
will be used by Sellers to notify the Under Secretary for Science and 
Technology of the Department of Homeland Security of a transfer of 
Designation.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: 250 to 500 
applicants annually, 15 to 30 minutes per application.
    (6) An estimate of the annual total public burden (in hours) 
associated with the collection: 250 hours.
    (d) Collection of Information Form No. DHS-S&T-I-SAFETY-004.
    (1) Type of Information Collection: New Collection.
    (2) Title of the Form/Collection: Notice of License of Qualified 
Anti-Terrorism Technology.
    (3) Agency form numbers and applicable component sponsoring the 
collection: Form Number: DHS-S&T-I-SAFETY-004, Directorate of Science 
and Technology, Department of Homeland Security.
    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary: Sellers of qualified anti-terrorism 
technology. Abstract: The Notice of License of Qualified Anti-Terrorism 
Technology.
    Application Form for Transfer of Designation will be used by 
Sellers to notify the Under Secretary for Science and Technology of the 
Department of Homeland Security of its license of the right to 
manufacture, use or sell Designated technology.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: 250 to 500 
applicants annually; fifteen to thirty minutes per application.
    (6) An estimate of the annual total public burden (in hours) 
associated with the collection: 250 hours.
    (e) Collection of Information Form No. DHS-S&T-I-SAFETY-005.
    (1) Type of Information Collection: New Collection.
    (2) Title of the Form/Collection: Notice of License of Approved 
Technology.
    (3) Agency form numbers and applicable component sponsoring the 
collection: Form Number: DHS-S&T-I-SAFETY-005, Directorate of Science 
and Technology, Department of Homeland Security.
    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary: Sellers of approved anti-terrorism 
technology. Abstract: The Form for Notice of License of Approved Anti-
Terrorism Technology will be used by Sellers to notify the Under 
Secretary for Science and Technology of the Department of Homeland 
Security of the right to manufacture and sell approved technology.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: 250 to 500 
applicants annually; fifteen to thirty minutes per application.
    (6) An estimate of the annual total public burden (in hours) 
associated with the collection: 250 hours.
    (f) Collection of Information Form No. DHS-S&T-I-SAFETY-006.
    (1) Type of Information Collection: New Collection.
    (2) Title of the Form/Collection: Application for Modification of 
Designation.
    (3) Agency form numbers and applicable component sponsoring the 
collection: Form Number: DHS-S&T-I-SAFETY-006, Directorate of Science 
and Technology, Department of Homeland Security.
    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary: Sellers of qualified anti-terrorism 
technology. Abstract: The Application Form for Modification of 
Designation will be used by Sellers to apply to the Under Secretary for 
Science and Technology of the Department of Homeland Security for 
approval of modification of a designation of Qualified Anti-Terrorism 
Technology.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: 250 applicants 
annually; 10 to 20 hours per application.
    (6) An estimate of the annual total public burden (in hours) 
associated with the collection: 5,000 hours.
    (g) Collection of Information Form No. DHS-S&T-I-SAFETY-007.
    (1) Type of Information Collection: New Collection.
    (2) Title of the Form/Collection: Application for Renewal of 
Certification of an Approved Product for Homeland Security.
    (3) Agency form numbers and applicable component sponsoring the 
collection: Form Number: DHS-S&T-I-SAFETY-007, Directorate of Science 
and Technology, Department of Homeland Security.
    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract: Primary: Sellers of qualified anti-terrorism 
technology. Abstract: The Application Form for Renewal of Certification 
of an Approved Product for Homeland Security will be used by Sellers to 
request renewal of Certification of an approved product for Homeland 
Security to the Under Secretary for Science and Technology of the 
Department of Homeland Security.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: 250 to 500 
applicants annually; fifteen to thirty minutes per application.
    (6) An estimate of the annual total public burden (in hours) 
associated with the collection: 250 hours.
    (h) Additional Information: If additional information is required 
on any of these forms, contact: Directorate of Science and Technology, 
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC 
20528.
    (i) Submission of Comments on the Collection of Information: If you 
submit comments on the collection of information, submit them both to 
OMB and to the Docket Management Facility where indicated under 
addresses, by the date under Dates.
    (j) Valid OMB Control Document: You need not respond to a 
collection of information unless it displays a currently valid control 
document from OMB.
Regulatory Flexibility Act
    The Regulatory Flexibility Act requires the Department to determine 
whether this interim rulemaking will have a significant impact on a 
substantial number of small entities. Although we expect that many of 
the applicants for SAFETY Act protection are likely to meet the Small 
Business Administration's criteria for being a small entity, we do not 
believe this interim rulemaking will impose a significant financial 
impact on them. In fact, we believe this interim rule will be a benefit 
to technology development businesses, especially small businesses, by 
presenting them with an attractive, voluntary option of pursuing a 
potentially profitable investment by reducing the amount of risk and 
uncertainty of lawsuits associated with developing anti-terrorist 
technology. The requirements of this interim rulemaking will only be 
imposed on such businesses that voluntarily seek the liability 
protection of the SAFETY Act. If a company does not request that 
protection, the company will bear no cost.
    To the extent that demand for insurance falls, however, insurers 
may be adversely impacted by this interim rule. The Department believes 
that

