Background

On May 4, 2011, the Department published a proposed rule (76 FR 25414) that would revise 7 CFR part 273 to change the program name from the Food Stamp Program to SNAP and make other nomenclature changes in conformance with Section 4001 of the Food, Conservation and Energy Act of 2008 (Pub. L. 110-246). As part of these nomenclature changes, the Department also proposed to revise § 273.11(e) and (f) to remove references to paper coupons and to update the procedures for providing benefits via EBT cards to residents of drug addiction or alcoholic treatment and rehabilitation programs (DAA treatment centers) and residents of group living arrangements (GLAs). Prior to the implementation of EBT, such centers were required to redeem residents' paper coupons through authorized food stores. Under EBT systems, both DAA treatment centers and GLAs may be authorized as retailers in order to redeem benefits directly through a financial institution. The institutions may also use an aggregate EBT card, or may use individual EBT cards at authorized stores if the center is the household's authorized representative. The Department proposed to update the regulatory description to conform with current EBT processes.

Commenters responding to the nomenclature changes in the proposed rule recommended additional substantive revisions to § 273.11(e) and (f) to better protect the rights of SNAP clients who are residents of DAA treatment centers and GLAs when these clients leave these establishments. Accordingly, in addition to finalizing the nomenclature updates for those particular provisions, the final rule Supplemental Nutrition Assistance Program (SNAP): Eligibility, Certification, and Employment and Training Provisions of the Food, Conservation and Energy Act of 2008, published January 6, 2017 (82 FR 2010), included an interim final rule with amendments to 7 CFR 273.11(e) and (f) to revise the procedures for when SNAP clients leave DAA treatment centers or GLAs. Specifically, the interim final rule mandated that DAA treatment centers and GLAs return EBT cards to residents with benefits pro-rated based on the date of their departure, submit complete change report forms to the State agency when a resident leaves, and notify the State agency within 5 days if unable to provide the resident with their EBT card at departure.

The initial comment period for this interim final rule was 60 days. Consistent with the memorandum of January 20, 2017, to the heads of executive departments and agencies from the Assistant to the President and Chief of Staff, entitled “Regulatory Freeze Pending Review”, the comment period for the interim final rule was extended from ending on March 7, 2017, to April 6, 2017. The effective date for the interim final rule was delayed to June 5, 2017.

FNS received five comments in response to the interim final rule. Four of the comments were from State agencies and one comment was outside the scope of the interim final rule. All four germane comments were adverse.

Commenters indicated significant logistical and operational difficulties to comply with the provisions as written and, as a result, the Department has concluded that more research and stakeholder outreach must be done in this area before requirements for these centers are finalized.

The interim final rule required that when a household leaves a GLA or DAA treatment center, the GLA or DAA treatment center must return a prorated amount of the departing household's monthly allotment back to the household's EBT account based on the number of days in the month that the household resided at the center. Three commenters noted that GLAs and DAA treatment centers are not required by regulations to be authorized as SNAP retailers or to have EBT point-of-sale (POS) devices that would facilitate such action. As such, they expressed concern as to how centers without EBT POS devices would be able to return benefits once SNAP clients were no longer residents. One of these commenters, a State agency, indicated that while it supported the return of pro-rated benefits to households, the State had no DAA treatment centers or GLAs authorized as retailers in the State and thus there would be no functional way to implement the rule as written. Another commenter noted that proration is not an automatic function for EBT systems and, therefore, proration would have to be manually completed by even those GLAs or DAA treatment centers with POS devices, which could potentially be error-prone.

The Department acknowledges that the interim final rule does not accurately reflect the operationalization of benefit redemptions in GLAs and DAA treatment centers that are not authorized retailers, and would cause undue hardship in requiring every GLA and DAA treatment center to become an authorized retailer. The Department acknowledges it was not its intent to require all GLAs and DAA treatment centers to become authorized SNAP retailers, but that the interim final rule as written would have required this of the centers in order for them to meet the requirements outlined in the rule in a practical manner. Due to the negative response, the Department is not finalizing the substantive amendments contained in the interim final rule.

This rule only finalizes the statutorily mandated nomenclature changes and procedures for § 273.11(e) and (f), as well as the paragraph removals, redesignations and technical revisions as outlined in the department's proposed rule issued on May 4, 2011. The Department received no comments that addressed these changes alone. The changes to procedures in § 273.11(e) and (f) are codifying existing policy. The Department is also making changes throughout § 273.11(e) to ensure consistent nomenclature in referring to DAA treatment centers, removing references to “DAA centers” or “DAAs” and replacing these with “DAA treatment centers”, and clarifying that “DAA treatment centers” refers to publicly operated or private non-profit drug addict or alcoholic treatment and rehabilitation programs. The proposed rule's paragraph removals, redesignations and revisions that were substantially unchanged and codified by the interim final rule are not amended further here.

The Department still intends to further assess the operations of GLAs and DAA treatment centers and remains interested in enhancing protections when clients leave a GLA or DAA treatment center. However, the Department intends to consult with State agencies and other stakeholders in order to determine the most appropriate changes for future rulemaking on this topic. The Department will conduct a holistic review of GLAs and DAA treatment centers that are authorized retailers as well as those that are not authorized retailers to better understand current operational procedures, and work with all stakeholders to determine what appropriate changes should be made in rulemaking based on existing processes and technology. The Department appreciates the concerns for client access and GLA and DAA treatment center responsibility raised by commenters in both the proposed and interim final rules, and will take them into consideration while conducting its review of GLA and DAA treatment center procedures. During this time, GLA and DAA treatment centers will continue to follow the procedures as outlined in this final rule and residents who depart these facilities will continue to receive some benefits depending on the time of month of their departure.

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. This final rule has been determined to be significant and was reviewed by the Office of Management and Budget in conformance with Executive Order 12866.

Executive Order 13771 directs agencies to reduce regulation and control regulatory costs and provides that the cost of planned regulations be prudently managed and controlled through a budgeting process. FNS considers this rule to be an Executive Order 13771 deregulatory action.

A Regulatory Impact Analysis must be prepared for rules with economically significant effects ($100 million or more in any one year). USDA does not anticipate that this final rule is likely to have an economic impact of $100 million or more in any one year, and therefore, does not meet the definition of “economically significant” under Executive Order 12866. Provisions of this rule do not affect the level of benefits paid to SNAP participants who reside in these facilities. The Department estimates that removing the substantive provisions of the interim final rule will result in a savings of $2.6 million annually and $13 million over five years in administrative costs to federal and State governments and DAA treatment centers and GLAs operating as authorized SNAP retailers.

The interim final rule provisions would have inadvertently required additional DAA treatment centers and GLAs to become SNAP-authorized retailers. Under provisions of the Food and Nutrition Act, operators of GLAs and DAAs that would have become newly-authorized SNAP retailers under the interim final rule provisions would be eligible for free EBT-only point-of-sale (POS) devices. Estimated cost of providing equipment to newly authorized DAA treatment centers and GLAs is $540 per year per retailer; this cost would be split evenly between federal and State governments. The Department estimates that an additional 1,900 DAA treatment centers or GLAs would have become newly-authorized under the interim final rule provisions, so the total cost of providing this equipment to newly-authorized GLAs and DAAs would have been approximately $1 million per year.

In addition, DAA treatment centers and GLAs will no longer incur costs related to prorating benefits and submitting reports to State agencies when residents leave facilities. The Department estimates that removing this requirement will save GLAs and DAAs approximately $1.6 million annually. There currently are approximately 1,500 DAA treatment centers and GLAs that are authorized SNAP retailers. As noted above, the Department estimates that an additional 1,900 DAA treatment centers and GLAs would have become authorized retailers under the interim final rule provisions, for a total of about 3,400 (2,100 DAAs and 1,300 GLAs).

Based on annual redemptions of approximately $120 million, the Department estimates the average currently-authorized DAA serves about 38 SNAP participants per month and the average authorized GLA serves about 99 SNAP participants per month. 1 Assuming the average length of stay for residential treatment facilities is 90 days and the average length of stay for GLAs is one year, each facility would have been required to prorate benefits and report to the State agency approximately 148 times per year (DAAs) or 99 times per year (GLAs) under the interim final rule provisions. The Department assumes each proration/report would take .25 hours at a mean wage of $14.65 for a health care support worker, or $3.66 per occurrence.

The Regulatory Flexibility Act (5 U.S.C. 601-612) requires Agencies to analyze the impact of rulemaking on small entities and consider alternatives that would minimize any significant impacts on a substantial number of small entities. Pursuant to that review, the Administrator of the Food and Nutrition Service certifies that this final rule does not have a significant impact on a substantial number of small entities including DAA treatment centers and GLAs. State and local human service agencies will be the most affected to the extent that they administer SNAP. The provisions of this final rule are implemented through State agencies which are not small entities as defined by the Regulatory Flexibility Act.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, requires Federal agencies to assess the effects of their regulatory actions on State, local and tribal governments and the private sector. Under section 202 of the UMRA, the Department generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local or tribal governments, in the aggregate, or the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, Section 205 of the UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives and adopt the most cost effective or least burdensome alternative that achieves the objectives of the rule.

This final rule does not contain Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local and tribal governments or the private sector of $100 million or more in any one year. Thus, the rule is not subject to the requirements of sections 202 and 205 of the UMRA.

SNAP is listed in the Catalog of Federal Domestic Assistance under No. 10.561. For the reasons set forth in the final rule, Department of Agriculture Programs and Activities Covered Under Executive Order 12372 (48 FR 29114), the Program is included in the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials.

Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulations describing the agency's considerations in terms of the three categories called for under Section 6(b)(2)(B) of Executive Order 13132. The Department has considered the impact of this rule on State and local governments and has determined that this rule does not have federalism implications. Therefore, under section 6(b) of the Executive Order, a federalism summary is not required.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full and timely implementation. This rule is not intended to have retroactive effect unless so specified in the Effective Dates section of the final rule. Prior to any judicial challenge to the provisions of the final rule, all applicable administrative procedures must be exhausted.

FNS has reviewed this final rule in accordance with USDA Regulation 4300-4, “Civil Rights Impact Analysis,” to identify any major civil rights impacts the rule might have on program participants on the basis of age, race, color, national origin, sex or disability. After a careful review of the rule's intent and provisions, FNS has determined that this rule is not expected to affect the participation of protected individuals in SNAP.

Further, FNS specifically prohibits the State and local government agencies that administer the program from engaging in discriminatory actions. Discrimination in any aspect of program administration is prohibited by SNAP regulations, the Food and Nutrition Act of 2008, the Age Discrimination Act of 1975, Section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990 and Title VI of the Civil Rights Act of 1964. State agencies must comply with these requirements and the regulations at 7 CFR 272.6.

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

FNS has assessed the impact of this rule on Indian tribes and determined that this rule does not, to its knowledge, have tribal implications that require tribal consultation under Executive Order 13175. If a Tribe requests consultation, the FNS will work with the Office of Tribal Relations to ensure meaningful consultation is provided where changes, additions and modifications identified herein are not expressly mandated by Congress.

Currently, FNS provides regularly scheduled quarterly information sessions as a venue for collaborative conversations with Tribal officials or their designees. Reports from these information sessions are put on the USDA annual reporting on Tribal consultation and collaboration. FNS received no comments with Indian Tribes on either the proposed rule or the interim final rule that related to these provisions.

The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; 5 CFR 1320) requires the Office of Management and Budget (OMB) to approve all collections of information by a Federal agency before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current valid OMB control number.

This rule does not contain information collection requirements subject to approval by the Office of Management and Budget under the Paperwork Reduction Act of 1994.

The Department is committed to complying with the E-Government Act of 2002, Public Law 107-347, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

Accordingly, 7 CFR part 273 is amended as follows:

This action is governed by section 608c(16)(A) of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act,” and Marketing Agreement 104 and Marketing Order 953 (7 CFR part 953), referred to as the “Order,” effective under the Act.

The Department of Agriculture (USDA) is issuing this final rule in conformance with Executive Orders 13563 and 13175. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review. Additionally, because this final rule does not meet the definition of a significant regulatory action, it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, titled `Reducing Regulation and Controlling Regulatory Costs' ” (February 2, 2017).

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This final rule is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This final rule terminates the Order that authorizes regulation of the handling of Irish potatoes grown in designated counties of Virginia and North Carolina. The Order has been suspended for approximately seven years, at the industry's recommendation, and the industry has not expressed interest in reactivating the Order.

Section 953.66 provides, in pertinent part, that USDA terminate or suspend any or all provisions of the Order when a finding is made that the Order or any provision thereof does not tend to effectuate the declared policy of the Act. In addition, section 608c(16)(A) of the Act provides that USDA terminate or suspend the operation of any order or any provision thereof whenever they obstruct or do not tend to effectuate the declared policy of the Act. USDA is required to notify Congress not later than 60 days before the date an order would be terminated.

The Order has been in effect since 1948 and provides for the establishment of grade, size, quality, maturity, and inspection requirements for Irish potatoes grown in Southeastern states. The Order also authorizes reporting and recordkeeping functions required for the operation of the Order. The Order, when in effect, is locally administered by the Southeastern Potato Committee (Committee) and is funded by assessments imposed on handlers.

Based on the Committee's unanimous recommendation in 2011, USDA suspended the Order for a three-year period ending March 1, 2014. The Committee recommended the suspension to eliminate the expense of administering the Order while determining the effects of not having the Order in place. When the Committee made the recommendation to suspend the Order, it wanted the industry to have the option of reactivating the Order, if deemed appropriate. The final rule adopting an interim rule that implemented that action was published in the Federal Register on October 21, 2011 (76 FR 65360). Upon suspension of the Order in 2011, the Committee ceased to function.

In anticipation of the expiration of the suspension on March 1, 2014, USDA sent a letter to members of the industry, most of whom were former Committee members, in late 2013. The letter stated that suspension of the Order would soon be ending and that members of the industry would need to recommend an action to USDA. On December 18, 2013, representatives of the Virginia and North Carolina Irish potato industry met and requested that the suspension of all provisions of the Order be continued through March 1, 2017. The extension of the suspension would allow the industry further opportunity to study changes and evaluate new developments in the industry that could affect the need for the Order. The final rule adopting the interim rule that implemented that action was published in the Federal Register on August 19, 2015 (80 FR 50191).

Under the terms of the suspension, if the industry did not petition USDA to have the Order reactivated by March 1, 2017, AMS would propose termination of the Order. To date, the industry has not filed a petition to have the Order reactivated.

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this rule on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

There are approximately ten handlers of Irish potatoes grown in Southeastern states who are subject to regulation under the Order and approximately 20 potato producers in the regulated area. Small agricultural service firms are defined by the Small Business Administration (SBA) as those having annual receipts of less than $7,500,000, and small agricultural producers are defined as those whose annual receipts are less than $750,000 (13 CFR 121.201).

Using prices reported by AMS' Market News Service, the average free on board (f.o.b.) price for Southeastern potatoes for the 2017 marketing season was about $50 per hundredweight. Based on information from the National Agricultural Statistics Service (NASS), estimated total production in Virginia and North Carolina for the 2017 season was 4,666,000 hundredweight of potatoes. Multiplying the f.o.b. price by the estimated production results in an estimated handler value of $233,300,000. Dividing this figure by the number of handlers (ten) yields an estimated average annual handler receipt of $23,330,000. Using the average price and shipment information, the number of handlers, and assuming a normal distribution, the majority of handlers have average annual receipts of more than $7,500,000.

Based on information from NASS, during the 2017 season, there were 19,600 total acres harvested in Virginia and North Carolina with a total value of production at $59,038,000 for the season. The average producer prices for Virginia and North Carolina Irish potatoes in 2017 were $16.30 and $11.40 per hundredweight, respectively, for an average price of $13.85. Dividing the 2017 total production value by the average of the two states' producer prices and using a normal distribution, the average gross annual revenue for each of the 20 producers would be about $213,134, which is below the SBA threshold of $750,000.

Therefore, based on the above handler and producer revenue estimates, the majority of Southeastern potato handlers may be classified as large entities, while a majority of producers may be classified as small entities.

This final rule terminates the Order for Irish potatoes grown in Southeastern states and the rules and regulations issued thereunder. The Order authorizes regulation of the handling of Irish potatoes grown in designated counties of Virginia and North Carolina. The Order was initially suspended in 2011, at the recommendation of the Committee, to eliminate the expense of administering the Order while the industry determined the effects of not having regulations in place. At the request of the industry in 2013, the suspension was extended through March 1, 2017, to provide the industry with more time to consider changes and evaluate new developments that could affect the future need for the Order. The final rule that extended the suspension through March 1, 2017, stated that AMS would proceed with a notice to propose termination absent an industry recommendation to reactivate the Order. The results of the suspension and the industry's failure to petition USDA to have the Order reactivated by the end of the suspension period support termination of the Order.

Section 953.66 provides that USDA terminate or suspend any or all provisions of the Order when a finding is made that the Order does not tend to effectuate the declared policy of the Act. Furthermore, section 608c(16)(A) of the Act provides that USDA terminate or suspend the operation of any order whenever the order or any provision thereof obstructs or does not tend to effectuate the declared policy of the Act. An additional provision requires that Congress be notified not later than 60 days before the date an order would be terminated.

Termination of the Order will reduce costs to both handlers and producers (while marketing order requirements are applied to handlers, the costs of such requirements are often passed on to producers). Furthermore, following a period of over seven years of regulatory suspension, AMS has determined that termination of the Order will not adversely impact the Virginia and North Carolina Irish potato industry.

As an alternative to this action, AMS considered not terminating the Order. In that case, the industry could have recommended further refinements to the Order and the handling regulations to better meet current marketing needs. However, the industry did not petition to have the Order reactivated by the end of the suspension period. Therefore, this alternative was rejected, and AMS is terminating the Order.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the information collection requirements being terminated were previously approved by OMB and assigned OMB No. 0581-0178, Fruit, Vegetable and Specialty Crops. Termination of the reporting requirements under the Order will reduce the reporting and recordkeeping burden on Irish potato handlers in Southeastern states and should further reduce industry expenses.

USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions about the compliance guide should be sent to Richard Lower at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

A proposed rule inviting comments regarding the termination of the Order was published in the Federal Register on July 25, 2018 (83 FR 35151). USDA distributed the rule to Virginia and North Carolina potato associations and other Southeastern potato industry members. In addition, the rule was made available on the internet by USDA and the Office of the Federal Register. The rule provided a 60-day comment period, which ended on September 24, 2018. One comment was received in support of the termination.

Based on the foregoing, and pursuant to § 608c(16)(A) of the Act and § 953.66 of the Order, it is hereby found that Federal Marketing Order 953 regulating the handling of Irish potatoes grown in Southeastern states does not tend to effectuate the declared policy of the Act and is therefore terminated.

Section 608c(16)(A) of the Act requires USDA to notify Congress at least 60 days before terminating a Federal marketing order. Congress was so notified on October 24, 2018.