[[Page 59698]]

eventual new entry into this market and further opportunities to insure 
against terrorism risk implies that the long-term impact of this 
interim rulemaking on insurers is ambiguous but could very well be 
positive. We also expect that this interim rulemaking will affect 
relatively few firms and relatively few insurers either positively or 
negatively, as this appears to be a specialized industry. Therefore, we 
preliminarily certify this notice of interim rulemaking will not have a 
significant impact on a substantial number of small entities, and we 
request comments on this certification.
Unfunded Mandates Reform Act of 1995
    This interim rule will not 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, and it will not 
significantly or uniquely affect small governments. Therefore, no 
actions were deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.
Small Business Regulatory Fairness Act of 1996
    As noted above, the Department has tentatively determined that this 
interim rule would not qualify as a ``major rule'' as defined by 
section 804 of the Small Business and Regulatory Enforcement Act of 
1996.
Executive Order 13132--Federalism
    The Department of Homeland Security does not believe this interim 
rule will have substantial direct effects on the States, on the 
relationship between the national government and the States, or on 
distribution of power and responsibilities among the various levels of 
government. States will, however, benefit from this interim rule to the 
extent that they are purchasers of qualified anti-terrorism 
technologies. The Department requests comment on the federalism impact 
of this Interim rule. In particular, the Department seeks comment on 
whether this interim rule will raise significant federalism 
implications and, if so, what is the nature of those implications.

List of Subjects in 6 CFR Part 25

    Business and industry, Insurance, Practice and procedure, Science 
and technology, Security measures.

0
For the reasons discussed in the preamble, 6 CFR Chapter I is amended 
by adding part 25 to read as follows:

PART 25--REGULATIONS TO SUPPORT ANTI-TERRORISM BY FOSTERING 
EFFECTIVE TECHNOLOGIES

Sec.
25.1 Purpose.
25.2 Delegation.
25.3 Designation of qualified anti-terrorism technologies.
25.4 Obligations of seller.
25.5 Procedures for designation of qualified anti-terrorism 
technologies.
25.6 Government contractor defense.
25.7 Procedures for certification of approved products for homeland 
security.
25.8 Confidentiality and protection of intellectual property.
25.9 Definitions.

    Authority: Subtitle G, Title VIII, Pub. L. 107-296, 116 Stat. 
2238 (6 U.S.C. 441-444).

Sec.  25.1  Purpose.

    This part implements the Support Anti-terrorism by Fostering 
Effective Technologies Act of 2002, Subtitle G of Title VIII of Public 
Law 107-296 (``the SAFETY Act'' or ``the Act'').


Sec.  25.2  Delegation.

    All of the Secretary's responsibilities, powers, and functions 
under the SAFETY Act may be exercised by the Under Secretary for 
Science and Technology of the Department of Homeland Security (``the 
Under Secretary'') or the Under Secretary's designees.


Sec.  25.3  Designation of qualified anti-terrorism technologies.

    (a) General. The Under Secretary may designate as a qualified anti-
terrorism technology for purposes of protections set forth in Subtitle 
G of Title VIII of Public Law 107-296 any qualifying product, 
equipment, service (including support services), device, or technology 
(including information technology) designed, developed, modified, or 
procured for the specific purpose of preventing, detecting, 
identifying, or deterring acts of terrorism or limiting the harm such 
acts might otherwise cause.
    (b) Criteria to be considered. In determining whether to grant the 
designation under paragraph (a) (a ``Designation''), the Under 
Secretary may exercise discretion and judgment in interpreting and 
weighting the following criteria in each case:
    (1) Prior United States Government use or demonstrated substantial 
utility and effectiveness.
    (2) Availability of the technology for immediate deployment in 
public and private settings.
    (3) Existence of extraordinarily large or extraordinarily 
unquantifiable potential third party liability risk exposure to the 
Seller or other provider of such anti-terrorism technology.
    (4) Substantial likelihood that such anti-terrorism technology will 
not be deployed unless protections under the system of risk management 
provided under 6 U.S.C. 441-444 are extended.
    (5) Magnitude of risk exposure to the public if such anti-terrorism 
technology is not deployed.
    (6) Evaluation of all scientific studies that can be feasibly 
conducted in order to assess the capability of the technology to 
substantially reduce risks of harm.
    (7) Anti-terrorism technology that would be effective in 
facilitating the defense against acts of terrorism, including 
technologies that prevent, defeat or respond to such acts.
    (8) Any other factor that the Under Secretary may consider to be 
relevant to the determination or to the homeland security of the United 
States.
    (c) Use of standards. From time to time the Under Secretary may 
develop, issue, revise, and adopt technical standards for various 
categories of anti-terrorism technologies. Such standards will be 
published by the Department at http://www.dhs.gov, and copies may also 
be obtained by mail by sending a request to: Directorate of Science and 
Technology, SAFETY Act/room 4320, Department of Homeland Security, 
Washington, DC 20528. Compliance with any such standards that are 
applicable to a particular anti-terrorism technology may be considered 
before any Designation will be granted for such technology under 
paragraph (a) of this section; in such cases, the Under Secretary may 
consider test results produced by an independent laboratory or other 
entity engaged to test or verify the safety, utility, performance, or 
effectiveness of such technology.
    (d) Consideration of substantial equivalence. In determining 
whether a particular technology satisfies the criteria in paragraph (b) 
and complies with any applicable standards referenced in paragraph (c), 
the Under Secretary may take into consideration evidence that the 
technology is substantially equivalent to other, similar technologies 
(``predicate technologies'') that have been previously designated as 
``qualified anti-terrorism technologies'' under the SAFETY Act. A 
technology may be deemed to be substantially equivalent to a predicate 
technology if:
    (1) it has the same intended use as the predicate technology; and
    (2) it has the same or substantially similar technological 
characteristics as the predicate technology.