On December 18, 2018 (83 FR 64729), the NRC published a direct final rule amending its regulations in part 72 of title 10 of the Code of Federal Regulations by revising the “List of approved spent fuel storage casks” to include Amendment Nos. 7 and 8 to Certificate of Compliance No. 1025 for the NAC-MPC Storage System. Amendment No. 7 revises the technical specifications to eliminate the requirements for the heat removal system to be operable for La Crosse Boiling Water Reactor spent fuel stored in the NAC-MPC because convective cooling is not required, and to eliminate duplicative requirements. In addition, Amendment No. 8 removes duplicative surveillance requirements in the technical specifications because these requirements are already required by the revised Technical Specification A 3.1.6, “CONCRETE CASK Heat Removal System.”

In the direct final rule, the NRC stated that if no significant adverse comments were received, the direct final rule would become effective on March 4, 2019. As described more fully in the direct final rule, a significant adverse comment is a comment where the commenter explains why the rule would be inappropriate, including challenges to the rule's underlying premise or approach, or would be ineffective or unacceptable without a change. Because no significant adverse comments were received, the direct final rule will become effective as scheduled.

On December 12, 2018 (83 FR 63794), the NRC published a direct final rule amending its regulations in part 72 of title 10 of the Code of Federal Regulations (10 CFR) to the HI-STORM 100 System listing within the “List of approved spent fuel storage casks” to include Amendment Nos. 11 and 12 to Certificate of Compliance No. 1014. Amendment Nos. 11 and 12 revise multiple items in the technical specifications for multi-purpose canister models listed under Certificate of Compliance No. 1014; most of these revisions involve changes to the authorized contents. In addition, Amendment No. 11 makes several other editorial changes.

In the direct final rule, the NRC stated that if no significant adverse comments were received, the direct final rule would become effective on February 25, 2019. As described more fully in the direct final rule, a significant adverse comment is a comment where the commenter explains why the rule would be inappropriate, including challenges to the rule's underlying premise or approach, or would be ineffective or unacceptable without a change.

The NRC received two comments and has determined that they are not significant adverse comments. One comment questioned the short-term economic gains. As this rulemaking only addressed changes to the technical specifications for dry shielded canisters used to store nuclear waste on-site, the NRC determined this comment to be out of scope of this direct final rule. The second comment concerned specific casks used at a reactor site, a direct final rule for another storage cask, and another cask that is the subject of an NRC enforcement action. These issues are also outside the scope of this direct final rule.

The second commenter also stated that the environmental assessment for this direct final rule did not consider the effects of certain natural phenomena. Pursuant to 10 CFR part 72, the NRC requires that an applicant for a spent fuel storage system provide the design bases, design criteria, and the margins of safety for the system in its safety analysis. The design bases, design criteria, and safety margins include consideration of applicable natural phenomena. In its review, the NRC determined that the cask system is designed to mitigate the effects of design basis accidents, including human-induced and the most severe natural phenomena. Specifically, in considering design requirements for each accident condition, the NRC evaluates whether the design would prevent loss of confinement, shielding, and criticality control in the event of an accident. The NRC identified a broad range of natural hazards and accidents that were considered in the environmental assessment for this direct final rule. Further, the safety evaluation report for the Holtec International HI-STORM 100 Cask System (ADAMS Accession No. ML003711865; May 4, 2000) identified all accident-level events and conditions, which are Design Events III and IV as defined in American National Standard Institute/American Nuclear Society 57.9-1984. These include natural phenomena and human-induced low-probability events such as those listed in Comment 2. The NRC determined in the May 4, 2000, safety evaluation report that all potential safety consequences were considered.

This direct final rule makes changes to the technical specifications of Certificate of Compliance No. 1014 for the HI-STORM 100 Cask System. However, this direct final rule makes limited and routine changes; it does not involve significant changes to the design or the fabrication of the cask system. The second comment does not raise specific safety concerns regarding the changes made in this direct final rule. The second comment did not propose a specific change or an addition that could be incorporated into this direct final rule and did not raise a relevant issue not previously addressed by the NRC. Accordingly, the second comment does not meet the criteria of a significant adverse comment. Because no significant adverse comments were received, this direct final rule will become effective as scheduled.

On July 19, 2018, at 83 FR 34074, the Federal Register published our notice of proposed rulemaking (NPRM), which proposed to amend 14 CFR part 39 by adding an AD that would apply to Bell Model 429 helicopters with a NLG assembly part number (P/N) 429-336-100-101 installed. The NPRM proposed to revise the life limit for the NLG assembly. The proposed requirements were intended to prevent fatigue failure of an NLG assembly, which could result in subsequent damage to and loss of control of the helicopter.

The NPRM was prompted by Canadian AD No. CF-2016-07, dated March 4, 2016, to correct an unsafe condition for Bell Model 429 helicopters with wheeled landing gear. Transport Canada, which is the aviation authority for Canada, issued its AD after Bell replaced the airworthiness limitations for the NLG main fitting to bell crank bolt P/N M084-20H125-101 and NLG main fitting P/N M084-20H011-107 with an airworthiness limitation for the next higher assembly, NLG assembly P/N 429-336-100-101. According to Transport Canada, the NLG assembly's life limit is reduced to 50,000 retirement index number (RIN) or 4,500 hours time-in-service. Transport Canada advises that failure to replace components prior to established airworthiness limitations could result in an unsafe condition.

We gave the public the opportunity to participate in developing this AD, but we received no comments on the NPRM.

These helicopters have been approved by the aviation authority of Canada and are approved for operation in the United States. Pursuant to our bilateral agreement with Canada, Transport Canada, its technical representative, has notified us of the unsafe condition described in the Transport Canada AD. We are issuing this AD because we evaluated all information provided by Transport Canada and determined the unsafe condition exists and is likely to exist or develop on other helicopters of these same type designs and that air safety and the public interest require adopting the AD requirements as proposed.

The Transport Canada AD applies to certain serial-numbered helicopters, whereas this AD applies to all Bell Model 429 helicopters with the affected NLG assembly installed.

We reviewed Bell Alert Service Bulletin No. 429-15-24, Revision A, dated September 23, 2015, which specifies updating the Bell 429 maintenance manual with Revision 24 to incorporate the revised airworthiness limitations for the NLG assembly, NLG main fitting to bellcrank bolt, and the NLG main fitting.

We estimate that this AD affects less than 75 helicopters of U.S. Registry (as this AD does not apply to Bell Model 429 helicopters with skid landing gear). At an average labor rate of $85 per hour, replacing a NLG assembly requires 10 work-hours, and required parts cost $104,648, for a cost of $105,498 per helicopter and up to $7,912,350 for the U.S. fleet.

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

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

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

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

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

(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);

(3) Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared an economic evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

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

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Airbus SAS Model A318 series; Model A319 series; Model A320 series; and Model A321-111, -112, -131, -211, -212, -213, -231, and -232 airplanes. The NPRM published in the Federal Register on June 20, 2018 (83 FR 28555). The NPRM was prompted by reports of multiple AoA probe blockages. The NPRM proposed to require all ELAC units to be upgraded with new software, or replaced with upgraded units.

We are issuing this AD to address the blockage of AoA probes. This condition, if not corrected, could lead to undue activation of the AoA protection, reverting to manual control of the airplane, which, under specific circumstances, could result in reduced control of the airplane.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2018-0007R1, dated January 19, 2018 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Airbus SAS Model A318 series; Model A319 series; Model A320 series; and Model A321-111, -112, -131, -211, -212, -213, -231, and -232 airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2018-0556.

We gave the public the opportunity to participate in developing this final rule. The following presents the comments received on the NPRM and the FAA's response to each comment. United Airlines had no objection to the NPRM.

Air Line Pilots Association, International (ALPA), requested that the compliance time for the Model A320 series airplanes be reduced from 36 to 24 months, the same as for the other models. ALPA contended that 36 months is not an appropriate compliance time for the A320 because the severity of risk for the A320 is not less than for the other models.

We disagree with the request to reduce the compliance time for Model A320 series airplanes. We concur with the compliance time established by EASA, the state of design authority, which is based on the overall risk to the fleet, including the severity of the failure and the likelihood of the failure's occurrence. In conjunction with the manufacturer, we have determined that the compliance time for each airplane model will accommodate the time necessary to ensure the availability of required parts and maintain an adequate level of safety. However, if additional data are presented that would justify a shorter compliance time, we may consider further rulemaking on this issue. We have not changed this AD regarding this request.

Airbus SAS requested that we modify paragraphs (h)(3) and (j)(2)(iii) of the proposed AD to read: “The data-loadable ELAC unit is checked by two different means: by the line replaceable unit (LRU) identification and either the label call up or the Alpha Call Up ELA 1 and ELA 2 (if available).” We infer that this change was requested to clarify the meaning of those paragraphs.

We agree to clarify the specified paragraphs. We have changed paragraphs (h)(3) and (j)(2)(iii) of this AD accordingly.

Delta Air Lines (DAL) asked whether paragraph (h)(3) of the proposed AD, as written, actually requires two separate methods of identification for the same unit. DAL explained that not all ELAC units are labeled with the software load, that the labels were added later by Thales, and that there is no guarantee they will be present on the LRU.

We agree to clarify that there are two methods of checking the data-loadable ELAC unit. As stated previously, we have revised paragraph (h)(3) of this AD and paragraph (j)(2)(iii) of this AD to make this more clear.

Alaska Airlines asked whether the four conditions given in paragraphs (h)(1) through (h)(4) and (j)(2)(i) through (j)(2)(iv) of the proposed AD apply only to the “modification instructions approved by an EASA Design Organization Approval (DOA) (other than Airbus SAS's EASA DOA),” or also to the modification instructions approved by other authorities, as mentioned earlier in the paragraph.

We agree to clarify this aspect of the specified paragraphs. We have revised the language regarding the applicability of the four conditions given in paragraphs (h)(1) through (h)(4) and (j)(2)(i) through (j)(2)(iv) of this AD to clarify that these paragraphs are applicable only to the modification instructions that are part of an FAA-accepted maintenance or inspection program, as applicable. We have revised the language in paragraphs (h) and (j)(2) of this AD accordingly.

Alaska Airlines requested that we modify paragraph (j) of the proposed AD to address onboard loading of ELAC units with later software. Alaska Airlines also requested that we revise paragraphs (j)(2) and (j)(4) of the proposed AD to specify that those paragraphs are not applicable to onboard data loading, since they refer to removing and re-installing the data-loadable ELAC units. We infer that Alaska Airlines wants us to revise paragraphs (j)(2)(ii) and (j)(2)(iv) of the proposed AD because those paragraphs refer to the removal and re-installation of the data-loadable ELAC units.

We agree. We have modified paragraph (j) of this AD to include onboard loading of ELAC software and revised paragraphs (j)(2)(ii) and (j)(2)(iv) of this AD as requested.

DAL requested that the DOA signature requirement be removed from the proposed AD and that the previously established statement “The technical content of this document is approved under the authority of Design Organization Approval No. EASA 21J.031” used by the DOA in Airbus SAS service bulletins be deemed sufficient. DAL observed that if this document requires a signature, it is deviating from the previously established standard and will generate unnecessary alternative method of compliance (AMOC) requests from the administrator and/or unnecessary revisions of service bulletins by the manufacturer. DAL also stated that requiring a signature does not enhance or affect the safety of the aircraft.

We disagree with DAL's request to remove the DOA signature requirement. The FAA specifies the DOA signature requirement in the “contacting the manufacturer” paragraph (such as paragraph (m)(2) of this AD) because in the past some U.S. operators misinterpreted that any document, including an email message, received from a manufacturer or the manufacturer's customer support organization was considered DOA approved. Under the EASA DOA system, the only documents officially recognized as EASA-approved are those accompanied by the DOA-authorized signature. For the purpose of compliance with the “contacting the manufacturer” paragraph in FAA ADs, the FAA can only recognize the documents approved by the FAA, or EASA, or those authorized to make an EASA approval under the DOA system.

We also disagree with the request to use the statement “The technical content of this document is approved under the authority of Design Organization Approval No. EASA 21J.031.” This statement only recognizes that the service bulletin was originally approved under the authority of the DOA system as approved by EASA, and does not provide any process for an operator to receive other approved instructions from either EASA or the authorized DOA as a means of compliance to the FAA AD. The current “contacting the manufacturer” paragraph and the requirement for the DOA-authorized signature actually results in fewer AMOCs because of the FAA's recognition of both EASA and specific EASA DOA approvals under the “contacting the manufacturer” paragraph in this and other FAA ADs. We have not changed this AD in this regard.

DAL questioned the purpose of the condition stated in paragraph (h)(1) of the proposed AD, i.e., that there should be no warning or maintenance message before the ELAC unit is removed. DAL stated that if an electronic centralized aircraft monitor (ECAM) has a maintenance message or ECAM warning that is not airworthy, as a standard procedure the aircraft will be repaired and put back in an airworthy condition prior to return to service.

We agree that clarification is necessary. The intent of the condition stated in paragraph (h)(1) of this AD is to ensure that all pre-existing conditions have been fixed before uploading new software to an ELAC unit or installing a unit with updated software. We have not changed this AD regarding this question.

DAL questioned whether all of the steps in Airbus SAS Aircraft Maintenance Manual (AMM) Tasks 27-93-34-000-001-A and 27-93-34-400-001-A, such as accessing the access doors using an adjustable platform, are required for compliance.

We agree to clarify. The conditions in paragraphs (h)(2), (h)(4), (j)(2)(ii), and (j)(2)(iv) of this AD specified that actions must be done as specified in the AMM tasks. We did not intend the accessing and closing instructions of the AMM tasks to be required for compliance. We have revised paragraphs (h)(2), (h)(4), (j)(2)(ii), and (j)(2)(iv) of this AD accordingly.

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this final rule with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM for addressing the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM.

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this final rule.

Airbus has issued Service Bulletin A320-27-1263, dated April 28, 2017; and Service Bulletin A320-27-1264, dated April 28, 2017. The service information describes the software upgrade or replacement of ELAC units. These documents are distinct because they apply to different airplane configurations.

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

We estimate that this AD affects 1,250 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

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

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

This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to transport category airplanes and associated appliances to the Director of the System Oversight Division.

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

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

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

(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments prior to it becoming effective. However, we invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that resulted from adopting this AD. The most helpful comments reference a specific portion of the AD, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit them only one time. We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking during the comment period. We will consider all the comments we receive and may conduct additional rulemaking based on those comments.

We issued AD 2014-05-06 R1, Amendment 39-19529 (83 FR 64734, December 18, 2018) (AD 2014-05-06 R1), for certain Model EC135 P1, P2, P2+, T1, T2, and T2+ helicopters and Model MBB-BK 117C-2 helicopters. AD 2014-05-06 R1 required installing bushings and washers on the flight controls to prevent shifting of the flight control bearings in the axial direction. AD 2014-05-06 R1 removed AD 2014-05-06, Amendment 39-17779 (79 FR 13196, March 10, 2014) (AD 2014-05-06), which had the same requirements but had the additional requirement of repetitively inspecting the flight control bearings. The actions of AD 2014-05-06 and AD 2014-05-06 R1 were intended to detect and correct incorrectly installed flight control bearings.

After we published AD 2014-05-06 R1, we realized that the amendatory language is in error. Although, as published, AD 2014-05-06 R1 stated it replaced AD 2014-05-06, we previously removed AD 2014-05-06 when we issued AD 2017-03-01, Amendment 39-18792 (82 FR 11502, February 24, 2017) (AD 2017-03-01). AD 2017-03-01 contains the same requirements as AD 2014-05-06, including the repetitive inspections, but corrected an error in the compliance time. Instead of issuing AD 2014-05-06 R1, we should have issued a new AD to change the repetitive inspections by replacing AD 2017-03-01.

AD 2017-03-01 is still an effective AD that requires repetitively inspecting the flight control bearings and installing bushings and washers. Accordingly, we are removing AD 2014-05-06 R1.

AD 2014-05-06 R1 removed an AD that is no longer effective and required actions that are already required by an AD that is effective. As a result, AD 2014-05-06 R1 was causing confusion for operators and would have required unnecessary maintenance actions. We believe it is therefore unlikely that we will receive any adverse comments or useful information about this AD from U.S. operators. Therefore, we find good cause that notice and opportunity for prior public comment are unnecessary. In addition, for the reason stated above, we find that good cause exists for making this amendment effective in less than 30 days.

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

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

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

For the reasons discussed, I certify that this AD:

1. Is not a “significant regulatory action” under Executive Order 12866,

2. Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

3. Will not affect intrastate aviation in Alaska, and

4. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

We issued AD 2018-11-16, Amendment 39-19304 (83 FR 27891, June 15, 2018), (“AD 2018-11-16”), for certain EA GP7270 and GP7277 turbofan engines. AD 2018-11-16 required a one-time ECI of the engine fan hub blade slot bottom and blade slot front edge for cracks, a visual inspection of the engine fan hub assembly for damage, and removal of parts if damage or defects are found that are outside serviceable limits. AD 2018-11-16 resulted from an uncontained failure of the engine fan hub assembly. We issued AD 2018-11-16 to detect defects, damage, and cracks that could result in an uncontained failure of the engine fan hub assembly.

Since we issued AD 2018-11-16, we determined that inspections need to be expanded to all EA GP7270 and GP7277 turbofan engines with a certain engine fan hub assembly because all engines are subject to the unsafe condition. As a result, EA published EA Alert Service Bulletin (ASB) EAGP7-A72-389, Revision No. 3, dated October 18, 2018, to expand the population of engine fan hub assemblies that require inspection. We also determined that we could remove the EA GP7272 turbofan engine from the Applicability paragraph of this AD because the engine was not manufactured. The Applicability paragraph of this AD aligns with the EA service information. We are issuing this AD to address the unsafe condition on these products.

We reviewed EA ASB EAGP7-A72-389, Revision No. 3, dated October 18, 2018. The ASB describes procedures for ECI and visual inspection of the GP7270 and GP7277 engine fan hub assembly. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

We are issuing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This AD requires a one-time ECI of the GP7270 and GP7277 engine fan hub blade slot bottom and blade slot front edge for cracks, a visual inspection of the engine fan hub assembly for damage, and removal of the engine fan hub assembly if damage or defects are found that are outside of serviceable limits.

No domestic operators use this product. Therefore, we find good cause that notice and opportunity for prior public comment are unnecessary. In addition, for the reason stated above, we find that good cause exists for making this amendment effective in less than 30 days.

This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments before it becomes effective. However, we invite you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under the ADDRESSES section. Include the docket number FAA-2019-0048 and product identifier 2018-NE-19-AD at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this final rule. We will consider all comments received by the closing date and may amend this final rule because of those comments.

We will post all comments we receive, without change, to http://www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this final rule.

We estimate that this AD affects zero engines installed on airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

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

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

This AD is issued in accordance with authority delegated by the Executive Director, Aircraft Certification Service, as authorized by FAA Order 8000.51C. In accordance with that order, issuance of ADs is normally a function of the Compliance and Airworthiness Division, but during this transition period, the Executive Director has delegated the authority to issue ADs applicable to engines, propellers, and associated appliances to the Manager, Engine and Propeller Standards Branch, Policy and Innovation Division.

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

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

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

(2) Is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),

(3) Will not affect intrastate aviation in Alaska, and

(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

Table of Contents I. Executive Summary A. Purpose of the Final Rule B. Summary of the Major Provisions of the Final Rule C. Legal Authority D. Costs and Benefits II. Table of Abbreviations/Commonly Used Acronyms in This Document III. Background A. Need for and History of This Rulemaking B. Summary of Comments to the Proposed Rule IV. Legal Authority V. Comments on the Proposed Rule and FDA Response A. Introduction B. Description of General Comments and FDA Response C. Specific Comments and FDA Response VI. Effective Date VII. Economic Analysis of Impacts VIII. Analysis of Environmental Impact IX. Paperwork Reduction Act of 1995 X. Federalism XI. Consultation and Coordination With Indian Tribal Governments XII. References I. Executive Summary A. Purpose of the Final Rule

FDA is amending title 21 of the Code of Federal Regulations to add a list of bulk drug substances that can be used in compounding under section 503A of the FD&C Act (21 U.S.C. 353a) (referred to as “the 503A Bulks List” or “the list”). Bulk drug substances that appear on the 503A Bulks List can be used to compound drug products subject to the conditions of section 503A, although those substances are not the subject of an applicable USP or NF monograph or components of approved drug products.

In this final rule, FDA is establishing the criteria for evaluation of bulk drug substances for inclusion on the 503A Bulks List: (1) The physical and chemical characterization of the substance; (2) any safety issues raised by the use of the substance in compounded drug products; (3) the available evidence of effectiveness or lack of effectiveness of a drug product compounded with the substance, if any such evidence exists; and (4) historical use of the substance in compounded drug products, including information about the medical condition(s) the substance has been used to treat and any references in peer-reviewed medical literature.

Based on the results of its evaluation of nominated bulk drug substances to date, as well as consultation with the Pharmacy Compounding Advisory Committee (PCAC) and USP, FDA is including six bulk drug substances on the list: Brilliant Blue G, also known as Coomassie Brilliant Blue G-250; cantharidin (for topical use only); diphenylcyclopropenone (for topical use only); N-acetyl-D-glucosamine (NAG) (for topical use only); squaric acid dibutyl ester (for topical use only); and thymol iodide (for topical use only). FDA is also identifying four other bulk drug substances that will not be included on the list: Oxitriptan, piracetam, silver protein mild, and tranilast. Drugs compounded with these substances will not qualify for the 503A exemptions and cannot be used in compounding under section 503A of the FD&C Act.

Section 503A, in conjunction with our general rulemaking authority in section 701(a) of the FD&C Act (21 U.S.C. 371(a)), serves as our principal legal authority for this final rule.

FDA is establishing criteria for evaluating inclusion of bulk drug substances on the 503A Bulks List, placing six bulk drug substances on the 503A Bulks List, and not including four bulk drug substances on the 503A Bulks List. The present value of the costs of the final rule equals $3.33 million at a 7 percent discount rate and $3 million at a 3 percent discount rate. The final rule will result in annualized costs of $0.42 million at a 7 percent discount rate, or $0.31 million at a 3 percent discount rate. Because we lack sufficient information to quantify many of the costs and the benefits of this final rule, we also include a qualitative description of potential benefits and potential costs. We expect that the rule would affect compounding pharmacies and certain other entities that market the affected substances or drug products made from the affected substances, consumers of drug products containing the affected drug substances, and payers that cover these drug products or alternative drug products.

Section 503A describes the conditions under which a compounded drug product qualifies for exemptions from certain sections of the FD&C Act. Those conditions include that a licensed pharmacist in a State-licensed pharmacy or Federal facility or a licensed physician compounds the drug product using bulk drug substances that: (1) Comply with the standards of an applicable USP or NF monograph, if a monograph exists, and the USP chapter on pharmacy compounding; (2) if such a monograph does not exist, are drug substances that are components of drugs approved by the Secretary of Health and Human Services (the Secretary); or (3) if such a monograph does not exist and the drug substance is not a component of a drug approved by the Secretary, that appear on the 503A Bulks List. (See section 503A(b)(1)(A)(i) of the FD&C Act.) This final rule establishes criteria for evaluating bulk drug substances for inclusion on the 503A Bulks List and identifies six bulk drug substances the Secretary is placing on the list. The Agency considered four other bulk drug substances and is not including those substances on the 503A Bulks List. Additional bulk drug substances are under evaluation, and new substances may be added to the list through subsequent rulemaking.

The definitions that are relevant to this final rule are set forth in the notice of proposed rulemaking (NPRM) published in the Federal Register of December 16, 2016 (81 FR 91071). The 2016 proposed rule also includes a complete history of this rulemaking. In that proposed rule, FDA discussed the 10 bulk drug substances nominated for inclusion on the 503A Bulks List that are the subject of this final rule, along with the criteria FDA proposed to use when determining whether to place bulk drug substances on the 503A Bulks List.

Under this final rule, drug products compounded with the six substances that are being placed on the 503A Bulks List qualify for the 503A exemptions if the conditions of section 503A of the FD&C Act are met. In contrast, drugs compounded with the other four substances evaluated in this rulemaking—which are not being placed on the 503A Bulks List— do not qualify for the 503A exemptions and cannot be used in compounding under section 503A of the FD&C Act. As discussed in the 2016 proposed rule and in the guidance for industry entitled “Interim Policy on Compounding Using Bulk Drug Substances Under Section 503A of the Federal Food, Drug, and Cosmetic Act” (Interim Policy Guidance) (Ref. 1), FDA generally has not intended to take regulatory action for the use of certain substances, including the 10 substances that are the subject of this final rule, while those substances were being considered for inclusion on the 503A Bulks List (interim policy). Since the rulemaking is now complete for these 10 nominated substances, the interim policy no longer applies to those substances.

We received eight substantively relevant, unique comments to the 2016 proposed rule. The comments addressed FDA's proposals on the criteria for evaluating bulk drug substances for inclusion on the 503A Bulks List, including some comments on how FDA has been using the criteria in practice. The comments also addressed FDA's proposals on particular bulk drug substances. In addition to these topics, which addressed the language proposed to be included in the Code of Federal Regulations (CFR), commenters addressed a variety of topics related to FDA's evaluation of bulk drug substances, including procedural issues related to meetings of the PCAC, and compounding policies generally.

As described in the Background section, section 503A describes the conditions that must be satisfied for human drug products compounded by a licensed pharmacist or licensed physician to be exempt from three sections of the FD&C Act (sections 501(a)(2)(B), 502(f)(1), and 505 (21 U.S.C. 351(a)(2)(B), 352(f)(1), and 355)). One of the conditions that must be satisfied for a compounded drug to qualify for the exemptions under section 503A of the FD&C Act is that a licensed pharmacist in a State-licensed pharmacy or Federal facility or a licensed physician compounding drug products using bulk drug substances, must use bulk drug substances that: (1) Comply with the standards of an applicable USP or NF monograph, if a monograph exists, and the USP chapter on pharmacy compounding; (2) if such a monograph does not exist, are drug substances that are components of drugs approved by the Secretary; or (3) if such a monograph does not exist and the drug substance is not a component of a drug approved by the Secretary, appear on the 503A Bulks List. (See section 503A(b)(1)(A)(i) of the FD&C Act.) Section 503A(c)(1) of the FD&C Act also states that the Secretary shall issue regulations to implement certain parts of section 503A, and that before issuing regulations to implement section 503A(b)(1)(A)(i)(III) pertaining to the 503A Bulks List, among other sections, the Secretary shall convene and consult an advisory committee on compounding unless the Secretary determines that the issuance of such regulations before consultation is necessary to protect the public health. Section 503A(c)(2) of the FD&C Act requires the Secretary to issue the regulations in consultation with the USP, and to include in the regulation the criteria for such substances that shall include historical use, reports in peer-reviewed journals, and any other criteria the Secretary identifies. Thus, section 503A of the FD&C Act, in conjunction with our general rulemaking authority in section 701(a) of the FD&C Act, serves as our principal legal authority for this final rule.

We received 12 total comments posted to the docket for the proposed rule by the close of the comment period. Of the 12 comments received, 3 addressed subjects other than the proposed rule, and 9 were related to the proposed rule. Of the nine comments substantively related to the proposed rule, one was a duplicate. Of the eight unique, substantively relevant comments received, each discussed one or more issues. We received comments from consumers; trade organizations, including those representing compounders and clinicians with particular specialties; a company that sells bulk drug substances and other materials for compounding; and other organizations.

We describe and respond to the issues raised in the comments in sections V.B. and V.C. of this document. We have consolidated and grouped the issues raised in the comments, and assigned each issue a “comment number” to help distinguish among different issues raised in the comments. We have grouped similar issues raised in the comments together under the same comment number, and, in some cases, we have separated different issues discussed in the same comment and designated them with distinct comment numbers for purposes of our responses. The comment number assigned to each issue or topic is purely for organizational purposes and does not signify the value or importance of the issue or the order in which comments were received.

We received some comments that raised issues that are outside the scope of this rulemaking ( e.g., animal testing, access to compounded drug products as “office stock,” FDA's interpretation of the phrase “clinical need” as used in section 503B of the FD&C Act, competition and drug pricing). To the extent issues raised in comments are unrelated to this rulemaking, we do not respond to those comments.

(Comment 1) Some comments made general remarks supporting the proposed rule. These comments supported the proposed criteria, the proposed placement of the six substances listed above on the 503A Bulks List, the proposal not to include the four substances listed above on the 503A Bulks List, and FDA's Interim Policy Guidance.

(Response 1) We appreciate the support expressed in the comments received.

(Comment 2) Some comments objected to the proposed criteria as too broad and vague to provide standards by which ingredients will be judged. For example, one comment stated that FDA fails to define what constitutes “significant” toxicity or “other safety concerns,” which are vague and give FDA too much discretion. The comments stated that the proposed criteria will lead to highly subjective decisions.

(Response 2) We disagree and find no basis to change the criteria proposed in the 2016 proposed rule based on this comment. We acknowledge that the criteria have been and will be applied on a substance-by-substance basis, given the risks and benefits that may be presented by a particular substance. The Agency believes some measure of flexibility is necessary for FDA to evaluate the nominated bulk drug substances. We have applied and will continue to apply the criteria consistently, weighing them as appropriate based on the nature of the substance and proposed use, among other things. FDA also notes that its application of the criteria to particular bulk drug substances is subject to discussion with the PCAC and USP, and also is the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes it is not applying the criteria correctly in any particular case, FDA will consider that feedback before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 3) One commenter objected to the fourth criterion FDA proposed in the 2016 proposed rule: “Historical use of the substance in compounded drug products, including information about the medical condition(s) the substance has been used to treat and any references in peer-reviewed medical literature.” The commenter explained that current use is more relevant than historical use.

(Response 3) We disagree that FDA should not consider historical use. Further, we note that consideration of current use is encompassed in the historical use criterion. Regarding the criteria used to determine whether a bulk drug substance should be placed on the 503A Bulks List, section 503A(c)(2) of the FD&C Act specifies that the criteria shall include historical use, reports in peer reviewed medical literature, or other criteria the Secretary may identify. We are, therefore, required by statute to consider the historical use of a bulk drug substance. As we explained in the 2016 proposed rule, the Agency is considering how widespread the use of a bulk drug substance has been, as well as references in peer-reviewed medical literature, as part of the evaluation of the historical use.

(Comment 4) One commenter objected to FDA's consideration of the historical use criterion, noting that FDA has not been giving this factor adequate weight. This commenter suggested that, instead of applying the criterion as proposed, FDA should recommend a bulk drug substance for the 503A Bulks List if it has historically been in significant use by a particular specialty or community of physicians unless there is reliable evidence that the ingredient presents unacceptable sterility concerns or potential for adverse reactions.

(Response 4) As noted above, FDA is statutorily required to consider historical use when evaluating the nominated bulk drug substances, and the Agency has been doing so. To the extent information pertaining to historical use has been available, it has been discussed at length in each of the reviews underlying FDA's recommendations to the PCAC and its proposals in the 2016 proposed rule. As noted above, each criterion may weigh differently in the context of the risks and benefits presented by a particular bulk drug substance, and historical use may weigh more heavily in some cases than others. As also stated above, FDA's application of the criteria to particular bulk drug substances is subject to discussion with the PCAC and USP, and is the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes it is not giving the historical use criterion adequate weight in any particular case, FDA will consider that feedback before finalizing its proposal to include, or not include, a substance from the 503A Bulks List. We decline to adopt the commenter's suggestion to consider historical use as dispositive in certain cases, as we believe doing so would give disproportionate weight to the historical use criterion and would not give adequate consideration to a substance's physical and chemical characterization, safety, or effectiveness.

(Comment 5) Some commenters objected to FDA's consideration of the availability of approved drug products or drug products that conform to an over-the-counter (OTC) monograph to treat the same condition as the proposed bulk drug substance, and proposed that these alternatives not weigh against inclusion of the substance on the 503A Bulks List. The commenters noted that drug products are compounded because the drugs already available are not appropriate or effective for individual patients. Further, the commenters opposed the consideration of alternative therapies because they assert FDA has failed to consider the side effects of FDA-approved products, and any concern that use of compounded drugs could delay use of approved products is baseless. One of the commenters suggested that the approved alternatives should only be considered where the approved medication leads to a complete cure or remission of illness or otherwise fully addresses the purpose intended for the compounded drug product, and there is no other reason a compounded drug product containing the nominated bulk drug substance should be available.

(Response 5) We disagree with this comment and believe that the existence of FDA-approved drug products or drug products that conform to an OTC monograph may be relevant in the evaluation of particular bulk drug substances. However, the existence of alternative therapies is not one of the four criteria FDA is using to evaluate nominated bulk drug substances, nor is the availability of approved alternatives dispositive when considering whether to add a substance to the list. Rather, as explained in the 2016 proposed rule, we consider the existence of FDA-approved or OTC-monograph drug products relevant to FDA's consideration of the safety criterion, to the extent there may be therapies that have been demonstrated to be safe under the conditions of use set forth in the approved labeling, and the effectiveness criterion, to the extent there may be alternative therapies that have been demonstrated to be effective for certain conditions. Therefore, we find no reason to exclude consideration of the existence of FDA-approved or OTC monograph drug products where relevant.

Regarding the comment that FDA has not adequately considered the side effects of alternative therapies, we disagree and have considered the side effects of alternative therapies as part of the safety criterion where information is available and relevant. We note, however, that data comparing the safety profiles of compounded drug products with approved drug products are generally not available. In fact, in many cases, there are minimal data available concerning the safety, including side effects, of compounded drugs. The absence of information does not mean that safety risks do not exist. In contrast, approved drug products have been demonstrated to be safe under the conditions of use set forth in the approved labeling, and the benefits of the drug product for the approved conditions of use have been found to outweigh the risks. Similarly, regarding effectiveness, often there are minimal data supporting the effectiveness of a compounded drug product, and it may be preferable for a patient to use a drug product with side effects when that drug product has been proven to be effective. Even if a compounded drug product has fewer side effects than an FDA- approved or OTC monograph drug product, if it does not treat the condition at issue, it may be of no or limited benefit to the patient.

Regarding the comment that approved alternatives should only be considered when there is evidence that the FDA-approved drug product or OTC monograph product fully addresses patients' needs, we disagree. While not one of the four criteria, as described in the 2016 proposed rule and reflected in reviews completed and presented to the PCAC, under certain circumstances, the existence of an approved drug product or OTC monograph product to treat the condition, even where the product may not fully address patients' needs, is relevant to FDA's evaluation of one or more of the four criteria. For example, in considering the effectiveness criterion, the existence of an approved drug product or OTC monograph product may weigh against placing a substance on the 503A Bulks List when the condition to be treated is very serious or life threatening because of the serious consequences that could result from use of an ineffective or less effective treatment alternative (2016 proposed rule, 81 FR 91071 at 91075.) Likewise, in considering the safety criterion, the existence of an approved drug product or OTC monograph product likely would weigh against placing a substance on the 503A Bulks List when the toxicity of the substance appears to be significant, or other safety concerns are associated with the use of the substance (id.).

Further, we note that, as stated above, FDA's application of the criteria to particular bulk drug substances is subject to discussion with the PCAC and USP, and is also the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes it is not adequately considering the side effects of FDA-approved products in any particular case, the Agency will consider that feedback before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 6) One commenter proposes that a substance should be added to the 503A Bulks List if the Center for Food Safety and Applied Nutrition (CFSAN) has determined the substance is generally recognized as safe (GRAS). 1

(Response 6) We disagree. GRAS determinations for food are made under food safety standards and thus are not dispositive when considering the use of a substance as an active ingredient in a compounded drug product. A substance that is safe when used as a food might not be safe as an active ingredient in a drug product, for example, when used for a route of administration other than oral. Moreover, such a GRAS determination does not indicate that a substance would have any effectiveness for a particular proposed use when used in a compounded drug product. We note, however, that FDA has considered CFSAN's GRAS notices and their implications in reviews completed to date where relevant, for example, in our review of safety or physical and chemical properties.

As stated above, FDA's application of the criteria to particular substances is subject to discussion with the PCAC and USP, and is also the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes it is not adequately considering the GRAS determination of a substance in any particular case, FDA will consider that feedback before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 7) One comment objected to FDA's consideration of the seriousness of the condition the drug product compounded with the nominated bulk drug substance is proposed to treat. In the 2016 proposed rule, FDA proposed to weigh the effectiveness criterion more heavily when the bulk drug substance was proposed to treat a serious or life-threatening disease, and to give the safety criterion more weight when the substance was proposed for treatment of a less serious disease. The commenter asserted that there is no rational basis for such a standard.

(Response 7) We disagree with the comment. As we explain in the 2016 proposed rule, when a bulk drug substance is proposed to treat a more serious or life-threatening disease, there may be more serious consequences associated with ineffective therapy. When evaluating a bulk drug substance that is proposed for the treatment of a less serious illness, FDA will generally be more concerned about the safety of the substance than about its effectiveness. For these reasons, we find no reason to discontinue consideration of the seriousness of the condition the bulk drug substance is nominated to treat.

(Comment 8) One comment objected to the process FDA used to implement the criteria, noting that FDA was required to consult with the PCAC and obtain stakeholder input through notice and comment rulemaking before going forward with substance evaluations using the proposed criteria. The commenter asserts that there was no formal debate or discussion of the criteria with the PCAC.

(Response 8) We acknowledge that FDA began considering the proposed criteria and presenting recommendations to the PCAC before the criteria were finalized in this rulemaking. We believe that the criteria could not have been fully vetted and considered, by both the PCAC and USP, as well as commenters to the 2016 proposed rule, without illustration of how those criteria would apply in practice to evaluation of nominated bulk drug substances. As discussed in this rulemaking, FDA has considered the comments received on the proposed criteria and has found no basis to change those criteria based on the comments received.