[[Page 59699]]

    (e) Duration and depth of review. Recognizing the urgency of 
certain security measures, the Under Secretary will make a judgment 
regarding the duration and depth of review appropriate for a particular 
technology. This review will include submissions by the applicant for 
SAFETY Act coverage, along with information that the Under Secretary 
can feasibly gather from other sources. For technologies with which a 
Federal, state, or local government agency already has substantial 
experience or data (through the procurement process or through prior 
use or review), the review may rely in part upon that prior experience 
and, thus, may be expedited. The Under Secretary may consider any 
scientific studies, testing, field studies, or other experience with 
the technology that he deems appropriate and that are available or can 
be feasibly conducted or obtained in order to assess the capability of 
the technology to substantially reduce risks of harm. Such studies may, 
in the Under Secretary's discretion, include:
    (1) Public source studies;
    (2) Classified and otherwise confidential studies;
    (3) Studies, tests, or other performance records or data provided 
by or available to the producer of the specific technology; and
    (4) Proprietary studies that are available to the Under Secretary.
    In considering whether or the extent to which it is feasible to 
defer a decision on a Designation until additional scientific studies 
can be conducted on a particular technology, the Under Secretary will 
bring to bear his or her expertise concerning the protection of the 
security of the American homeland and will consider the urgency of the 
need for the technology.
    (f) Content of Designation. A Designation shall specify the 
technology, the Seller(s) of the technology, and the earliest date of 
sale of the technology to which the Designation shall apply (which 
shall be determined by the Under Secretary in his or her discretion, 
and may be prior to, but shall not be later than, the effective date of 
the Designation). The Designation may, but need not, also specify 
others who are required to be covered by the liability insurance 
required to be purchased by the Seller. The Designation shall include 
the Under Secretary's certification required by Sec.  25.4(h). The 
Designation may also include such other specifications as the Under 
Secretary may deem to be appropriate, including, but not limited to, 
specific applications of the technology, materials or processes 
required to be used in producing or using the technology, restrictions 
on transfer or licensing, and training and instructions required to be 
provided to persons involved in the deployment of the technology. 
Failure to specify a covered person or entity in a Designation will not 
preclude application of the Act's protections to that person or entity.
    (g) Government procurements. The Under Secretary may coordinate a 
SAFETY Act review in connection with a Federal, state, or local 
government agency procurement of an anti-terrorism technology in any 
manner he or she deems appropriate and consistent with the Act and 
other applicable laws.
    (h) Pre-application consultations. To the extent that he or she 
deems it appropriate, the Under Secretary may consult with potential 
SAFETY Act applicants regarding the need for or advisability of 
particular types of anti-terrorism technologies, although no pre-
approval of any particular technology may be given. Such potential 
applicants may request such consultations through the Pre-Application 
process set forth in the SAFETY Act Application Kit. The 
confidentiality provisions in Sec.  25.8 shall be applicable to such 
consultations.


Sec.  25.4  Obligations of Seller.

    (a) Liability insurance required. The Seller shall obtain liability 
insurance of such types and in such amounts as shall be required in the 
applicable Designation, which shall be the amounts and types certified 
by the Under Secretary to satisfy otherwise compensable third-party 
claims arising out of, relating to, or resulting from an act of 
terrorism when qualified anti-terrorism technologies have been deployed 
in defense against, response to, or recovery from, such act. 
Notwithstanding the foregoing, if the Under Secretary determines that 
insurance in appropriate amounts or of appropriate types is not 
available for a particular technology, the Under Secretary may 
authorize a Seller to self-insure and prescribe the amount and terms of 
the Seller's liability in the applicable Designation, which amount and 
terms shall be such as will not unreasonably distort the sales price of 
the Seller's anti-terrorism technology. The Under Secretary may request 
at any time (before or after the insurance certification process 
established under this section) that the Seller or any other provider 
of qualified anti-terrorism technology submit any information that 
would:
    (1) Assist in determining the amount of liability insurance 
required, or
    (2) Show that the Seller or any other provider of qualified anti-
terrorism technology otherwise has met all the requirements of this 
section.
    (b) Maximum Amount. For the total claims related to one act of 
terrorism, in determining the required amounts and types of liability 
insurance that the Seller will be required to obtain, the Under 
Secretary shall not require the Seller to obtain liability insurance of 
more than the maximum amount of liability insurance reasonably 
available from private sources on the world market at prices and terms 
that will not unreasonably distort the sales price of the Seller's 
anti-terrorism technology. The Under Secretary will determine the 
amount of liability insurance required for each technology, or, to the 
extent feasible and appropriate, a particular group of technologies. 
The Under Secretary or his designee may find that--notwithstanding the 
level of risk exposure for a particular technology, or group of 
technologies--the maximum amount of liability insurance from private 
sources on the world market is set at a price or contingent on terms 
that will unreasonably distort the sales price of a Seller's 
technology, thereby necessitating liability insurance coverage below 
the maximum amount available. In determining the amount of liability 
insurance required, the Under Secretary may consider any factor, 
including, but not limited to, the following:
    (1) The particular technology at issue;
    (2) The amount of liability insurance the Seller maintained prior 
to application;
    (3) The amount of liability insurance maintained by the Seller for 
other technologies or for the Seller's business as a whole;
    (4) The amount of liability insurance typically maintained by 
sellers of comparable technologies;
    (5) Information regarding the amount of liability insurance offered 
on the world market;
    (6) Data and history regarding mass casualty losses;
    (7) The intended use of the technology;
    (8) The possible effects of the cost of insurance on the price of 
the product, and the possible consequences thereof for development, 
production, or deployment of the technology; and
    (9) In the case of a Seller seeking approval to self-insure, the 
factors described in 48 CFR 28.308(d).
    (c) Scope of coverage. Liability insurance required to be obtained 
(or self-insurance required) pursuant to this section shall, in 
addition to the Seller, protect the following, to the extent of their 
potential liability for involvement in the manufacture, qualification, 
sale,

[[Page 59700]]

use, or operation of qualified anti-terrorism technologies deployed in 
defense against, response to, or recovery from, an act of terrorism:
    (1) Contractors, subcontractors, suppliers, vendors and customers 
of the Seller.
    (2) Contractors, subcontractors, suppliers, and vendors of the 
customer.
    (d) Third party claims. Any liability insurance required to be 
obtained (or self-insurance required) pursuant to this section shall 
provide coverage against third party claims arising out of, relating 
to, or resulting from an act of terrorism when the applicable qualified 
anti-terrorism technologies have been deployed in defense against, 
response to, or recovery from such act.
    (e) Reciprocal waiver of claims. The Seller shall enter into a 
reciprocal waiver of claims with its contractors, subcontractors, 
suppliers, vendors, and customers, and contractors and subcontractors 
of the customers, involved in the manufacture, sale, use, or operation 
of qualified anti-terrorism technologies, under which each party to the 
waiver agrees to be responsible for losses, including business 
interruption losses, that it sustains, or for losses sustained by its 
own employees resulting from an activity resulting from an act of 
terrorism when qualified anti-terrorism technologies have been deployed 
in defense against, response to, or recovery from such act. 
Notwithstanding the foregoing, if the Seller has used diligent efforts 
in good faith to obtain all required reciprocal waivers, then obtaining 
such waivers shall not be a condition precedent or subsequent for, nor 
shall the failure to obtain one or more of such waivers adversely 
affect, the issuance, validity, effectiveness, duration, or 
applicability of a Designation or a Certification. Nothing in this 
paragraph (e) shall be interpreted to render the failure to obtain one 
or more of such waivers a condition precedent or subsequent for the 
issuance, validity, effectiveness, duration, or applicability of a 
Designation or a Certification.
    (f) Extent of liability. Liability for all claims against a Seller 
arising out of, relating to, or resulting from an act of terrorism when 
such Seller's qualified anti-terrorism technology has been deployed in 
defense against, response to, or recovery from such act in accordance 
with the applicable Designation and such claims result or may result in 
loss to the Seller, whether for compensatory or punitive damages or for 
contribution or indemnity, shall not be in an amount greater than the 
limits of liability insurance coverage required to be maintained by the 
Seller under this Section, or, in the case of a Seller authorized by 
the Under Secretary to self-insure pursuant to this Section, shall not 
be in an amount greater than the liability limit prescribed by the 
Under Secretary in the applicable Designation.
    (1) In addition, in any action brought under Section 863 of the Act 
for damages:
    (i) No punitive damages intended to punish or deter, exemplary 
damages, or other damages not intended to compensate a plaintiff for 
actual losses may be awarded, nor shall any party be liable for 
interest prior to the judgment,
    (ii) Noneconomic damages may be awarded against a defendant only in 
an amount directly proportional to the percentage of responsibility of 
such defendant for the harm to the plaintiff, and no plaintiff may 
recover noneconomic damages unless the plaintiff suffered physical 
harm, and
    (iii) any recovery by a plaintiff shall be reduced by the amount of 
collateral source compensation, if any, that the plaintiff has received 
or is entitled to receive as a result of such acts of terrorism that 
result or may result in loss to the Seller.
    (2) Without prejudice to the authority of the Under Secretary to 
terminate a Designation pursuant to paragraph (h) of this Section, such 
liability limitations and reductions shall apply in perpetuity to all 
deployments of a qualified anti-terrorism technology that occur on or 
after the effective date of the Designation applicable to such 
technology in defense against, response to, or recovery from any act of 
terrorism, regardless of whether any liability insurance coverage 
required to be obtained by the Seller is actually maintained or not, 
provided that the sale of such technology was consummated by the Seller 
on or after the earliest date of sale of such technology specified in 
such Designation (which shall be determined by the Under Secretary in 
his or her discretion, and may be prior to, but shall not be later 
than, such effective date) and prior to the expiration or termination 
of such Designation.
    (g) Information to be submitted by the Seller. As part of any 
application for a Designation, the Seller shall provide a statement, 
executed by a duly authorized representative of the Seller, of all 
liability insurance coverage applicable to third-party claims arising 
out of, relating to, or resulting from an act of terrorism when the 
Seller's qualified anti-terrorism technology has been deployed in 
defense against, response to, or recovery from such act, including:
    (1) Names of insurance companies, policy numbers, and expiration 
dates;
    (2) A description of the types and nature of such insurance 
(including the extent to which the Seller is self-insured or intends to 
self-insure);
    (3) Dollar limits per occurrence and annually of such insurance, 
including any applicable sublimits;
    (4) Deductibles or self-insured retentions, if any, that are 
applicable;
    (5) Any relevant exclusions from coverage under such policies;
    (6) The price for such insurance, if available, and the per-unit 
amount or percentage of such price directly related to liability 
coverage for the Seller's qualified anti-terrorism technology deployed 
in defense against, or response to, or recovery from an act of terror;
    (7) Where applicable, whether the liability insurance, in addition 
to the Seller, protects contractors, subcontractors, suppliers, vendors 
and customers of the Seller and contractors, subcontractors, suppliers, 
vendors and customers of the customer to the extent of their potential 
liability for involvement in the manufacture, qualification, sale, use 
or operation of Qualified Anti-terrorism Technologies deployed in 
defense against, response to, or recovery from an act of terrorism;
    (8) Any limitations on such liability insurance; and
    (9) In the case of a Seller seeking approval to self-insure, all of 
the information described in 48 CFR 28.308(a)(1) through (10).
    (h) Under Secretary's certification. For each qualified anti-
terrorism technology, the Under Secretary shall certify the amount of 
insurance required under Section 864 of the Act. The Under Secretary 
shall include the certification under this section as a part of the 
applicable Designation. The certification may specify a period of time 
for which the certification will apply. The Seller of a qualified anti-
terrorism technology may at any time petition the Under Secretary for a 
revision or termination of the certification under this section. The 
Under Secretary or his designee may at any time request information 
from the Seller regarding the insurance maintained by the Seller or the 
amount of insurance available to the Seller.
    (i) Seller's continuing obligations. Within 30 days after the Under 
Secretary's certification required by paragraph (h), and within 30 days 
after each subsequent anniversary of the issuance of a Designation, the 
Seller shall certify to the Under Secretary that the Seller has 
maintained the insurance required by such certification. The Under 
Secretary may terminate a Designation if the Seller fails to provide