We disagree, however, with the comment asserting that there was no formal debate or discussion of the criteria with the PCAC. As discussed in the 2016 proposed rule, FDA presented the criteria to the PCAC and discussed the criteria with the PCAC at its February 23, 2015, meeting (Ref. 2). The public had the opportunity to attend and speak at the PCAC meeting at which these criteria were discussed. The public also had the opportunity to review the transcript of the discussion that took place at the PCAC meeting, both prior to the publication of the proposed rule via publication of the transcript on the FDA website and through the docket for the proposed rule, where the transcript was included as a reference. FDA also consulted with USP regarding the criteria, and USP agreed with the proposed criteria (Refs. 3 and 4).

(Comment 9) Some commenters objected to the proposed criteria as being underinclusive of the factors FDA has been applying in practice in its evaluations of the nominated bulk drug substances. Specifically, several comments stated that FDA's application of the proposed criteria has been skewed by inappropriate consideration of the availability of an investigational new drug (IND) application pathway, which should not be relevant to FDA's recommendation of whether to include a particular bulk drug substance on the 503A Bulks List.

(Response 9) We disagree with the comment that the proposed criteria are underinclusive of the factors FDA has been applying in practice. While the PCAC presentations and discussions have encompassed some information of interest that is not directly related to the four criteria, such as the differences in regulatory standards between dietary supplements and drug products, or general information about compounding facilities, that information was not the basis of FDA's recommendations or decisions with respect to the bulk drug substances. Rather, in each of FDA's reviews (included in the record for the 2016 proposed rule), our recommendations have been derived directly from consideration and balancing of the four criteria: (1) Physical and chemical characterization of the substance; (2) any safety issues raised by the use of the substance in compounded drug products; (3) available evidence of effectiveness or lack of effectiveness of a drug product compounded with the substance, if any such evidence exists; and (4) historical use of the substance in compounded drug products, including information about the medical condition(s) the substance has been used to treat and any references in peer-reviewed medical literature.

The option of making a substance available through an IND application has been discussed by the PCAC and addressed in some reviews to help inform the public of ways in which the drug can be further studied and used to treat patients. In no review to date, however, has the option of pursuing an IND been a basis in FDA's proposals to include, or not to include, a nominated bulk drug substance on the 503A Bulks List. For each substance evaluated to date, FDA has made its proposals based on the four criteria described above, without regard to the existence of, or option to pursue, an IND. We note that FDA can make recommendations to the PCAC, but the Agency cannot control the content of the PCAC's discussions or its advice. FDA takes the PCAC's discussions and advice, including the basis for any advice, into account when considering whether to propose a substance be placed on the 503A Bulks List.

As stated above, FDA's application of the criteria to particular bulk drug substances is subject to discussion with the PCAC and USP, and is also the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes it has inappropriately considered the availability of an IND in any particular case, FDA will consider that feedback before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 10) One comment asserted that FDA's application of criteria to evaluate bulk drug substances to date has been inconsistent. For example, according to the commenter, in some cases FDA and the PCAC recommended to include a bulk drug substance on the 503A Bulks List so there is an alternative to approved products, but in other cases, FDA and the PCAC recommended to not include a substance on the list because there is already an approved product available.

(Response 10) We disagree with this comment. As we noted above, the criteria are applied on a substance-by-substance basis, and a criterion that may be weighed heavily for one bulk drug substance might be weighed differently for another, given the risks and benefits that may be presented by a particular substance. We have applied, and will continue to apply, the criteria consistently, weighing them as appropriate based on the nature of the substance and proposed use, among other things. Also as stated above, FDA's application of the criteria to particular bulk drug substances is subject to discussion with the PCAC and USP and is the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes it has not applied the criteria correctly in any particular case, FDA will consider that feedback before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 11) One comment objected to the level of evidence of clinical effectiveness and toxicology FDA has been considering in its application of the proposed criteria. According to the comment, these high standards of evidence are unreasonable and change fundamental standards of practice. The comment asserts that FDA appears to be requiring studies that can survive any criticism and is ignoring the role of physician decisions based on clinical experience.

(Response 11) We disagree with the comment. As stated in the 2016 proposed rule, FDA recognizes that it is unlikely that candidates for the 503A Bulks List will have been thoroughly investigated in in vitro or in animal toxicology studies, or that there will be well-controlled clinical trials to substantiate their safe use in humans. We note that the evidence that has supported FDA's recommendations to place particular substances on the 503A Bulks List to date has not been of the type or quality that is ordinarily required and evaluated as part of the drug approval process. We further note that we considered the input of physicians and their clinical experience to the extent that information is provided to the Agency, including that provided during PCAC meetings. We find no reason to reduce the amount of evidence FDA has considered necessary to support a recommendation to include a bulk drug substance on the 503A Bulks List and believe that doing so would not be in the interest of public health.

(Comment 12) One comment asserted that application of the criteria to date has been too narrow in its application to a particular proposed use.

(Response 12) We disagree and believe that it is necessary to evaluate a nominated bulk drug substance in the context of the uses proposed for compounded drug products that include the substance. We acknowledge that inclusion of a substance on the 503A Bulks List is not limited to a specific use. However, for evaluation purposes, FDA finds it necessary to consider the criteria, particularly the effectiveness criterion, in the context of a specific proposed use or uses. Given the number of substances nominated for inclusion on the list, it would not be possible for FDA to consider all possible uses for a compounded drug product that includes the nominated substance. Therefore, we find it reasonable to rely on information from the interested parties who nominated the bulk drug substances to identify the proposed uses, and for FDA to evaluate the substance in the context of those uses.

Nevertheless, as indicated in the 2016 proposed rule, when FDA is aware of another use that may be relevant to its evaluation of a substance for the 503A Bulks List, such as when a use other than that for which it was nominated is widespread, FDA may consider that use in its discretion.

As discussed in the 2016 proposed rule, FDA has opened a docket through which interested individuals may nominate additional bulk drug substances or provide additional information about substances already nominated with sufficient information for the 503A Bulks List (see Docket No. FDA-2015-N-3534). If an interested party believes that the nominations for a particular substance did not include a proposed use that it would like to be reviewed, and that substance has not yet been addressed in an NPRM, additional information or nominations may be provided through that docket.

(Comment 13) One comment asserted that application of the criteria to date has given undue weight to possible side effects or safety concerns related to use of compounded drug products, which are often speculative.

(Response 13) We disagree with the comment. FDA's reviews of nominated substances to date have appropriately balanced the safety criterion with the other three criteria, and FDA has applied its scientific judgment to identify side effects or safety concerns based on available data and information. As stated above, FDA's application of the criteria to particular bulk drug substances is subject to discussion with the PCAC and USP, and is also the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes it has inappropriately considered safety information related to compounded drug products in any particular case, FDA will consider that feedback before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 14) One comment objected to statements made during PCAC meetings indicating concern that, if a bulk drug substance is placed on the list, drug products compounded with that substance could be marketed with any claims. The comment notes that marketing a drug product for unsubstantiated claims is illegal, and if FDA and PCAC are concerned that this is happening, appropriate action and education should be undertaken. The commenter asserts that the possibility of misleading marketing should not be considered when determining whether to include a bulk drug substance on the 503A Bulks List.

(Response 14) We did not consider the possibility of misleading marketing when determining whether to include a bulk drug substance on the 503A Bulks List. Under section 502(bb) of the FD&C Act, a compounded drug will be deemed misbranded if the advertising or promotion of such compounded drug is “false or misleading in any particular.” In addition, under section 502(a) of the FD&C Act, a drug will be deemed misbranded if its labeling is “false or misleading in any particular.” However, the existence of false or misleading advertising is not one of the four criteria considered when evaluating a nominated substance for inclusion on the 503A Bulks List.

(Comment 15) One comment requests that the listing of NAG codified at § 216.23(a) (21 CFR 216.23(a)) not be limited to topical use only, and instead, to allow use of that substance by any route of administration. The comment notes that one of the nominations for that bulk drug substance was not limited to topical use.

(Response 15) We disagree that the listing for NAG in the codified should be expanded beyond topical use. As we explained in the Federal Register of July 2, 2014 (79 FR 37747 at 37748 (July 2014 Request for Nominations)), which detailed the type of information to be provided with nominations, FDA only intended to review nominations that were supported with adequate data and information. Doing so has allowed FDA to focus its limited resources on the nominated uses and routes of administration for which nominators have provided the most support. Also, as indicated in the July 2014 Request for Nominations, the Agency reviewed information for multiple nominations of the same substance collectively (79 FR 37747 at 37749).

None of the nominations for NAG proposed or provided information that would support administration of NAG by any route of administration other than topical. The nomination from the International Academy of Compounding Pharmacists mentioned in the comment did not specify a proposed use or route of administration. Rather, the nomination stated only that “[t]he very nature of a compounded preparation for an individual patient prescription as provided for within FDCA 503A means that the purpose for which it is prescribed is determined by the health professional authorized to issue that prescription.” (Ref. 5.) Taken alone, this nomination did not provide adequate support to allow FDA to evaluate the nominated substance (for topical or other routes of administration), and it was only considered collectively with the other nominations for NAG for topical use. As noted in the 2016 proposed rule, individuals and organizations may petition FDA under 21 CFR 10.30 to amend the list, including to request that the Agency evaluate NAG for routes of administration other than topical. See Response 31 for further discussion of the petition process.

(Comment 16) Some comments object to the exclusion of oxitriptan from the 503A Bulks List and request that oxitriptan be included on the list codified at § 216.23(a). The comments state that oxitriptan is widely sold as a dietary supplement and that it has an extensive safety record through its long history of use as a dietary supplement, which they believe should be given more weight. The comments assert that patients benefit from a relationship with their prescriber and pharmacist that is not available in the dietary supplement context because dietary supplements are purchased over the counter. According to one of the commenters, there is no evidence of any risk that oxitriptan would have the same side effects as other medications used to treat depression, and the mechanism of action of oxitriptan is demonstrably different from that of approved therapies. The comment asserts that oxitriptan's safety profile is significantly better than that of approved products. One comment also asserts that oxitriptan has been shown to be effective in the treatment of a variety of conditions, including depression and insomnia.

(Response 16) We have considered the comments and the references cited therein (Refs. 6 to 9), and find no reasoning or data that cause FDA to change its evaluation not to include this substance on the 503A Bulks List. As noted above, the availability of a substance as a dietary supplement is not a criterion considered when evaluating a substance for inclusion on the 503A Bulks List. Dietary supplements are intended for oral ingestion only, are not intended to be used to treat diseases, and therefore, are subject to a different legal and regulatory scheme than drug products. Section 503A addresses compounded drug products only. We acknowledge that FDA's reviews and PCAC meetings included discussions about the availability of dietary supplements with dietary ingredients that were the same or similar to the nominated bulk drug substances. As noted in prior PCAC discussions, FDA's proposals in this context do not impact a substance's availability as a dietary supplement.

Regarding the argument that there is no evidence of any risk that oxitriptan (also known as 5-hydroxytryptophan or 5-HTP) would have the same side effects as other medications used to treat depression, as previously stated in FDA's review (Ref. 5), there is a dearth of reliable scientific data regarding the safety of oxitriptan. We found no data indicating that the use of oxitriptan for depression would be free of the same side effects as other medications used to treat depression, and no reliable scientific data were provided in the comments received on the proposed rule to support this assertion.

Regarding the argument that the mechanism of action of oxitriptan is demonstrably different from that of approved therapies, as previously stated in FDA's review, the psychoactive action of oxitriptan is related to increased production of serotonin in central nervous system tissue (id). Based on this mechanism of action, oxitriptan, particularly with concomitant use of antidepressant drug products, could result in serotonin syndrome, a life-threatening drug interaction, and cases that are likely to be serotonin syndrome have been reported with the use of oxitriptan as a dietary supplement (Ref. 10). In fact, one source cited by a commenter warns against taking oxitriptan with certain approved antidepressants because both increase the brain chemical serotonin and taking both “might increase serotonin too much and cause serious side effects including heart problems, shivering, and anxiety” (Ref. 7).

Regarding the argument that oxitriptan's safety profile is significantly better than that of approved products, we disagree. As explained in Response 5, data comparing the safety profiles of compounded drug products with approved drug products are generally not available, and we do not have any such comparative data here. As stated above, the absence of information does not mean that safety risks do not exist. In contrast, approved drug products have been demonstrated to be safe under the conditions of use set forth in the approved labeling, and the benefits of the drug product for the approved conditions of use have been found to outweigh the risks.

Regarding the argument that oxitriptan has been shown to be effective for the treatment of a number of conditions, including depression and insomnia, similarly, the comments provided no reliable scientific data that would cause FDA to change its evaluation of oxitriptan, which balanced the available data on effectiveness with the other three criteria. As stated in the 2016 proposed rule, data supporting the drug's effectiveness for depression and insomnia are limited, and there are no data to support the effectiveness of the long-term use of oxitriptan to treat depression. FDA's conclusion in the 2016 proposed rule regarding the effectiveness of oxitriptan for insomnia and depression was based on FDA's consideration of more recent and comprehensive data than that provided by the commenters, and the information provided by the commenters does not alter that conclusion. We also note that one source cited by a commenter stated that there is insufficient evidence to rate the effectiveness of oxitriptan for insomnia (Ref. 7).

In sum, we have reviewed the scientific references and considered the reasoning set forth in the comments, and they do not change FDA's analysis of oxitriptan as stated in our review (Ref. 5) or our conclusion that it should not appear on the 503A Bulks List.

(Comment 17) Some comments object to the exclusion of piracetam from the 503A Bulks List and request that piracetam be included on the list codified at § 216.23(a). The comments note that FDA has recognized that there is not a significant safety risk related to the use of piracetam. They assert that the recommendation to exclude piracetam from the 503A Bulks List was based on a presumption that piracetam could be obtained through an IND, which was not a proper consideration. One comment provided data about the effectiveness of piracetam for short-term cognitive performance (Ref. 11) and the safety of its administration in high doses to patients with acute stroke (Ref. 12).

(Response 17) We have considered the comments and references cited therein and find no reasoning or data that cause FDA to change its evaluation not to include this substance on the 503A Bulks List. Regarding the safety of piracetam, we note that while our review of piracetam indicated that doses of less than 8 grams per day  2 appear to be unlikely to cause serious adverse reactions or drug interactions, the review also described safety concerns associated with certain patient populations and certain concomitant medications (Ref. 13). Piracetam is not recommended for patients with severe renal impairment because clearance of the compound is dependent on the renal creatinine clearance and would be expected to diminish with renal insufficiency. Piracetam is also not recommended for those taking concomitant anticoagulants because piracetam reduces platelet function, interferes with clotting factors, and prolongs bleeding time at certain doses. We also note that, in evaluating piracetam, we considered the three other criteria in addition to the safety of piracetam.

Although it is well characterized chemically and physically and has been used in compounded drug products for approximately 40 years, as stated in its review, FDA is concerned about the effectiveness of piracetam (id.). The available data do not show a clear benefit associated with the use of piracetam (id.). Numerous studies of piracetam have been conducted, and all but a few were designed poorly or used inappropriate statistical methods to support conclusions that piracetam is effective as a treatment for the studied condition (id.). The publications that suggest piracetam is effective for treating cognitive impairment, acute vertigo, or stroke are inconsistent, and there are also publications that conclude that piracetam is ineffective for treating these same conditions (id.). We were able to identify a single, well-designed and executed study of piracetam, which showed that it is ineffective for the treatment of cognitive impairment (Ref. 14).

The two scientific articles referenced in the comments, one of which is discussed in FDA's evaluation of piracetam (Ref. 11), and the other of which addressed the safety of high doses of piracetam when used as a treatment for acute stroke (Ref. 12), do not address FDA's concerns regarding the lack of data supporting its effectiveness in treating serious and life-threatening conditions such as stroke. For the reasons set forth above, neither the scientific references nor the reasoning set forth in the comments provide a basis for FDA to change its analysis of piracetam according to the four criteria (Ref. 13), or FDA's ultimate conclusion that piracetam should not appear on the 503A Bulks List.

Finally, we acknowledge that the possibility of pursuing an IND application for piracetam was discussed at the PCAC meeting (Ref. 15) to inform the public of a pathway to study and access piracetam. FDA did not consider the availability of an IND in its review of piracetam under the four criteria, however (Ref. 13). As FDA explained in its review, based on the absence of a clear benefit associated with piracetam, the seriousness of the conditions for which piracetam was proposed for use, and the availability of safe and effective medications for many of these uses that have undergone greater scientific scrutiny (id.), FDA proposed piracetam not be placed on the 503A Bulks List.

(Comment 18) One comment objects to the exclusion of silver protein mild from the 503A Bulks List and requests that silver protein mild be included on the list codified at § 216.23(a). The comment states that silver protein mild is well characterized physically and chemically, has a long history of use, is relatively nontoxic, and side effects are only rarely reported.

(Response 18) We have considered the comment and find no reasoning or data therein that cause FDA to change its evaluation not to include this substance on the 503A Bulks List. As stated in the 2016 proposed rule, silver protein mild is not well-characterized, and the term “silver protein mild” can refer to a variety of different drug products. FDA is also concerned about the safety of silver protein mild, which can cause argyria (a permanent ashen-gray discoloration of the skin, conjunctiva, and internal organs) (Ref. 13). Despite the commenter's characterization of the substance as relatively nontoxic, FDA remains concerned that chronic use of silver protein mild may result in permanent discoloration of the conjunctiva, cornea, and/or lens (id.). As for the commenter's characterization that the side effects are rarely reported, we note that the use of silver protein mild declined precipitously after the introduction of FDA-approved ocular anti-infectives. As described in FDA's review, numerous articles and books published when silver protein mild was more commonly used described deposits of silver in the conjunctiva, lacrimal sac, cornea, and lens following administration (id.).

We also note that there is no reliable evidence that silver protein mild would be effective for the proposed use. It has been studied in two controlled studies. In one study, silver protein mild was found to be numerically, although not statistically, inferior to having no treatment at all. In the second study, silver protein mild was found to be inferior to povidone iodine, which is an FDA-approved drug product (id.). While silver protein mild does have a long history of use, dating back to the early 1900s, as noted above, the use of silver protein mild declined dramatically after the introduction of FDA-approved ocular anti-infectives (id.).

The reasoning set forth in the comment does not address FDA's concerns about the characterization, safety, or effectiveness of silver protein mild, and does not change FDA's conclusion that silver protein mild should not appear on the 503A Bulks List.

(Comment 19) Some comments object to the exclusion of tranilast from the 503A Bulks List and request that tranilast be included on the codified list at § 216.23(a). The commenters note that FDA's proposal not to include tranilast is contrary to the advice of the PCAC. They assert that FDA's view is based on a faulty understanding of the increased bilirubin observed in clinical trials and note that the proposed topical dosage is well below that used in those trials. One comment described anecdotal reports that the topical use of tranilast has been effective in the treatment of keloids and hypertrophic scars. Another comment asserted that tranilast has been available in Japan for over 30 years, apparently without detrimental effects.

(Response 19) We have considered the comments and decline to include tranilast on the 503A Bulks List. As stated in the 2016 proposed rule, FDA has serious concerns about the safety of tranilast when administered orally, and there is insufficient information about the systemic absorption of topical tranilast formulations to determine whether topical administration of the drug product presents the same safety concerns (81 FR 91071 at 91079). No new data about the use of tranilast were provided in the comments; rather, the comments provided only anecdotal reports about the use of tranilast and further discussion of the same data presented to the PCAC, which FDA considered prior to publishing the 2016 proposed rule. The reasoning in the comments did not sufficiently address FDA's safety concerns regarding the use of this substance.