[[Page 59701]]

the certification required by this paragraph or provides a false 
certification. The Under Secretary may also consider such failure to 
provide the certification or provision of a false certification when 
reviewing future applications from the same Seller. The Seller must 
also notify the Under Secretary of any changes in types or amounts of 
liability insurance coverage for any qualified anti-terrorism 
technology.


Sec.  25.5  Procedures for designation of qualified anti-terrorism 
technologies.

    (a) Application procedure. Any Seller seeking a designation shall 
submit information supporting such request to the Assistant Secretary 
for Plans, Programs, and Budget of the Department of Homeland Security 
Directorate of Science and Technology (``the Assistant Secretary''), or 
such other official of such Directorate as may be designated from time 
to time by the Under Secretary. The Under Secretary shall make 
application forms available at http://www.dhs.gov and by mail upon 
request sent to: Directorate of Science and Technology, SAFETY Act/room 
4320, Department of Homeland Security, Washington, DC 20528.
    (b) Initial notification. Within 30 days after receipt of an 
Application for a Designation, the Assistant Secretary or his or her 
designee shall notify the applicant in writing that:
    (1) The Application is complete and will be reviewed, or
    (2) That the Application is incomplete, in which case the missing 
or incomplete parts will be specified.
    (c) Review process. The Assistant Secretary or his or her designee 
will review each complete Application and any included supporting 
materials. In performing this function, the Assistant Secretary or his 
or her designee may, but is not required to:
    (1) Request additional information from the Seller;
    (2) Meet with representatives of the Seller;
    (3) Consult with, and rely upon the expertise of, any other Federal 
or nonfederal entity;
    (4) Perform studies or analyses of the technology or the insurance 
market for such technology; and
    (5) Seek information from insurers regarding the availability of 
insurance for such technology.
    (d) Recommendation of the Assistant Secretary. (1) Within 90 days 
after receipt of a complete Application for a Designation, the 
Assistant Secretary shall make one of the following recommendations to 
the Under Secretary regarding such Application:
    (i) That the Application be approved and a Designation be issued to 
the Seller;
    (ii) That the Seller be notified that the technology is potentially 
eligible for a Designation, but that additional specified information 
is needed before a decision may be reached; or
    (iii) That the Application be denied.
    (2) If approval is recommended, the recommendation shall include a 
recommendation regarding the certification required by Sec.  25.4(h). 
The Assistant Secretary may extend the time period beyond 90 days upon 
notice to the Seller; the Assistant Secretary is not required to 
provide a reason or cause for such extension.
    (e) Action by the Under Secretary. Within 30 days after receiving a 
recommendation from the Assistant Secretary pursuant to paragraph (d) 
of this section, the Under Secretary shall take one of the following 
actions:
    (1) Approve the Application and issue an appropriate Designation to 
the Seller, which shall include the certification required by 
Sec. 25.4(h);
    (2) Notify the Seller in writing that the technology is potentially 
eligible for a Designation, but that additional specified information 
is needed before a decision may be reached; or
    (3) Deny the Application, and notify the Seller in writing of such 
decision. The Under Secretary may extend the time period beyond 30 days 
upon notice to the Seller; the Under Secretary is not required to 
provide a reason or cause for such extension. The Under Secretary's 
decision shall be final and not subject to review, except at the 
discretion of the Under Secretary.
    (f) Term of Designation; renewal. A Designation shall be valid and 
effective for a term of five to eight years (as determined by the Under 
Secretary based upon the technology) commencing on the date of 
issuance. At any time commencing two years prior to the expiration of a 
Designation, the Seller may apply for renewal of the Designation. The 
Under Secretary shall make the application form for renewals available 
at http://www.dhs.gov and by mail upon request sent to: Directorate of 
Science and Technology, SAFETY Act/room 4320, Department of Homeland 
Security, Washington, DC 20528.
    (g) Transfer of Designation. (1) Except as may be restricted by the 
terms and conditions of a Designation, any Designation may be 
transferred and assigned to any other person or entity to which the 
Seller transfers and assigns all right, title, and interest in and to 
the technology covered by the Designation, including the intellectual 
property rights therein (or, if the Seller is a licensee of the 
technology, to any person or entity to which such Seller transfers all 
of its right, title, and interest in and to the applicable license 
agreement). Such transfer and assignment of a Designation will not be 
effective unless and until:
    (i) the Under Secretary is notified in writing of the transfer 
using the ``Application for Transfer of Designation'' form issued by 
the Under Secretary (the Under Secretary shall make this application 
form available at http://www.dhs.gov and by mail by written request 
sent to: Directorate of Science and Technology, SAFETY Act/room 4320, 
Department of Homeland Security, Washington, DC 20528), and
    (ii) the transferee complies with all applicable provisions of the 
SAFETY Act, this Part, and the relevant Designation as if the 
transferee were the Seller.
    (2) Upon the effectiveness of such transfer and assignment, the 
transferee will be deemed to be a Seller in the place and stead of the 
transferor with respect to the applicable technology for all purposes 
under the SAFETY Act, this Part, and the transferred Designation. The 
transferred Designation will continue to apply to the transferor with 
respect to all transactions and occurrences that occurred through the 
time at which the transfer and assignment of the Designation became 
effective, as specified in the applicable Application for Transfer of 
Designation.
    (h) Application of Designation to licensees. Except as may be 
restricted by the terms and conditions of a Designation, any 
Designation shall apply to any other person or entity to which the 
Seller licenses (exclusively or nonexclusively) the right to 
manufacture, use, or and sell the technology, in the same manner and to 
the same extent that such Designation applies to the Seller, effective 
as of the date of commencement of the license, provided that the Seller 
notifies the Under Secretary of such license by submitting, within 30 
days after such date of commencement, a ``Notice of License of 
Qualified Anti-terrorism Technology'' form issued by the Under 
Secretary. The Under Secretary shall make this form available at http://www.dhs.gov and by mail upon request sent to: Directorate of Science 
and Technology, SAFETY Act/room 4320, Department of Homeland Security, 
Washington, DC 20528. Such notification shall not be required for any 
licensee listed as a Seller on the applicable Designation.
    (i) Termination of Designation resulting from significant 
modification.

[[Page 59702]]

A Designation shall terminate automatically, and have no further force 
or effect, if the designated qualified anti-terrorism technology is 
significantly changed or modified. A significant change or modification 
in the technology is one that could significantly reduce the safety or 
effectiveness of the technology. This could include, in the case of a 
device, a significant change or modification in design, material, 
chemical composition, energy source, manufacturing process, or purpose 
for which it is to be sold, and in the case of a service, a significant 
change or modification in methodology, procedures, or purpose for which 
it is to be sold. If a Seller is planning a change or modification to a 
designated technology, such Seller may apply for a corresponding 
modification of the applicable Designation in advance of the 
implementation of such modification. Application for such a 
modification must be made using the ``Application for Modification of 
Designation'' form issued by the Under Secretary. The Under Secretary 
shall make this application form available at http://www.dhs.gov and by 
mail upon request sent to: Directorate of Science and Technology, 
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC 
20528. Changes or modifications will be evaluated at a minimum with 
reference to the description of the technology and its purposes as 
provided in the Seller's application and with reference to what was 
designated in the applicable Designation. In lieu of issuing a modified 
Designation in response to such an application, the Under Secretary may 
elect to issue a certificate to the Seller certifying that the 
submitted changes or modifications are not significant within the 
meaning of this paragraph (i) and that the Seller's existing 
Designation continues to be applicable to the changed or modified 
technology.


Sec.  25.6  Government contractor defense.

    (a) Criteria for certification. The Under Secretary may certify a 
qualified anti-terrorism technology as an Approved Product for Homeland 
Security for purposes of establishing a rebuttable presumption of the 
applicability of the government contractor defense. In determining 
whether to grant such certification, the Under Secretary or his or her 
designee shall conduct a comprehensive review of the design of such 
technology and determine whether it will perform as intended, conforms 
to the Seller's specifications, and is safe for use as intended. The 
Seller shall provide safety and hazard analyses and other relevant data 
and information regarding such technology to the Department in 
connection with an application. The Under Secretary or his designee may 
require that the Seller submit any information that the Under Secretary 
or his designee considers relevant to the application for approval. The 
Under Secretary or his designee may consult with, and rely upon the 
expertise of, any other governmental or non-governmental person or 
entity, and may consider test results produced by an independent 
laboratory or other person or entity engaged by the Seller.
    (b) Extent of liability. Should a product liability or other 
lawsuit be filed for claims arising out of, relating to, or resulting 
from an act of terrorism when qualified anti-terrorism technologies 
certified by the Under Secretary as provided in Sec. Sec.  25.6 and 
25.7 of this part have been deployed in defense against or response or 
recovery from such act and such claims result or may result in loss to 
the Seller, there shall be a rebuttable presumption that the government 
contractor defense applies in such lawsuit. This presumption shall only 
be overcome by evidence showing that the Seller acted fraudulently or 
with willful misconduct in submitting information to the Assistant 
Secretary during the course of the Assistant Secretary's consideration 
of such technology under this subsection. This presumption of the 
government contractor defense shall apply regardless of whether the 
claim against the Seller arises from a sale of the product to Federal 
Government or non-Federal Government customers. Such presumption shall 
apply in perpetuity to all deployments of a qualified anti-terrorism 
technology (for which a Certification has been issued by the Under 
Secretary as provided in this section and Sec.  25.7) that occur on or 
after the effective date of the Certification applicable to such 
technology in defense against, response to, or recovery from any act of 
terrorism, provided that the sale of such technology was consummated by 
the Seller on or after the earliest date of sale of such technology 
specified in such Certification (which shall be determined by the Under 
Secretary in his or her discretion, and may be prior to, but shall not 
be later than, such effective date) and prior to the expiration or 
termination of such Certification.