We acknowledge that the PCAC recommended including tranilast on the 503A Bulks List with a restriction to topical use. However, advisory committee recommendations are not binding on FDA. Rather, FDA considers the PCAC's advice but makes an independent judgment regarding whether particular substances should appear on the 503A Bulks List. As we explained in our supplemental review of tranilast (Ref. 16) and the 2016 proposed rule, the government-approved Japanese tranilast product label provided evidence of teratogenicity in animals and contraindicated the use of tranilast in pregnant women or women who may become pregnant. We did not find that the risk of prescribing a potential teratogen to women who may be or may become pregnant was outweighed by the potential benefit of treating scar tissue. Therefore, FDA continues to believe that the criteria weigh against placing tranilast on the 503A Bulks List.

Regarding the commenter's statements about the effectiveness of tranilast for keloids and hypertrophic scarring, scientific data supporting effectiveness for those uses are lacking. While there is some evidence that tranilast may be effective for allergic disorders, evidence of effectiveness for those other uses is either not available or inconclusive (Refs. 5 and 16).

(Comment 20) One comment objected to the rejection of substances that are dietary supplements from the 503A Bulks List. The commenter states that by rejecting these substances from the list, FDA is forcing consumers to use products that are subject to less quality oversight and lack physician supervision. The commenter proposes that dietary supplements only be rejected for proven safety concerns.

(Response 20) As stated in Response 16, a substance's availability as a dietary ingredient or supplement is not a criterion when evaluating a substance for inclusion on the 503A Bulks List. Dietary supplements are intended for oral ingestion only, and are not intended to be used to treat diseases, and therefore, are subject to a different legal and regulatory scheme than drug products. Section 503A of the FD&C Act addresses compounded drug products only. To the extent FDA's reviews and PCAC meetings included discussions about the availability of dietary supplements with dietary ingredients that were the same or similar to the nominated bulk drug substances, we note that FDA's proposals in this context do not impact a substance's availability as a dietary supplement.

Regarding the comment about the lack of quality oversight for dietary supplements, we note that dietary supplement manufacturers are required to comply with FDA's Current Good Manufacturing Practice regulations for dietary substances and are subject to inspection by FDA (21 CFR part 111). Regarding physician supervision, we note that physicians may recommend dietary supplements to their patients regardless of whether the substance appears on the 503A Bulks List.

(Comment 21) Some commenters objected to FDA's interpretation, as stated in the 2016 proposed rule, that dietary supplement monographs are not “applicable monographs” for purposes of determining which substances may be included in compounded drug products under section 503A(b)(1)(A)(i)(I) of the FD&C Act. They note that physicians may prescribe dietary supplements. They also state that in a “2014 guidance,”  3 FDA said that dietary supplement monographs were “applicable monographs” under section 503A, and that change in policy has not been explained.

(Response 21) We disagree that dietary supplement monographs should be considered “applicable monographs” for purposes of section 503A of the FD&C Act. As stated in the 2016 proposed rule, section 503A sets forth conditions that must be met for a compounded drug product to qualify for certain exemptions from the FD&C Act. Among other conditions, section 503A(b)(1)(A)(i) of the FD&C Act requires that a bulk drug substance used in a compounded drug product meet one of the following criteria: (1) Comply with the standards of an applicable USP or NF monograph, if one exists; (2) be a component of an FDA-approved human drug product, if a monograph does not exist; or (3) be on a list of bulk drug substances that may be used for compounding, to be developed by FDA through regulation. FDA has interpreted the term “an applicable United States Pharmacopoeia (USP) or National Formulary (NF) monograph” to refer to official drug substance monographs. Therefore, a substance that is the subject of a dietary supplement monograph, but not a drug substance monograph, may only be compounded if the substance is a component of an FDA-approved drug product or is on the FDA's list of bulk drug substances that may be used for compounding.

This interpretation is both legally supportable and in the best interest of the public health. Under the FD&C Act, drugs and dietary supplements are different product categories that are subject to different regulatory schemes. Section 503A, the key statutory provision for this rulemaking, concerns pharmacy compounding of drug products, not dietary supplements. It states that a drug product may be compounded under section 503A(a) of the FD&C Act if the licensed pharmacist or licensed physician compounds the drug product using bulk drug substances that comply with the standards of an applicable United States Pharmacopoeia or National Formulary monograph, if a monograph exists, and the United States Pharmacopoeia chapter on pharmacy compounding (emphasis added). (See section 503A(b)(1) of the FD&C Act.)

Accordingly, it is reasonable to interpret the phrase “applicable United States Pharmacopoeia monograph” in this statutory provision as a reference to USP drug monographs, not USP dietary supplement monographs. Moreover, adopting the alternative interpretation urged by the comment— i.e., that “applicable” USP monographs include dietary supplement USP monographs—would not be in the best interest of the public health. USP monographs for dietary supplements can differ in significant ways from USP monographs for drugs because of the differences between dietary supplements and drug products. For example, dietary supplements are intended for ingestion only, and the standards contained in the USP dietary supplement monographs are likewise intended for dietary supplements that will be ingested; the standards are not appropriate for use in compounding drug products that may have different routes of administration ( e.g., intravenous, intramuscular, topical). In addition, the USP limits for elemental impurities are different for drugs and dietary supplements: There are limits specified in USP General Chapters for many more elemental contaminants for drugs than there are for dietary supplements. Furthermore, the bioburden allowable for dietary supplements is considerably higher than that allowed for drug substances. Relying on the standards of a dietary supplement monograph for a substance that will be used in compounding drug products could therefore put patients at risk.

We disagree with the commenter's statement that a 2014 guidance stated that dietary supplement monographs were “applicable monographs” under section 503A of the FD&C Act. FDA is unaware of any Agency statements that support that view, including the July 2014 Request for Nominations.

(Comment 22) One comment asserted that the Homeopathic Pharmacopeia of the United States (HPUS) homeopathic monographs and other types of monographs should be considered “applicable monographs” under section 503A(b)(1)(A)(i)(I) of the FD&C Act, making substances that are the subject of such monographs eligible for use in compounding. The comment asserted that the Drug Quality and Security Act (DQSA) (Pub. L. 113-54) gives FDA authority to designate sources other than USP or NF monographs as “applicable monographs.” The comment also noted that the FD&C Act recognizes the HPUS as “official” in 21 U.S.C. 358(b), and in the definitions at 21 U.S.C. 321, the FD&C Act defines “drug” to include articles recognized in the HPUS.

(Response 22) We disagree that HPUS homeopathic monographs and other types of monographs should be considered “applicable monographs” under section 503A. The provisions of DQSA cited in the comment do not apply to section 503A of the FD&C Act. Rather, the language of section 503A explicitly applies only to applicable USP or NF monographs. Therefore, we decline to consider HPUS or other types of monographs to be “applicable monographs” under section 503A(b)(1)(A)(i)(I) of the FD&C Act.

(Comment 23) One commenter asserted that incorporating the statements about FDA's interpretation of “applicable monographs” from the Interim Policy Guidance effectively and improperly converts that guidance document to rulemaking. The commenter pointed out that regulations cannot be issued through guidance documents and stated that the guidance should be rescinded.

(Response 23) We disagree with this comment. Describing an interpretation of the applicable statute in both a guidance document and in a preamble to a proposed rule does not “convert” the guidance document to a rulemaking and has no impact on the status of the guidance. The guidance document was issued in accordance with our “Good guidance practices” regulation (21 CFR 10.115).

(Comment 24) One comment stated that FDA should consider its “conflict of interest” arising from the Agency's receipt of funds under the Prescription Drug User Fee Act (PDUFA) related to new drug applications (NDAs). According to the commenter, these funds cause FDA to be biased in favor of approved products.

(Response 24) We disagree with this comment. It is unclear what action the commenter was suggesting that FDA take to address this perceived “conflict of interest.” We note that the receipt of PDUFA fees related to NDAs has not affected FDA's ability to be impartial when evaluating bulk drug substances for inclusion on the 503A Bulks List. The Agency believes that compounded drugs can play a critical role for patients whose medical needs cannot be met by an approved drug.

Moreover, FDA's recommendations on particular bulk drug substances are subject to discussion with the PCAC and USP, and are the subject of notice and comment rulemaking. If, through the rulemaking process, FDA receives feedback that any party believes its recommendations are biased in any particular cases, FDA will consider that feedback before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 25) One comment requested that FDA allow inclusion of bulk drug substances on the list with certain qualifiers or limited uses, such as dose or dosage form. The comment stated that such qualifiers will give FDA greater leeway to add bulk drug substances to the list, which will benefit patients.

(Response 25) We agree that in some limited cases, it may be appropriate to place bulk drug substances on the 503A Bulks List subject to a restriction on use, such as the route of administration. For example, several of the substances that are being added to the list in this rulemaking are restricted to topical use only. For the substances we are not including on the list in this rulemaking, we found no relevant qualifiers on the compounded drug product, such as route of administration, that would have justified inclusion of the substances on the list.

(Comment 26) One comment raised concerns about the composition of the PCAC. The commenter asserted that the professions most familiar with compounded drug products are not represented on the PCAC, and neither FDA nor the PCAC has the necessary expertise to make judgments on the nominated bulk drug substances. In particular, according to the commenter, naturopaths need to be consulted, and a counterbalance to the representation by Public Citizen and the Pew Charitable Trusts is needed on the committee. The comment stated that PCAC members may have conflicts of interest.

(Response 26) We disagree with the comment. Of the current PCAC members, seven are pharmacists, and five are physicians. Twelve committee members have experience related to drug compounding, including experience in the preparation, prescribing, and use of compounded medications, as well as compounding-related research activities. In accordance with section 503A of the FD&C Act, one member is a representative from USP, and one member is a representative from the National Association of Boards of Pharmacy.

Industry participated in the selection of two additional committee members—one from the pharmaceutical manufacturing industry and one from the compounding industry. Additionally, a consortium of consumer advocacy representatives participated in the selection of a consumer representative.

More than 100 names were submitted to the Agency in response to the January 13, 2014, Federal Register notices requesting nominations. 4 (79 FR 2177; 79 FR 2178; 79 FR 2179.) In addition, FDA identified qualified candidates from its own pool of special government employees. The selection process of candidates that were not designated representatives of particular groups included evaluation for conflicts of interest as required by 21 CFR 14.80, and for the relevancy of their qualifications for the purpose of the committee. Candidates with actual or potential conflicts of interest in matters that would come before the committee were eliminated from consideration. For example, for those candidates not representing a particular group, FDA reviewed whether the candidate owned a compounding pharmacy, consulted for the compounding industry, or supplied bulk drug substances for compounding, because those activities would likely raise a financial interest that could be affected by the matters expected to come before the committee.

In general, members are invited to serve for overlapping terms of up to 4 years. As it has to date, the Agency will consider future nominations for membership and strive to select members with robust and relevant experience and expertise related to drug compounding.

Nominations may be submitted to the Advisory Committee Membership Portal at any time and submitted nominations will be considered as vacancies occur. See https://www.accessdata.fda.gov/scripts/FACTRSPortal/FACTRS/index.cfm . See https://www.fda.gov/AdvisoryCommittees/AboutAdvisoryCommittees/CommitteeMembership/ApplyingforMembership/default.htm for more information on the nomination procedure.

(Comment 27) One comment asserted that FDA has “unfairly screen[ed]” the evidence provided by nominators to the PCAC, has “misrepresented” the availability of other routes of approval of drug products compounded with the nominated bulk drug substance, and has “manipulated” the PCAC into rejecting certain nominated substances. The commenter stated that FDA appeared to be “cherry-picking” studies only to show negative data, and was not scrutinizing studies that showed safety concerns with the use of the bulk drug substance in the same way that it has scrutinized studies the nominators put forward to show effectiveness.

(Response 27) We disagree with this comment. As stated above, FDA is determining whether to place a substance on the list after weighing available data and information in light of the four criteria set forth in this rulemaking and considering feedback from PCAC, USP, and the public. FDA considers publicly available studies that are relevant to the evaluation criteria, regardless of the source of those studies.

As stated above, if members of the public believe FDA is not giving adequate weight to certain studies, or is otherwise misrepresenting information presented to the PCAC in any particular case, they are encouraged to submit a comment to the docket for the NPRM in which the substance at issue is addressed. Nominators and the public are also invited to present at PCAC meetings where they have an opportunity to discuss their interpretation of the relevant studies and address the PCAC regarding each substance considered. FDA will consider all feedback received before finalizing its proposal to include, or not include, a substance on the 503A Bulks List.

(Comment 28) Some comments stated that nominators were not being given equal time with FDA to make presentations to the PCAC, and instead were limited to 10-minute presentations. Commenters asserted that this imbalance is unfair and has resulted in skewed decision making by the PCAC. Commenters also asserted that nominators were given insufficient notice of PCAC meetings and did not have adequate time to prepare.

(Response 28) We acknowledge that FDA presentations have been allotted more time than those by nominators, which we believe is appropriate given that FDA is tasked with developing the 503A Bulks List and is necessary for FDA to present fully on the reviews of the bulk drug substances.

Regarding notice of PCAC meetings, FDA has notified the public at least 20 days prior to PCAC meetings, and the Agency strives to give notice further in advance where possible. However, further advance notice is not always possible due to the need to coordinate various logistical issues.

(Comment 29) Some commenters noted that it was not possible for nominators to provide the information FDA requested in its July 2014 Request for Nominations for the list of bulk drug substances that can be compounded under section 503A of the FD&C Act for two reasons. First, commenters stated there is a gap between the stated criteria and how FDA is applying the criteria, and therefore, nominators did not have sufficient notice of what information would be needed for FDA's decision making. Second, commenters asserted that it is not possible to provide the information FDA required for a nomination because decisions about how a compounded drug is used are at the discretion of the physician.

(Response 29) We disagree with this comment. As noted previously, FDA is applying the four criteria set forth in this rulemaking when evaluating bulk drug substances for inclusion on the list. FDA considers the information requested in the July 2014 Request for Nominations and bases its decision on the physical and chemical characterization, safety, effectiveness, and historical use of the bulk drug substance in compounded drug products. If nominators believe that there is additional information relevant to those four criteria that would be helpful to consideration of nominations that are still pending with FDA for evaluation, that information can be submitted for FDA's consideration via Docket No. FDA-2015-N-3534.

With respect to the concern about challenges in submitting nominations because physicians may prescribe compounded drug products tailored to the needs of individual patients, we note that physicians and prescribers, who may have unique insights on how compounded drug products are used in particular cases, may submit information for FDA's consideration via Docket No. FDA-2015-N-3534.

(Comment 30) Some comments objected to FDA's process regarding bulk drug substances that were nominated without adequate information for FDA to evaluate the substance. One commenter requested that FDA issue letters to the parties whose nominations were rejected informing them of the specific deficiencies with the nomination. The comment described this process as resource-intensive, but necessary because access to the bulk drug substance is being “cut off.”

(Response 30) We disagree with this comment. The July 2014 Request for Nominations identifies the information that the Agency is requesting in the nominations, and nominations containing the information requested in the July 2014 Request for Nominations will be deemed adequate.

As described in the Interim Policy Guidance, Docket No. FDA-2015-N-3534 is open to receive new nominations, including renominations of substances previously nominated with inadequate supporting information, or additional information about bulk drug substances previously nominated with adequate information to allow evaluation. FDA is evaluating new information provided to the docket on a rolling basis and is periodically adding newly nominated or renominated substances to “Category 1” (the category for adequately supported nominations that will be evaluated for inclusion on the 503A Bulks List) when appropriate.

(Comment 31) One comment stated that clarity is needed regarding the process by which substances that have been “considered and rejected” by the PCAC may be renominated. The comment noted that new or additional information about the substance may become available that warrants further evaluation by FDA and the PCAC.

(Response 31) We have considered this comment and are clarifying the process for providing additional information about substances that have been considered by the PCAC. Bulk drug substances, including those that have been evaluated by FDA and presented to the PCAC and USP, remain under consideration until they are addressed in a final rule. Individuals and organizations may submit additional information relevant to the evaluation criteria about a use proposed in the original nomination(s) for a bulk drug substance to Docket No. FDA-2015-N-3534 until that substance is addressed in an NPRM. When a substance is addressed in an NPRM, individuals and organizations may submit additional information relevant to the evaluation criteria about the use(s) evaluated for that bulk drug substance as a comment to that proposed rule. As noted above, after the substance is addressed in a final rule, individuals and organizations may submit a citizen petition to FDA under 21 CFR 10.30 asking FDA to amend the list ( i.e., to add or delete bulk drug substances).

If an individual or organization seeks to use a bulk drug substance that has been evaluated by FDA and not recommended in FDA's review for placement on the 503A Bulks List, for a use, dosage form, or route of administration that was not previously evaluated by FDA, or where there is otherwise a substantive change between the use of the bulk drug substance sought by the individual or organization and how it was evaluated by FDA, the individual or organization may file a citizen petition under 21 CFR 10.30 requesting that FDA reconsider its evaluation of the bulk drug substance, regardless of whether that substance has been addressed in an NPRM or final rule. In responding to such citizen petitions, FDA generally intends to consider whether, for example, the petitioner provides information not previously considered or shows a significant change in circumstances supported by scientific references that alters the Agency's analysis of the four criteria.

(Comment 32) One comment stated that FDA is only sending certain nominations to the committee and appeared to be “approving” some nominations without consulting the PCAC.

(Response 32) We disagree with this comment, the basis of which is unclear. FDA acknowledges that it is evaluating and consulting with USP and the PCAC only on substances that were nominated with adequate support to allow the Agency's review, as described in the Interim Policy Guidance. FDA is not, however, “approving” the use of any bulk drug substances or proposing to include bulk drug substances on the 503A Bulks List, without consulting USP and the PCAC.

(Comment 33) One comment stated that FDA should have consulted with the PCAC before seeking nominations for the 503A Bulks List or before the Agency evaluated the first set of bulk drug substances for inclusion on the list.

(Response 33) The statute does not require that FDA seek nominations for the 503A Bulks List, or that it consult the PCAC, at any specific stage prior to undertaking rulemaking. Section 503A requires only that FDA consult with the PCAC before issuing regulations to implement subsection (b)(1)(A)(i)(III). FDA sought nominations for the 503A Bulks List and began evaluating substances for inclusion on the list before consulting with the PCAC because this enabled the Agency to prepare robust background materials for PCAC meetings and thereby obtain more meaningful PCAC and public input prior to proposing a rule describing the criteria.

(Comment 34) One comment objected to the rulemaking generally as infringing on the practice of medicine and overregulating physicians' choices of ingredients that can be used in compounded drug products.

(Response 34) The FD&C Act establishes the framework for regulating the drugs that physicians may prescribe. Within this framework, once a drug becomes legally available, with certain limited exceptions, FDA does not interfere with physicians' decisions to use it when they determine that in their judgment it is medically appropriate for their patients. The Agency believes that this rulemaking is consistent with this framework and does not overregulate.

(Comment 35) The comment asserted that this action amounts to poor public health policy and will stifle innovation, because drugs will not be researched or considered for new drug applications unless they show some initial promise.

(Response 35) We disagree. FDA is carrying out its statutory mandate in a manner that seeks to protect the public from exposure to bulk drug substances that are not suitable for use in compounded drug products. We believe it protects the public health to prevent the use of drug products for which there is insufficient evidence that benefits to the patients might outweigh possible risks. To protect human subjects and the integrity of any research, it is important that drugs generally not be studied in humans outside of an investigational new drug application.

(Comment 36) One comment objected to this rulemaking generally, based on FDA's lack of regulation in this arena previously. The commenter asserted that the compounding industry has developed under State law, and use of bulk drug substances in compounding should be considered “grandfathered in.” The comment noted that many of the bulk drug substances at issue were in use prior to 1962.

(Response 36) We disagree with this comment. Section 503A of the FD&C Act does not provide for “grandfathering in” the use of bulk drug substances, including those in use prior to 1962. Moreover, FDA is considering the length and extent of the historical use of the bulk drug substance in compounded drug products when determining whether to recommend the substance for inclusion on the 503A Bulks List.

(Comment 37) One comment objected to this rulemaking based on the January 20, 2017, memorandum signed by Reince Priebus on behalf of President Trump entitled “Regulatory Freeze Pending Review” and January 30, 2017, Executive Order 13771 entitled “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs” because FDA has not identified two regulations to be eliminated.

(Response 37) The requirements outlined in Executive Orders 13771 and 13777 have been considered in issuing this final rule, and this rule will be accounted for as appropriate under both executive orders.

(Comment 38) Some commenters alleged that FDA's actions related to this rulemaking, many of which are described in the comments summarized above, have been arbitrary and capricious in violation of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq. ). In addition, one commenter stated that FDA's actions through this rulemaking are arbitrary and capricious because the rulemaking goes beyond concerns about the safety of compounded drug products, which applies only to sterile drug products. That commenter noted that Congress enacted the DQSA to address concerns surrounding sterility and contamination.

(Response 38) We disagree with this comment. FDA has followed proper rulemaking procedures and has not acted in an arbitrary and capricious manner in violation of the APA.

Section 503A requires FDA to issue the 503A Bulks List through a rulemaking process, and it gives the Agency discretion to consider relevant criteria (see section 503A(c)(2) of the FD&C Act). FDA is establishing the four criteria described above, and applying these criteria to bulk drug substances that are not the subject of an applicable USP-NF monograph or a component of an FDA-approved drug product. Such substances may be used to compound sterile or non-sterile drug products. Accordingly, FDA applies the established criteria to bulk drug substances that may be used to compound sterile or non-sterile drug products. FDA notes that the safety criterion is not limited to consideration of sterility and contamination, and FDA may have safety concerns about bulk drug substances used to compound sterile and non-sterile drug products.

This final rule will become effective 30 calendar days after the date of its publication in the Federal Register .

We have examined the impacts of the final rule under Executive Order 12866, Executive Order 13563, Executive Order 13771, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct us 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 13771 requires that the costs associated with significant new regulations “shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” We believe that this final rule is not a significant regulatory action as defined by Executive Order 12866.

The Regulatory Flexibility Act requires us to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because we do not have enough information about the effect of the final rule on small entities, we find that the final rule will have a significant economic impact on a substantial number of small entities.

The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a written statement, which includes an assessment of anticipated costs and benefits, before issuing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $150 million, using the most current (2017) Implicit Price Deflator for the Gross Domestic Product. This final rule would not result in an expenditure in any year that meets or exceeds this amount.

We evaluated 10 bulk drug substances for this final rule. We will place six bulk drug substances on the 503A Bulks List, and we will not place four substances on the 503A Bulks List. We expect that the rule will affect compounding pharmacies and other producers that market the affected substances or drug products made from the affected substances, consumers of drug products containing the affected substances, and payers that cover these drug products or alternative treatments. Because we lack sufficient information to quantify most of the costs and benefits of this final rule, we also include a qualitative description of potential benefits and potential costs.

In table 1, we summarize the impacts of the final rule. The present value of the costs of the final rule equals $3.33 million at a 7 percent discount rate and $3 million at a 3 percent discount rate. The final rule will result in annualized costs of $0.42 million at a 7 percent discount rate, or $0.31 million at a 3 percent discount rate.

We have developed a comprehensive Economic Analysis of Impacts that assesses the impacts of the proposed rule. The full analysis of economic impacts is available in the docket for this final rule (Ref. 17) and at https://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm .

We have determined under 21 CFR 25.30(h) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This final rule contains no collection of information. Therefore, FDA is not required to seek clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995.

We have analyzed this final rule in accordance with the principles set forth in Executive Order 13132. We have determined that the rule does not contain policies that have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, we conclude that the rule does not contain policies that have federalism implications as defined in the Executive Order and, consequently, a federalism summary impact statement is not required.

We have analyzed this rule in accordance with the principles set forth in Executive Order 13175. We have determined that the rule does not contain policies that have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes. Accordingly, we conclude that the rule does not contain policies that have tribal implications as defined in the Executive Order and, consequently, a tribal summary impact statement is not required.

The following references marked with an asterisk (*) are on display at the Dockets Management Staff (see ADDRESSES ) and are available for viewing by interested persons between 9 a.m. and 4 p.m., Monday through Friday; they also are available electronically at https://www.regulations.gov. References without asterisks have copyright restriction and can be viewed at Dockets Management Staff. They are not available publicly on the internet due to copyright restriction. FDA has verified the website addresses, as of the date this document publishes in the Federal Register , but websites are subject to change over time.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 216 is amended as follows:

It has been determined that publication of this CFR part removal for public comment is impracticable, unnecessary, and contrary to public interest because it is based on removing obsolete information. This rule implemented Executive Order 12637, “Productivity Improvement Program for the Federal Government,” which was revoked by Executive Order 13048, “Improving Administrative Management in the Executive Branch,” on June 10, 1997. The DoD-level program was discontinued in 2010, and the corresponding internal DoD guidance was canceled. Any associated reporting was sunset thereafter. The content of the rule is obsolete and should be removed.

This rule is not significant under Executive Order (E.O.) 12866, Regulatory Planning and Review, therefore, the requirements of E.O. 13771, Reducing Regulation and Controlling Regulatory Costs do not apply.

This is a summary of the Commission's Report and Order and Order on Reconsideration in WC Docket Nos. 10-90, 14-58, 07-135, CC Docket No. 01-92; FCC 18-176, adopted on December 12, 2018 and released on December 13, 2018. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street SW, Washington, DC 20554 or at the following internet address: https://docs.fcc.gov/public/attachments/FCC-18-176A1.pdf. The Further Notice of Proposed Rulemaking (FNPRM) that was adopted concurrently with the Report and Order and Order on Reconsideration will be published elsewhere in this issue of the Federal Register .

1. In the Report and Order, the Commission continues its efforts to bridge the digital divide. According to the Commission's most recently available data, about 30% of rural Americans lack access to fixed, terrestrial high-speed internet of at least 25 Mbps download/3 Mbps upload (25/3 Mbps), the Commission's current speed benchmark, which reflects consumer demand for high-speed broadband services. In urban areas, that number is 2%. The gap between broadband access in rural and urban areas is unacceptable. The Commission must do better. The Commission has made progress in bringing broadband service to rural Americans living in areas served by our nation's largest telecommunications companies, and will realize additional gains as the winners of the Connect America Fund (CAF) Phase II auction begin to deploy 25/3 Mbps or higher speed service to approximately 713,176 locations. But the rules governing smaller, community-based providers—rate-of-return carriers—have not kept pace, making it more difficult for these carriers to bring 25/3 Mbps service to rural America. The Report and Order addresses the challenges that rate-of-return carriers face by taking steps to promote broadband deployment, ensure the efficient use of resources, and provide sufficient and predictable support necessary to increase broadband deployment.

2. By improving access to modern communications services, the Commission can help provide individuals living in rural America with the same opportunities that those in urban areas enjoy. Broadband access is critical to economic opportunity, job creation, education, and civic engagement. And as important as these benefits are in America's cities, they can be even more important in America's more remote small towns and rural and insular areas. Rural Americans deserve to reap the same benefits of the internet—and not run the risk of falling yet further behind.

3. The Report and Order marks a significant next step in closing the digital divide. The Commission recognizes that access to 25/3 Mbps broadband service is not a luxury for urban areas, but important to Americans wherever they live. To that end, the Commission adopts additional measures toward its goal of expanding the availability of affordable broadband service to rural America. First, the Commission makes another model offer to those rate-of-return carriers currently receiving Alternative Connect America Cost Model (A-CAM) support for additional funding if they commit to building out to additional locations at speeds of 25/3 Mbps. Second, the Commission makes a new model offer to those on legacy support in return for specifically tailored obligations to build out broadband networks providing speeds of 25/3 Mbps. Third, for those rate-of-return carriers remaining on legacy support that do not take the new model offer, the Commission adopts a new budget based on uncapped 2018 claims that will be increased by inflation annually, as well as new deployment obligations that require speeds of 25/3 Mbps rather than 10/1 Mbps. Fourth, the Commission adopts measures to mitigate the regulatory burden on providers and encourage the efficient use of universal service support.

4. In the Order on Reconsideration, the Commission denies three petitions seeking reconsideration of the Commission's decision directing the Bureau to offer additional support up to $146.10 per-location to all carriers that accepted the revised offers of model-based support.

5. To promote additional broadband deployment in areas served by existing A-CAM carriers, the Commission initiates a new set of revised model offers which would provide support up to $200 per month, per location. These revised offers, in effect, fund the initial offers extended by the Bureau on August 3, 2016, before those offers were reduced for budgetary reasons. To ensure these revised offers are in the public interest, the Commission conditions them on increased deployment obligations. These increased deployment obligations will further advance the Commission's goal of widespread availability of 25/3 Mbps service throughout the nation.

6. Discussion. The Commission authorizes additional support up to $200 per location to all carriers that are currently authorized to receive A-CAM support. Increasing support immediately will result in substantial additional broadband deployment, while balancing overall budgetary constraints. This increase does not affect funding available to those carriers on legacy support.

7. The record uniformly supports increasing the funding cap for A-CAM to $200, as long as doing so does not adversely affect carriers receiving legacy support. With additional funding, parties have made clear the economic, educational, and healthcare benefits that will directly follow.

8. Consistent with the Commission's goal of realizing widespread deployment of 25/3 Mbps service, it increases the deployment obligations associated with this revised offer. In adopting the speed obligations in the 2016 Rate-of-Return Reform Order, 81 FR 24282, April 25, 2016, the Commission noted that “our minimum requirements for rate-of-return carriers will likely evolve over the next decade.” The Commission acknowledged, in particular, NTCA's argument that “a universal service program premised on achieving speeds of 10/1 Mbps risks locking rural America into lower service levels.” Although the Commission agreed that “our policies should take into account evolving standards in the future,” it required carriers electing A-CAM to deploy 25/3 Mbps service to only a fraction of their fully funded eligible locations. The Commission's recent experience with the CAF Phase II auction, which resulted in more than 99.7% of new locations being served by 25/3 Mbps service, affirms its conclusion that a higher standard of service is achievable.

9. Therefore, the Commission increases the 25/3 Mbps deployment obligations associated with the revised offer. Carriers receiving A-CAM under the existing offers must deploy 25/3 Mbps service to a number of eligible locations equal to at least 25%, 50%, or 75% of the number of fully funded locations, depending on the density of the population in the carrier's service territory. The Commission increases the 25/3 Mbps service requirement to 50% of fully funded locations for low density carriers, 65% of fully funded locations for medium density carriers, and 85% of fully funded locations for high density carriers consistent with ITTA's proposal. ITTA's proposal assumes that carriers will devote the additional support from the revised offer entirely to capital expenses associated with the deployment of new broadband, and estimates the number of locations that carriers in each band would, on average, be able to reach with 25/3 Mbps service as a result. The Commission finds that ITTA's proposal provides a reasonable estimate of how many additional locations a carrier could be expected to serve with 25/3 Mbps service and ensure that all new fully funded locations based on this offer will receive 25/3 Mbps service.

10. The Commission notes that the revised offer will be made available to all carriers that accepted the firstA-CAM offer, including those carriers whose offer of model-based support is less than their legacy support (referred to as glide path carriers). Although this will not provide any additional support to glide path carriers during the eight remaining years of the original authorization, it would provide an opportunity for the glide path carriers to receive an additional two years ofA-CAM support, through the end of the term of this revised offer, in consideration for additional obligations to deploy 25/3 Mbps service. Glide path carriers currently receive approximately $51 million per year in A-CAM support (excluding transitional support) and would be required to deploy 25/3 Mbps service to over 8,300 additional eligible locations if all companies accepted.

11. If all eligible carriers accept the revised offer, this deployment obligation would increase the number of locations to which carriers would be required to offer 25/3 Mbps service by more than 100,000 locations. This exceeds the more than 39,000 partially funded locations, currently required to be served with 4/1 Mbps or only upon reasonable request, that would be fully funded and would be required to be served by at least 10/1 Mbps service. The Commission further notes that the number of locations subject to the reasonable request standard would be reduced by more than 26,000. The Commission finds that these higher deployment obligations justify the potential $67 million per year cost of funding to the $200 per location cap.

12. In the absence of the increased deployment obligations, the Commission does not believe a revised offer for the existing A-CAM carriers with a $200 per-location funding cap would provide a sufficient value for its limited universal service resources. Absent the higher deployment obligations, in contrast to the increased deployment figures noted above, the revised offer could increase the number of locations that would receive 25/3 Mbps over the course of the support term by only 17,800, with only another 21,678 locations receiving 10/1 Mbps (while still reducing the number of locations subject to provision of broadband service only on reasonable request by more the 26,000). Given a $67 million per year price tag, the Commission does not believe that this result, without more, achieves sufficient “bang for the buck.”

13. The Commission declines to adopt ITTA's request to count existing locations towards the deployment obligations of existing A-CAM carriers. Specifically, ITTA proposes that a carrier should be permitted to satisfy its deployment obligations by providing service to locations that were ineligible in the original offer because they were in census blocks in which the carrier or its affiliate already served with fiber-to-the-premises or cable facilities. The Commission does not believe this modification would be in the public interest. In most cases, the otherwise eligible locations that were excluded because they were already served by the carrier with fiber-to-the-premises or cable facilities are likely to be relatively less costly to serve than other eligible locations. As a result, ITTA's proposal would allow A-CAM carriers to meet their deployment obligations by serving locations that are, in many cases, far less costly to serve than the ones on which their A-CAM support offers were calculated. Further, by definition, some of these locations are already served by fiber-to-the-premises or cable technology, so making these areas eligible for deployment would limit the amount of deployment to additional unserved locations. Finally, the Commission notes that this approach would make it much more difficult for the Commission to monitor and verify whether any built out locations are actually new.

14. The Commission declines to adopt Gila River's proposal to apply a Tribal Broadband Factor, as it does with the new model offer, in the following, to existing A-CAM recipients. In the new model offer, the Commission includes a Tribal Broadband Factor to reflect that the assumptions made about the amount of end-user revenues in the model may not be reasonable for Tribal lands. When the existing A-CAM carriers accepted the model offer, they implicitly accepted that the end-user revenue assumptions were sufficiently reasonable for them to meet the deployment obligations associated with the model offer. Accordingly, the Commission does not believe that existing A-CAM carriers require the adjustment that it adopts for the new model offer.

15. To provide carriers accepting this revised A-CAM offer sufficient time to meet the increased deployment obligations, the Commission adopts a modified term of support and deployment milestones for those carriers. The term of the revised offer will be ten years, beginning January 1, 2019, and running until December 31, 2028. Effectively, this revised term extends A-CAM by two years for carriers that elect this revised offer. Carriers electing this revised offer will be obligated to meet the deployment milestones to which they previously agreed with respect to 10/1 Mbps service. In addition, they will be required to meet similar milestones to deploy 25/3 Mbps service to the required number of eligible locations on a ten-year schedule beginning January 1, 2019. In other words, each carrier will be required to serve at least 40% of the requisite number of eligible locations by end of the 2022, 50% by the end of 2023, 60% by the end of 2024, 70% by the end of 2025, 80% by the end of 2026, 90% by the end of 2027, and 100% by the end of 2028.

16. The Commission directs the Bureau to release a public notice announcing the revised model-based support amounts and corresponding deployment obligations and providing carriers that have previously been authorized to receive A-CAM support with 30 days to confirm that they will accept the revised offer. Any such election shall be irrevocable. USAC shall begin disbursing this revised model support the month following a Bureau public notice authorizing those carriers that accept this revised offer.

17. The Commission extends a new model offer, or A-CAM II, to legacy rate-of-return carriers that did not previously elect model support or support pursuant to the Alaska Plan. This offer will re-open a voluntary path for legacy rate-of-return carriers to receive model-based support in exchange for deploying broadband-capable networks to a predetermined number of eligible locations. Expanding the number of carriers receiving model-based support will advance the Commission's longstanding objective to provide high-cost support based on a carrier's forward-looking, efficient costs and will help spur additional broadband deployment in rural areas. As described in the following, this new model offer retains many elements of the original A-CAM offer but makes several critical adjustments to encourage new carriers to take advantage of model-based support and accelerate deployment of broadband networks.

18. Discussion. The Commission adopts a new model offer, A-CAM II, as described in detail in the following. This new model offer of up to $200 per location will be available to all existing legacy carriers, including those previously excluded because they had deployed 10/1 Mbps service to more than 90% of eligible locations. The new model offer will include a Tribal Broadband Factor, rely on broadband coverage data from the most recent FCC Form 477 (which the Commission anticipates will be data as of December 2017), and include census blocks where the carrier or its affiliates have deployed fiber-to-the-premises or cable. It will exclude census blocks served by an unsubsidized competitor only when the competitor offers voice and 25/3 Mbps or faster broadband service. In addition to the deployment requirements previously required of A-CAM recipients, carriers accepting the new model offer will be required to deploy 25/3 Mbps service to a number of locations equal to the number of eligible fully funded locations in their service area. The new model offer will be fully funded up to the $200 per-location cap, and it will not affect the budget for rate-of-return carriers remaining on legacy support. To the extent the Report and Order is silent regarding the terms and conditions of the new model offer, the Commission adopts the terms of the original A-CAM offer.

19. While a few commenters unconditionally supported a new model offer to all legacy carriers, many commenters supported the broader new model offer only on the condition that the Commission address the budgetary concerns of carriers remaining on legacy support. Because the new model offer has no impact on funds available for rate-of-return carriers receiving legacy support, the Commission believes they have satisfied the primary concerns of these parties.