Sec.  25.7  Procedures for Certification of Approved Products for 
Homeland Security.

    (a) Application procedure. A Seller seeking certification of anti-
terrorism technology as an Approved Product for Homeland Security under 
Sec. 25.6 (a ``Certification'') shall submit information supporting 
such request to the Assistant Secretary. The Under Secretary shall make 
application forms available at http://www.dhs.gov, and copies may also 
be obtained by mail by sending a request to: Directorate of Science and 
Technology, SAFETY Act/room 4320, Department of Homeland Security, 
Washington, DC 20528. An application for a certification may not be 
filed unless the Seller has also filed an application for designation 
of qualified anti-terrorism technology for the same technology. The two 
applications may be filed simultaneously and may be reviewed 
simultaneously.
    (b) Initial notification. Within 30 days after receipt of an 
Application for a Certification, the Assistant Secretary or his or her 
designee shall notify the applicant in writing that:
    (1) The Application is complete and will be reviewed, or
    (2) That the Application is incomplete, in which case the missing 
or incomplete parts will be specified.
    (c) Review process. The Assistant Secretary or his or her designee 
will review each complete Application for a Certification and any 
included supporting materials. In performing this function, the 
Assistant Secretary or his or her designee may, but is not required to:
    (1) Request additional information from the Seller;
    (2) Meet with representatives of the Seller;
    (3) Consult with, and rely upon the expertise of, any other Federal 
or nonfederal entity; and
    (4) Perform or seek studies or analyses of the technology.
    (d) Recommendation of the Assistant Secretary. (1) Within 90 days 
after receipt of a complete Application for a Certification, the 
Assistant Secretary shall make one of the following recommendations to 
the Under Secretary regarding such Application:
    (i) That the Application be approved and a Certification be issued 
to the Seller;
    (ii) That the Seller be notified that the technology is potentially 
eligible for a Certification, but that additional specified information 
is needed before a decision may be reached; or
    (iii) That the Application be denied.
    (2) The Assistant Secretary may extend the time period beyond 90 
days upon notice to the Seller; the Assistant Secretary is not required 
to provide a reason or cause for such extension.
    (e) Action by the Under Secretary. (1) Within 30 days after 
receiving a

[[Page 59703]]

recommendation from the Assistant Secretary pursuant to paragraph (d) 
of this section, the Under Secretary shall take one of the following 
actions:
    (i) Approve the Application and issue an appropriate Certification 
to the Seller;
    (ii) Notify the Seller in writing that the technology is 
potentially eligible for a Certification, but that additional specified 
information is needed before a decision may be reached; or
    (iii) Deny the Application, and notify the Seller in writing of 
such decision.
    (2) The Under Secretary may extend the time period beyond 30 days 
upon notice to the Seller, and the Under Secretary is not required to 
provide a reason or cause for such extension. The Under Secretary's 
decision shall be final and not subject to review, except at the 
discretion of the Under Secretary.
    (f) Designation is a pre-condition. The Under Secretary may approve 
an application for a certification only if the Under Secretary has also 
approved an application for a designation for the same technology under 
section 25.3.
    (g) Content and term of certification; renewal. A Certification 
shall specify the technology, the Seller(s) of the technology, and the 
earliest date of sale of the technology to which the Certification 
shall apply (which shall be determined by the Under Secretary in his or 
her discretion, and may be prior to, but shall not be later than, the 
effective date of the Certification). The Certification may also 
include such other specifications as the Under Secretary may deem to be 
appropriate, including, but not limited to, specific applications of 
the technology, materials or processes required to be used in producing 
or using the technology, restrictions on transfer or licensing, and 
training and instructions required to be provided to persons involved 
in the deployment of the technology. A certification shall be valid and 
effective for the same period of time for which the related Designation 
is issued, and shall terminate upon the termination of such related 
Designation. The Seller may apply for renewal of the Certification in 
connection with an application for renewal of the related Designation. 
An application for renewal must be made using the ``Application for 
Certification of an Approved Product for Homeland Security'' form 
issued by the Under Secretary.
    (h) Application of Certification to licensees. Any certification 
shall apply to any other person or entity to which the Seller licenses 
(exclusively or nonexclusively) the right to manufacture and sell the 
technology, in the same manner and to the same extent that such 
certification applies to the Seller, effective as of the date of 
commencement of the license, provided that the Seller notifies the 
Under Secretary of such license by submitting, within 30 days after 
such date of commencement, a ``Notice of License of Approved Anti-
terrorism Technology'' form issued by the Under Secretary. The Under 
Secretary shall make this form available at http://www.dhs.gov and by 
mail upon request sent to: Directorate of Science and Technology, 
SAFETY Act/room 4320, Department of Homeland Security, Washington, DC 
20528. Such notification shall not be required for any licensee listed 
as a Seller on the applicable Certification.
    (i) Transfer of Certification. In the event of any permitted 
transfer and assignment of a Designation, any related Certification for 
the same anti-terrorism technology shall automatically be deemed to be 
transferred and assigned to the same transferee to which such 
Designation is transferred and assigned. The transferred Certification 
will continue to apply to the transferor with respect to all 
transactions and occurrences that occurred through the time at which 
such transfer and assignment of the Certification became effective.
    (j) Issuance of Certificate; Approved Product List. For anti-
terrorism technology reviewed and approved by the Under Secretary and 
for which a Certification is issued, the Under Secretary shall issue a 
certificate of conformance to the Seller and place the anti-terrorism 
technology on an Approved Product List for Homeland Security, which 
shall be published by the Department of Homeland Security.