20. The Commission also is not persuaded by the Broadband Alliance's argument that any new model offer should be deferred until the Commission has gathered evidence about the efficacy of the existing A-CAM program as compared to legacy support. The Broadband Alliance suggests that legacy support may possibly be more effective because its members have “already deployed [fiber-to-the-home] to 70 percent of their network, on average,” but that model-based companies “will not reach” that same milestone until 2024. However, the Broadband Alliance contradictorily argues that whether legacy support or A-CAM offers better results cannot be empirically known for a number of years. In any event, the Commission disagrees with their argument. First, the Commission notes that Broadband Alliance ignores the difference between eligible locations (on which A-CAM recipients' deployment obligations are based) and all locations (on which Broadband Alliance's deployment percentage is based). Second, the Broadband Alliance seems to assume that A-CAM carriers will not deploy service before they are required to do so, but deployment submissions to the High Cost Universal Broadband (HUBB) portal show that there are A-CAM carriers deploying at faster rates than required by the Commission's rules. Further, the fixed amount of model-based support guaranteed to the carriers provides enormous benefits to carriers in planning capital spending, allowing them to deploy broadband to areas they would not have otherwise deployed than if they needed to base decisions on varying levels of legacy-based support.

21. $200 per-location funding cap. Consistent with the original A-CAM offer and with the new offer to existing A-CAM carriers described in this document, the Commission sets the per-location cap at $200. The Commission does not limit the amount of support available through this offer and does not adopt any provision to reduce the funding cap based on the amount of support resulting from carrier elections of this offer. Most commenters supported funding the new model offer up to a $200 per-location cap, rather than the proposed $146.10 per-location cap.

22. The Commission declines to make further adjustments to the per-location funding cap. Specifically, the Commission rejects WISPA's request to reduce significantly the per-location cap to account for changes in technologies and business models that reflect that not all deployments are fiber. While WISPA advocates for an ad hoc change in the way cost estimates are used to calculate support, the rationale for WISPA's proposal implies a major reconsideration in the model's methodology for estimating the costs of deployment. The Commission specified the use of a wireline network architecture to estimate model costs in the USF/ICC Transformation Order, 76 FR 73830, November 29, 2011, and rejected arguments that the model should also estimate wireless costs. Moreover, there is no evidence in the record to support how to construct a model based on the costs of deploying broadband with wireless technologies. Without a rigorous method of estimating the alternative costs of serving specific areas, considering their specific topography and other characteristics, the Commission cannot determine whether WISPA's suggested cost savings would even be achievable for any particular carrier. For example, the cost savings may be associated disproportionately with locations that are above the funding threshold by a relatively small amount. In that case, lowering the funding cap would have no effect on locations that could be cost-effectively served with wireless technologies, while reducing funding for model locations that could not be.

23. Carriers Eligible for New Model Offer. The new model offer will be extended to all carriers that currently receive legacy support, i.e., CAF BLS and HCLS, and do not receive A-CAM or Alaska Plan support. Expanding the number of carriers receiving model-based support will advance the Commission's longstanding objective to provide high-cost support based on forward-looking efficient costs to help spur additional broadband deployment in rural areas. Model-based support, backed by significant, verifiable deployment obligations, provides the appropriate incentives for carriers to serve their rural and high-cost communities efficiently with modern broadband networks. For that reason, the Commission believes it is in the public interest to make the new model offer available to all carriers, including those that were not previously eligible. The Commission discusses some notable elements of this broad eligibility.

24. First, the Commission will extend the offer to carriers that have reported deploying 10/1 Mbps service to more than 90% of eligible locations. All commenters addressing this question support this approach. The Commission recognizes that the high-cost of maintaining networks in rural America means that the deployment of 10/1 Mbps does not end the need for high-cost support. Further, the model is an appropriate tool for determining high-cost support even when a carrier has fully deployed broadband service. The model's cost module, which calculates the cost of deploying and maintaining the network, estimates the static, life cycle cost of a network fully deploying fiber-to-the-premises, and does not distinguish between carriers that have already deployed broadband and those that have not. As such, the model appropriately estimates the forward-looking costs of a carrier that is maintaining a broadband network and replacing its depreciated assets. Finally, because the Commission's deployment obligations require significant deployment of 25/3 Mbps service, it is likely that A-CAM II support will, in fact, spur deployment of higher speeds, even for carriers that were previously excluded due to their reported 10/1 Mbps deployment. The Commission therefore finds that it is appropriate to extend the model offer to all rate-of-return carriers receiving legacy support, regardless of the existing deployment.

25. Second, the Commission extends the offer of support to all legacy carriers, even those that would receive more annual support from the model than under legacy rate-of-return support mechanisms. The model and its associated deployment obligations provide effective incentives for efficient and widespread deployment of high-quality, 25/3 Mbps broadband service. If the model indicates that a carrier should receive additional support, then that suggests the carrier may require additional support to deploy or maintain its broadband network. And the Commission believes that providing the long-term funding certainty to such carriers, along with verifiable deployment obligations, outweighs the additional costs to the Fund. Although some commenters would prefer to limit the new model offer to carriers willing to accept lower payments than they have historically received, they rely on the rationale that doing so would enable the Commission to provide additional funding to other legacy and A-CAM carriers. As the Commission explains in the following, it delinks the legacy budget from the model budgets, ensuring that its decisions here do not impact those carriers that remain on legacy support mechanisms.

26. The Commission declines to adopt Shawnee and Moultrie's proposal to limit the loss of support for each glide path carrier to a specified percentage of its current legacy support, essentially setting carrier-specific funding caps. Under Shawnee and Moultrie's proposal, some carriers could have funding caps well in excess of $200 per location, by virtue of their current high levels of legacy support. The Commission does not believe, at this time, that using model-based support to fund those very high cost locations is an effective use of universal service resources.

27. Third, the Commission declines to exclude carriers from eligibility for the new model offer if the offer would include no fully funded locations. In other words, a carrier may elect the offer even if it would be required to deploy only 4/1 Mbps or on reasonable request. The Commission notes, however, that new model offers meeting this criterion would represent a very small number of carriers and very little support; moreover, these carriers can always exceed the minimum obligation.

28. Revising Model Parameters. The Commission adopts revised model parameters for the purpose of extending the new model offer. The revised parameters will encourage carriers to take advantage of model-based support.

29. First, for reasons similar to those for which the Commission permits carriers with more than 90% deployment to participate, it finds that the new model offer should include census blocks where fiber-to-the-premises or cable has already been deployed by the incumbent or its affiliate. ITTA, WTA, and USTelecom support this modification, and no commenter opposed it. Including census blocks which already have some fiber-to-the-premises will promote more and higher speed deployment to locations in those census blocks that do not currently have 25/3 Mbps or better service. Moreover, the Commission has previously recognized that areas with partially or fully-deployed fiber-to-the-premises may still require high-cost support to maintain existing service. The cost module of the model does not distinguish between those areas that have or have not had 25/3 Mbps service, and the model fairly estimates the costs of providing service even if that service has already been deployed.

30. Second, the Commission adjusts the model so that it excludes locations presumed to be served by unsubsidized competitors only when the unsubsidized competitor provides voice and at least 25/3 Mbps service. Previously, the model excluded areas served by unsubsidized competitors only if they provided voice and 10/1 Mbps or faster service. Based on the Commission's recent experience with the CAF Phase II auction, it believes that a higher standard of service is achievable. Given the Commission's commitment to using model-based support to achieve widespread deployment of 25/3 Mbps service, the Commission finds it necessary to exclude locations from eligibility only when a competitor provides a comparable level of service. NTCA, in particular, has emphasized the need for deployment of networks capable of providing 25/3 Mbps or greater service throughout rural areas. Simultaneously asking carriers to deploy 25/3 Mbps service while excluding from eligibility locations served by competitors with inferior service would consign many more rural locations to lower quality service for at least the term of the new model offer.

31. The Commission is not persuaded by WISPA's arguments that the model should exclude locations presumed to be served by unsubsidized competitors when the unsubsidized competitor provides at least 10/1 Mbps, rather than 25/3 Mbps. WISPA argues that there is “inherent inequity” in providing A-CAM II support to rate-of-return carriers in areas where they provide 10/1 Mbps but excluding areas from A-CAM II only if an unsubsidized competitor provides 25/3 Mbps. The Commission finds no such inconsistency in these model parameters. Rate-of-return carriers that have already deployed 10/1 Mbps currently receive high-cost support pursuant to legacy mechanisms and likely require support in areas where the model indicates their forward-looking costs exceed their reasonable end-user revenues. Providing A-CAM II model-based support that requires them to widely deploy 25/3 Mbps service is not inconsistent with the separate consideration that A-CAM II support is not required in areas where an unsubsidized competitor already provides 25/3 Mbps service.

32. WISPA further argues that the Commission's universal service resources would be better used if A-CAM II excluded areas where an unsubsidized competitor provides service of at least 10/1 Mbps because that unsubsidized competitor may provide 25/3 Mbps service at a future date or because the current service may be closer to 25/3 Mbps than 10/1 Mbps. To create a functional model offer the Commission must have a brightline threshold for whether an unsubsidized competitor's service is sufficient to make an area ineligible for A-CAM II support. WISPA's proposal to address hypothetical future unsubsidized services, or services that do not meet the threshold, would effectively lower the threshold. The Commission concludes that reducing the threshold does not appropriately drive deployment of the 25/3 Mbps service that is the new service standard.

33. Finally, WISPA notes that the 25/3 Mbps unsubsidized competitor standard harms service providers that have invested in reliance on “the Commission's representations that the establishment of 10/1 Mbps service would be sufficient to avoid government-funded subsidies flowing to competitors.” WISPA does not cite with specificity any such representations, and the Commission finds that such reliance would be misplaced in any event. Congress explicitly defined universal service as “an evolving level of telecommunications services . . . taking into account advances in telecommunications and information technologies and services.” The Commission has previously stated that broadband speeds would be subject to an evolving standard, which indicates that higher speed thresholds would likely be established at a later time. Indeed, the Commission first determined that advanced telecommunications capability required 25/3 Mbps in 2015. Further, the areas subject to the new model offer currently receive high-cost support from legacy mechanisms that support rate-of-return carriers without regard to whether a competitor provides 10/1 service, except in the rare case where a competitive provider has completely overbuilt the incumbent provider.

34. Third, the Commission modifies the model by updating the broadband coverage data with the most recent publicly available FCC Form 477 data (which the Commission anticipates will be data as of December 2017) prior to any additional offer of support. This broadband coverage data is used to determine which census blocks are served by unsubsidized competitors providing 25/3 Mbps broadband service, so that universal service resources can be effectively targeted to areas that require high-cost support. NCTA and WISPA support the use of FCC Form 477 data to identify areas of competitive overlap. Relying on the certified FCC Form 477 data will permit us to avoid a time-consuming and administratively burdensome challenge process. In the challenge process for the first A-CAM offer, the Bureau granted only 61 challenges of the more than 250 requests to change A-CAM coverage. Even that low success rate may overstate the consequences of the granted challenges because those particular census blocks still would not be considered “unserved” if there were other unsubsidized providers reporting service in those census blocks. Further, given the Commission's decision to adjust the model so that it will only exclude locations presumed to be served by unsubsidized competitors providing at least 25/3 Mbps service, the Commission believes that even fewer locations will be excluded based on competitive overlap, and many fewer will be linked to the type of false positives that the challenge process is intended to address.

35. The Commission's reliance on FCC Form 477 data is consistent with the process the Commission used in the Connect America Phase II auction proceeding. There, the Commission found that FCC Form 477 data superseded the results of the prior Connect America Phase II model support proceeding. The Commission further did not require the Bureau “to entertain challenges from parties seeking to establish that a block reported as served on a certified FCC Form 477 . . . is unserved.” In other words, the Connect America Phase II auction proceeding did not permit the type of challenges at issue here. In declining to permit such challenges, the Commission found that the Phase II model support process “was very time-consuming and administratively burdensome for all involved.” The Commission specifically found that it is “difficult for the incumbent provider to prove a negative—that a competitor is not serving an area. . . .” This burden of proving a negative is precisely the burden that possible electors of a new model offer would carry in their challenge process.

36. Several commenters argue in favor of retaining a challenge process. Although a challenge process might make some modest improvement to the quality of the data, the Commission remains unconvinced that the challenge process represents a significant improvement over the FCC Form 477 data, such that the benefits of the improved data would outweigh the significant administrative burdens of conducting a challenge process.

37. The Blooston Rural Carriers (Blooston), while conceding that the challenge process is administratively burdensome and that only 20% were granted in the past, argue that the “volume of [challenges] . . . clearly demonstrates the inaccuracy of [the 477] data.” Blooston does not explain why the absolute number of challenges is more relevant than the low success rate of the challenges, nor does it try to quantify in any way the supposed benefit of the challenge process. Blooston further cites two Mobility Fund proceedings in which the Commission did not rely on FCC Form 477 data to suggest the “importance of a bona fide challenge process used in connection with Form 477 data.” The Commission does not find the two Mobility Fund proceedings cited by Blooston informative here. The Mobility Fund Phase I process did not rely on FCC Form 477 data (which did not collect the relevant broadband deployment information at that time), and instead used commercially available data to preliminarily identify eligible areas. In the Mobility Fund Phase II proceeding, the Commission ultimately decided to adopt an industry consensus proposal to perform a one-time data collection very specifically tailored to identify qualified 4G LTE coverage for the purposes of Mobility Fund II. Identifying qualified 4G LTE coverage is a significantly more complex issue than determining whether qualified broadband service is offered in a census block, and there is no industry consensus surrounding an alternative data collection process in this proceeding. Neither case provides any useful data regarding the benefits or burdens of a challenge process for the FCC Form 477 data. Similarly, to demonstrate the supposed inadequacies of FCC Form 477 data, TCA points to the Commission's review of study areas receiving legacy high-cost support to identify study areas 100% overlapped by unsubsidized competitors but that proceeding uses a much higher standard for competitive coverage than is used to determine A-CAM eligibility.

38. WTA and Granite State support the use of a challenge process, but specifically do so as a means of setting a higher standard for when a census block would be deemed ineligible for the new model offer. WTA argues specifically that the challenge process should be based on the “actual availability” of service “throughout the census block.” Granite State argues in favor of “a challenge process similar to the one adopted for the 100 percent overlap and rate-of-return challenge process where the competitor has the burden of proof.” The Commission declines to adopt their proposals. Neither proposal includes sufficient detail to determine how the challenge process would work in the model offer context. Moreover, both proposals would appear to make locations eligible for model support even if they are served by unsubsidized competitors providing comparable service, on the grounds that the unsubsidized competitors do not provide service throughout the census block. Providing model support for such locations would be inconsistent with the Commission's policy, adopted in the USF/ICC Transformation Order, to condition Connect America Fund broadband obligations on not spending the funds in areas already served by an unsubsidized competitor.

39. Finally, to address the unique challenges of deploying high-speed broadband to rural Tribal communities, the Commission incorporates a Tribal Broadband Factor into the model. Specifically, A-CAM incorporates nationwide assumptions about take rates and potential average revenues per subscriber to estimate a reasonable amount of end-user revenues per location that form the basis of the $52.50 per location funding threshold. Those assumptions may be unrealistic given the “high concentration of low-income individuals [and] few business subscribers” in many rural, Tribal areas. By reducing the funding threshold by 25% for locations in Indian country—in other words, by setting a high-cost funding benchmark of $39.38 on Tribal lands—the revised model directly addresses the lower expected end-user revenues in rural, Tribal areas and by improving the business case will spur further broadband deployment there. The Commission believes that 25% is a reasonable approximation of the additional funding needed in Tribal areas. Because A-CAM support is calculated at the census block level, the Tribal Broadband Factor will efficiently target support to carriers that serve significant Tribal lands, as well as those carriers that serve only a minimal amount of Tribal lands or a small number of housing units on Tribal lands in their study area. For the purpose of this revised parameter, the Commission adopts the definition of “Tribal lands” that was used in the USF/ICC Transformation Order and later modified in the 2015 Lifeline Reform Order, 80 FR 40923, July 14, 2015. Several commenters support this revised parameter.

40. To fully effectuate this Tribal Broadband Factor, the Commission also raises the funding cap for Tribal lands to $213.12 per location to reflect the additional funding arising from the lower threshold. The Commission notes that this approach is consistent with Sacred Wind's proposal to adopt another tier of model support for carriers serving Tribal lands.

41. The Commission declines to adopt alternatives to the Tribal Broadband Factor proposed by the National Tribal Telecommunications Association (NTTA) and Gila River Telecommunications, Inc. (Gila River). Both propose a different tribal broadband factor that would be applied to increase support (both A-CAM and legacy) provided to carriers serving Tribal lands by 25%. Providing additional legacy support, without any particular correlation to circumstances faced by carriers serving Tribal lands, would not be an effective use of universal service resources in support of broadband deployment. Hypothetically, a carrier receiving high (but permissible) universal service support could receive enough additional support from this proposed factor that it could meet its revenue requirement without any subscribers and could receive more than an additional dollar of support for each additional dollar it spent. In contrast, the Tribal Broadband Factor the Commission adopts here makes model-based support more attractive for carriers serving Tribal lands by addressing a very specific element of model support—the estimated end-user revenues. NTTA further argues that, even with the Tribal Broadband Factor, most carriers serving Tribal lands are estimated to receive less support than they currently do under legacy support mechanisms. The Commission notes that some carriers have elected to receive A-CAM despite a reduction in support due to the stability of support and improved incentives for efficiently offering service.

42. Term of Support. The Commission adopts a ten-year term of support for carriers that elect the new model offer, beginning January 1, 2019. The Commission concludes carriers electing the new model offer should have ten-year terms to maximize broadband deployment. A ten-year term will also permit the Commission to align the deployment obligations of those accepting the new model offer with the terms set for the existing A-CAM carriers without adjusting the new model offer to a shorter term. Further, beginning the new model period on January 1, 2019 will reduce the short-term burden on the Fund; an earlier date would require the possible upfront payment of true-ups associated with a prior start date.

43. A ten-year term for the new model offer will align the termination of the term of the new model offer with existing A-CAM carriers that accept the revised offer adopted above. Multiple commenters supported aligning the terms of support, and none opposed it. Carriers that decline the revised offer will have terms that end prior to the term of the new model offer. The Commission anticipates that it will take into account the different termination dates in a subsequent rulemaking to determine how support will be awarded at the end of the 10-year term and develop a plan that addresses them.

44. Transition. The Commission adopts the same three-tiered transition process for carriers that receive less A-CAM support than they had received under legacy support mechanisms as the Commission used for existing A-CAM recipients. Specifically, the Commission bases the transition payments on the percentage difference between model support and legacy support, as described in the 2016 Rate-of-Return Reform Order. In that Order, the Commission found that “a tiered transition is preferable because it recognizes the magnitude of the difference in support for particular carriers. At the same time, the transition is structured in a way that prevents carriers for whom legacy support is greater than [A-CAM] support from locking in higher amounts of support for an extended period of time.” USTelecom and Concerned Rural LECs support the tiered transition process.

45. Several commenters propose alternatives to the transition payments that focus on capping reductions to a specific percentage of current support levels. The Commission declines to adopt these proposals. Permanently locking carriers into specified levels of support based on the legacy mechanisms, higher than what the model would provide, is inconsistent with the Commission's goal of moving carriers toward more rational, efficient levels of support.