Sec.  25.8  Confidentiality and protection of intellectual property.

    The Secretary, in consultation with the Office of Management and 
Budget and appropriate Federal law enforcement and intelligence 
officials, and in a manner consistent with existing protections for 
sensitive or classified information, shall establish confidentiality 
protocols for maintenance and use of information submitted to the 
Department under the SAFETY Act and this Part. Such protocols shall, 
among other things, ensure that the Department will utilize all 
appropriate exemptions from the Freedom of Information Act.


Sec.  25.9  Definitions.

    Act of Terrorism--The term ``act of terrorism'' means any act 
that--
    (1) Is unlawful;
    (2) Causes harm to a person, property, or entity, in the United 
States, or in the case of a domestic United States air carrier or a 
United States-flag vessel (or a vessel based principally in the United 
States on which United States income tax is paid and whose insurance 
coverage is subject to regulation in the United States), in or outside 
the United States; and
    (3) Uses or attempts to use instrumentalities, weapons or other 
methods designed or intended to cause mass destruction, injury or other 
loss to citizens or institutions of the United States.
    Assistant Secretary--The term ``Assistant Secretary'' means the 
Assistant Secretary for Plans, Programs, and Budget of the Department 
of Homeland Security Directorate of Science and Technology, or such 
other official of such Directorate as may be designated from time to 
time by the Under Secretary.
    Certification--The term ``Certification'' means (unless the context 
requires otherwise) a certification that a qualified anti-terrorism 
technology for which a Designation has been issued will perform as 
intended, conforms to the Seller's specifications, and is safe for use 
as intended.
    Contractor--The term ``contractor'' of a Seller means any person or 
entity with whom or with which the Seller has entered into a contract 
relating to the manufacture, sale, use, or operation of anti-terrorism 
technology for which a Designation is issued (regardless of whether 
such contract is entered into before or after the issuance of such 
Designation), including, without limitation, an independent laboratory 
or other entity engaged in testing or verifying the safety, utility, 
performance, or effectiveness of such technology, or the conformity of 
such technology to the Seller's specifications.
    Designation--The term ``Designation'' means a designation of a 
qualified anti-terrorism technology under the SAFETY Act issued by the 
Under Secretary under authority delegated by the Secretary of Homeland 
Security.
    Loss--The term ``loss'' means death, bodily injury, or loss of or 
damage to property, including business interruption loss (which is a 
component of loss of or damage to property).
    Noneconomic damages--The term ``noneconomic damages'' means damages 
for losses for physical and emotional pain, suffering, inconvenience, 
physical impairment, mental anguish, disfigurement, loss of enjoyment 
of life, loss of society and companionship, loss of consortium, hedonic 
damages, injury to reputation, and any other nonpecuniary losses.

[[Page 59704]]

    Physical harm--The term ``physical harm'' as used in the Act shall 
mean a physical injury to the body that caused, either temporarily or 
permanently, partial or total physical disability, incapacity or 
disfigurement. In no event shall physical harm include mental pain, 
anguish, or suffering, or fear of injury.
    Qualified Anti-Terrorism Technology (QATT)--The term ``'qualified 
anti-terrorism technology''' means any product, equipment, service 
(including support services), device, or technology (including 
information technology) designed, developed, modified, or procured for 
the specific purpose of preventing, detecting, identifying, or 
deterring acts of terrorism or limiting the harm such acts might 
otherwise cause, for which a Designation has been issued under this 
Part.
    SAFETY Act or Act--The term ``SAFETY Act'' or ``Act'' means the 
Support Anti-terrorism by Fostering Effective Technologies Act of 2002, 
enacted as Subtitle G of Title VIII of the Homeland Security Act of 
2002, Public Law 107-296.
    Seller--The term ``Seller'' means any person or entity to whom or 
to which (as appropriate) a Designation has been issued under this Part 
(unless the context requires otherwise).
    Under Secretary--The term ``Under Secretary'' means the Under 
Secretary for Science and Technology of the Department of Homeland 
Security.

    Dated: October 10, 2003.
Tom Ridge,
Secretary of Homeland Security.
[FR Doc. 03-26217 Filed 10-10-03; 4:15 pm]
BILLING CODE 4410-10-P