46. As in the 2016 Rate-of-Return Reform Order, if the difference between legacy and model-based support is 10% or less, the carrier will have a one-year transition; if greater than 10% but not more than 25%, then the transition period will be four years; and if the difference is greater than 25%, then the transition will occur over the full-term of the plan, with no extra transition support only in the final year of the term.

47. For carriers electing the new model offer, the Commission adopts 2018 claims as the base year for calculating transitional support. This is the most recent year for which complete data will be available when the new model offers are likely to be released.

48. Deployment Obligations. The Commission adopts robust obligations for carriers accepting the new model offer to deploy 25/3 Mbps to all fully funded locations. This requirement is consistent with the Commission's goal of realizing widespread deployment of 25/3 Mbps service throughout rural America. In adopting the speed obligations in the 2016 Rate-of-Return Reform Order, the Commission noted that “our minimum requirements for rate-of-return carriers will likely evolve over the next decade.” The Commission acknowledged, in particular, NTCA's argument that “a universal service program premised on achieving speeds of 10/1 Mbps risks locking rural America into lower service levels.” Although the Commission agreed that “our policies should take into account evolving standards in the future,” it required carriers electing A-CAM to deploy 25/3 Mbps service to only a fraction of their fully funded eligible locations. The Commission's recent experience with the CAF Phase II auction, which resulted in more than 99.7% of new locations being served by 25/3 Mbps service, affirms its conclusion that a higher standard of service is achievable. Accordingly, the Commission does not adopt the same speed requirement as are used for existing A-CAM carriers, as urged by several commenters. The Commission instead requires carriers electing model support to maintain voice and existing broadband service as of December 31, 2018, and to offer 25/3 Mbps or higher service to at least the number of locations fully funded by the model by the end of the support term.

49. Consistent with the previous A-CAM offer, the Commission also requires carriers electing model support to offer at least 4/1 Mbps to a defined number of locations that are not fully funded by the end of the support term. Carriers with a density of more than 10 housing units per square mile will be required to offer at least 4/1 Mbps to 50% of all capped locations; and carriers with a density of 10 or fewer housing units per square mile will be required to offer at least 4/1 Mbps to 25% of all capped locations. The remaining capped locations will be subject to the reasonable request standard.

50. The Commission will require carriers electing the new model offer to provide a minimum usage allowance of the higher of 170 GB per month or one that reflects the average usage of a majority of consumers, using Measuring Broadband America data or a similar data source. In addition, the Commission will require carriers electing to receive model support to certify that 95% or more of all peak period measurements of round-trip latency are at or below 100 milliseconds. This latency standard will apply to all locations that are fully funded. As stated previously, the Commission “recognize[s] there may be need for relaxed standards in areas that are not fully funded, where carriers may use alternative technologies to meet their public interest obligations.” Therefore, the Commission adopts the high-latency metric used in the CAF Phase II auction proceeding for any capped locations served by a non-terrestrial technology. Under the high-latency standard, carriers are required to certify that 95% or more of all peak period measurements of round-trip latency are at or below 750 milliseconds, and with respect to voice performance, a score of four or higher using the Mean Opinion Score (MOS).

51. The Commission adopts the same deployment milestones that the Commission required for existing A-CAM recipients, except delayed by two years to reflect the later start of the ten-year term. Specifically, companies accepting the new model offer will be required to offer at least 25/3 Mbps service to 40% of fully funded locations by the end of 2022, to 50% of the requisite number of funded locations by the end of 2023, an additional 10% each year thereafter, and 100% by 2028. In addition, by the end of 2028, these carriers will be required to offer 4/1 Mbps to the requisite percentage of locations depending on density. The Commission also provides the same flexibility afforded other A-CAM recipients to deploy to only 95% of the required number of fully funded locations by the end of the term of support.

52. Consistent with existing obligations, the Commission requires carriers to report geocoded location information for all newly deployed locations that are capable of delivering broadband meeting or exceeding the speed tiers. The Commission also adopts defined deployment milestones so that the same previously adopted non-compliance measures would apply.

53. Election Process. The Commission adopts a single-step process whereby electing carriers make an irrevocable acceptance of the offered amount because no support adjustments will need to be made to address budget targets. The Commission directs the Bureau to release a public notice announcing the new model-based support amounts and corresponding deployment obligations and providing carriers with 45 days to confirm that they will accept the revised offer. Any such election shall be irrevocable.

54. To ensure sufficient and predictable support for legacy carriers and spur additional deployment of 25/3 Mbps broadband service, the Commission increases the budget and make corresponding adjustments to carriers' buildout obligations. A budget designed to spur the deployment of 4/1 Mbps broadband to rural America is no longer sufficient or appropriate for deploying the high-speed broadband capable networks of at least 25/3 Mbps that consumers living in rural America demand. Moreover, fluctuations in support reductions make it more challenging to engage in capital planning, potentially resulting in reduced broadband deployment that, in turn, could harm consumers. The Commission therefore establishes a minimum threshold of support for each carrier and establish a budget for legacy carriers that is independent of the fluctuating needs of other rate-of-return support streams. Commensurate with the Commission's changes to provide a sufficient and predictable support mechanism, the Commission adopts measurable deployment obligations that will spur the availability of 25/3 Mbps broadband service throughout rural America.

55. The Commission also adopts further reforms to the legacy program to streamline its rules where possible and promote further predictability and efficiency. For example, the Commission eliminates the capital investment allowance and revise the budget control mechanism to simplify its rules and promote greater certainty. Further, to ensure the efficient use of the Commission's limited funding, it reduces the maximum support that a legacy provider can obtain on a per-line basis and revise the Commission's methodology for allocating support to those areas that are close to 100% overlapped by unsubsidized competitors. Finally, the Commission addresses a number of technical changes, including revising line count reporting requirements and updating accounting rules.

56. To spur broadband deployment, the Commission adopts a budget for legacy rate-of-return carriers based on 2018 unconstrained claims, including an inflationary factor to increase the budget annually. The Commission also establishes a minimum threshold of support for rate-of-return carriers.

57. Discussion. The Commission addresses the concerns raised by Congress and the industry by adopting a budget that provides sufficient and predictable support to legacy carriers, while meeting its responsibilities as stewards of public funds. The Commission also adopts a minimum threshold of support for legacy carriers to ensure that they receive sufficient and predicable funding to meet their revised deployment obligations. In adopting this budget for legacy carriers, the Commission continues the progress and adherence towards the Commission's universal service reform principles and goals.

58. The Commission adopts a new budget for legacy carriers based on 2018 uncapped claims—approximately $1.42 billion—increased annually by inflation.

59. The increased legacy budget demanded by the industry and Congress is consistent with the Commission's requirement to base its policies on making services in “rural, insular, and high cost areas . . . reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas.” Consumers demand higher speeds as they realize the benefits that come with them, and the Commission cannot leave consumers in rural areas behind. Providing legacy carriers an increased budget will provide the means and the certainty necessary to spur investments to meet demand and help achieve the Commission's universal service goals. Without increasing the budget for legacy carriers, the Commission could expect increasing rates, diminishing deployment, and a growing gap between rural and urban areas in broadband availability.

60. The Commission determines that using 2018 unconstrained claims as the basis to reset the budget is sufficient and will help spur broadband deployment in rural areas. Since the budget control mechanism became effective, the Commission has authorized repaying legacy carriers all support reductions since July 1, 2017. The Commission now takes 2018 support claims, i.e., what the carriers are spending today, and increase that by inflation annually going forward. Claims for 2018 reflect a time when legacy carriers are fully engaged in deploying and/or maintaining broadband capable networks. Accordingly, the Commission finds it is a reasonable timeframe from which to establish a budget better tailored for today's broadband needs. Furthermore, by basing the budget on 2018 unconstrained claims, the Commission is using a figure beneficial to meeting consumers' demand because, based on the Commission's claims data, 2018 unconstrained claims are the highest since the USF/ICC Transformation Order.

61. Also, with a higher overall budget and a budget control mechanism that does not include a per-line reduction (discussed in the following), the Commission expects a higher degree of predictability for each carrier individually—predictability that over time will increase as carriers become more familiar with the process. A budget also helps with the overall predictability of the fund, which is financially prudent and in the public interest.

62. To mitigate any harmful effects of having a lower 2018 budget, the Commission will reimburse all support reductions due to the budget control mechanism from July 1, 2018 through December 31, 2018, or the effective date of this Report and Order, whichever is later. In addition, there will be no reductions to legacy support from January 1, 2019 through June 30, 2019, as the Commission anticipates claims to increase only slightly over 2018 claims during this time.

63. In addition, rather than awarding legacy support based on the budget remaining once other rate-of-return recipients have been funded under the overall $2 billion budget, the Commission establishes this budget for legacy providers separate and apart from the other programs. In doing so, the Commission provides greater certainty and predictability for legacy providers. The Commission agrees that separate budgets “enable proponents of the two support mechanisms [legacy andA-CAM] to focus on how best to efficiently maximize broadband deployment under each paradigm.” Furthermore, the Commission agrees that “each should be afforded a budget analysis on its own bona fides without regard to the other,” which will allow us in the future to better evaluate “each support mechanism on its own merits.” The Commission also agrees with ITTA's proposal to remove CAF ICC from the budget equation and administer it outside of the legacy budget and A-CAM support mechanism.

64. In establishing a separate budget for legacy carriers, the Commission declines to adopt the joint industry proposal to adopt an overall budget for all the rate-of-return support mechanisms. The Commission finds that an all-encompassing rate-of-return budget is no longer appropriate, given the different obligations and terms of the various rate-of-return funding streams. In light of how other high cost support streams have evolved, the Commission sees no reason going forward why the support amounts for A-CAM, Alaska Plan, and CAF ICC should affect total legacy support. Legacy carriers should have their own budget—a budget that is suited to allow small, rural carriers to meet consumers' demands in rural areas in furtherance of universal service goals.

65. The Commission finds that a budget in general for legacy carriers is in the public interest. In contrast to other rate-of-return support mechanisms, legacy support is based on carriers' costs, i.e., claims made for support, and support claims from legacy carriers have continued to increase since the Commission adopted a budget in 2011. The industry and NECA forecast continued increases. As the Commission noted in the 2018 Rate-of-Return Reform Order and NPRM, 83 FR 18951, May 1, 2018 and 80 FR 17968, April 25, 2018, rate-of-return regulation provides incentives for companies to operate inefficiently by “padding” operating expenses and over-investing in capital projects to increase profits. Some portion of the continually increasing claims may be due to those incentives. Although commenters contend that there is no evidence to show rate-of-regulation provides incentives to operate inefficiently, that carriers lack the means to over spend/invest as a practical matter, and that the Commission's rules already counteract these alleged incentives, basic economic theory confirms that such motivations exist. The Commission also recognizes, however, that network improvements to meet demand have led to increased claims.

66. Setting a budget cap for legacy carriers is financially prudent and in the public interest. The Commission must be mindful of its obligation to ensure that scarce public resources are spent judiciously. Moreover, as courts have recognized, too much subsidization could affect the affordability of telecommunications services for those that pay for universal service support, in violation of section 254(b). An annual budget cap for a support mechanism that funds carriers' claims—claims that have continually increased at varying rates—helps us meet that obligation. A budget that constrains spending encourages efficiency and resourcefulness, and it ensures a relatively greater level of predictability for the overall CAF. Finally, the Commission notes that the record supports some form of a budget.

67. The Commission will adjust the new budget for legacy carriers based on 2018 uncapped claims increased annually by inflation—the United States Department of Commerce's Gross Domestic Product-Chained Price Index (GDP-CPI). The Commission notes that industry supports budget adjustments using some type of inflationary factor. While NTCA suggests using the Employment Cost Index (ECI) because it recognizes that labor is a key component in rising costs, the ECI only accounts for one specific cost input. However, of the two, the Commission finds that GDP-CPI is more appropriate as it measures price changes in goods and services purchased by consumers, businesses, and governments, and is the inflationary factor the Commission has used for many years in other legacy support mechanisms.

68. Further, in using an inflationary factor to annually increase the overall budget for legacy carriers, the Commission is not conceding that broadband deployment and maintenance costs increase over time commensurate with inflation. In the development of the Connect America Cost Model (CAM), Commission staff found that in the remote, model-supported areas the Commission is subsidizing, costs are unlikely on average to rise going forward; roughly speaking, this is because rising labor costs are offset by falling equipment costs and productivity gains. Some commenters have echoed the belief that new equipment may lower costs. Nonetheless, other parties argue that their costs for labor and equipment have increased or that deployment costs have not been offset by increased productivity or lower equipment costs. Therefore, the Commission adopts an inflationary escalator to increase the budget and note that this increased support will be included in the revised calculation of mandatory deployment obligations. The Commission uses the GDP-CPI to address inflation in other high-cost support mechanisms and see no reason to deviate from that precedent here. Moreover, the Commission declines the industry's request to increase the entirety of the high-cost USF program to reflect inflation or the overall rate-of-return budget. As noted in this document, the Commission believes that giving legacy carriers a separate, independent budget is more appropriate at this time, and the Commission declines to make legacy carrier support dependent on the A-CAM, the Alaska Plan, CAF ICC, or other high-cost support.

69. The Commission addresses issues raised regarding the effect that the increasing number of conversions to broadband-only lines are having on the budget. Several parties have raised the concern that as carriers convert voice and voice/broadband lines to broadband-only lines there will be additional pressure on the universal service budget because federal support for broadband-only lines is typically greater than for voice and voice/broadband lines. This circumstance is in large part because the costs of a broadband-only line are all interstate whereas a voice or voice/broadband line has a portion of its costs recovered through intrastate sources. The Commission believes that increases in support caused by these conversions will be offset through the approach it is taking to account for support for those carriers taking the new model offer.

70. Although the Commission currently has insufficient data to quantify this increase, it concludes that 7% is a reasonable estimate that will promote stability for legacy rate-of-return carriers. The Commission notes that carriers expecting above average numbers of broadband-only conversions (and thus greater funding increases under the legacy mechanism) are more likely to remain on legacy support than those expecting below average conversion rates, putting pressure on the legacy rate-of-return budget. A 7% increase balances the Commission's interest in accounting for expected increases without unduly increasing the rate-of-return budget while it considers long-term means of addressing these conversions, as discussed in the concurrently adopted FNPRM. To account for this increase, the Commission adjusts how it allocates funding for those carriers accepting the new model offer. For carriers that accept a new model offer that will receive more model support than their uncapped claims, USAC shall take those claims out of the legacy budget. However, for carriers accepting a new model offer that will receive less model support than their unconstrained claims (glide-path carriers), USAC shall take only the carriers' model support amounts out of the budget cap. The Commission anticipates that a sufficient number of glide-path carriers will accept model-based support and that the amount of increase to the legacy budget will therefore be at least 7% of the budget cap (as adjusted for those taking model-based support), if not greater. However, to ensure that this is the case, the Commission will increase the budget in July 2019 by 7%. Once the Commission has determined which carriers are accepting the new model offer, if, because of the number of glide-path carriers accepting model support, the legacy budget increases by more than 7%, legacy carriers will benefit from that entire increase in the budget going into effect in July 2020. This will be a one-time increase.

71. This approach will also ensure that if carriers whose legacy support is decreasing choose model-based support, the funding that would have been available to other legacy carriers will continue to be available to those carriers that remain on legacy support. For the same reasons, after any future overlap auctions, the Commission will also leave any resulting savings in the legacy budget. Although the Commission believes that the new budget will account for any support demand increases due to conversions to broadband-only lines, the Commission seeks comment on whether additional measures are needed in the concurrently adopted FNPRM.

72. The Commission recognizes that by setting the budget at 2018 unconstrained claims initially, it is not setting it as high as the industry requests. The industry requests an overall amount that will “fully fund” the entire high-cost program so that there is no budget constraint. Universal service support is paid by ratepayers, however, and increasing funding demands on those ratepayers could affect the affordability of telecommunications services, in violation of section 254(b). By adopting an overall budget for legacy carriers based on today's support claims and then limiting future budget increases, the Commission minimizes unexpected increases in the contributions required from ratepayers.

73. Moreover, the Commission still is providing sufficient and appropriate funding for the rate-of-return high-cost program. A-CAM carriers will receive up to $200 per location and all transition payments; Alaska Plan carriers will continue to receive their authorized amounts; CAF ICC will receive its full amounts; and for legacy carriers the Commission will reimburse all support cuts to date due to the budget control mechanism. To encourage efficient and resourceful spending and help minimize contribution burdens, going forward, starting in July 2019, the Commission establishes a budget for the legacy carriers, but to help meet demands and obligations, it still allows for gradual and predictable annual increases. Furthermore, as explained in the following, the Commission revises deployment obligations based on the projected funding that carriers will receive. As the Tenth Circuit stated in upholding the budget adopted in 2011, “the FCC quite clearly rejected any notion that budgetary `sufficiency' is equivalent to `complete' or `full' funding for carrying out the broadband and other obligations imposed upon carriers who are voluntary recipients of USF funds.”

74. In addition to the new budget described in this document, the Commission also adopts a minimum threshold of support for each carrier. The uncapped threshold will be based on a five-year CAF BLS forecast to be developed by NECA for establishing the carrier-specific deployment obligation, but any amounts greater than that may be subject to a budget control mechanism. Thus, no legacy carrier will receive less support, i.e., HCLS plus CAF BLS, as a result of budget constraints than predicted in this CAF BLS forecast. The Commission links this minimum threshold of support for each carrier to its minimum deployment obligation so that carriers will receive at a minimum, the amount of support that went into determining minimum deployment obligations. This new five-year forecast will be calculated using the budget adopted in this Report and Order, including the annual inflation adjustment, and will be used to calculate each legacy carrier's new mandatory deployment obligations. In conjunction with the new budget, this minimum threshold will provide legacy carriers the sufficiency and predictability that they have argued did not exist under the previous budget. In addition, to the extent any support adjustments may be appropriate, by eliminating the per-line reduction component of the budget control mechanism, the Commission expects that no carrier will see drastic reductions from the budget control mechanism relative to other carriers.

75. While commenters support the general concept of using unconstrained claims for a support “floor,” there is no consensus on how any such “floor” should be established. Although some commenters express concerns with this approach, the Commission finds that a minimum threshold based on a revised NECA five-year forecast, in combination with the revised budget amounts adopted herein, will ensure that carriers can meet their deployment obligations. The Commission disagrees with NTTA's suggestion that it prioritizes Tribal areas, the highest-cost areas, and then all other areas because it lacks any justification of how such a proposal is consistent with the goals of the high-cost program, and in particular how it would further bringing broadband to all high-cost areas of the country. And the Commission disagrees with a recent industry proposal to use each carrier's “unconstrained costs over the prior three years” as a minimum. Such a proposal would essentially require the elimination of the budget constraint mechanism entirely while guaranteeing more support for each carrier than that tied to its deployment obligations. Indeed, this proposal would negate the overall predictability for the fund that a budget provides. The “floor” for each carrier would be dependent upon each's spending behavior, which can change annually or even quarterly. As the “floor” changes for each carrier, the Commission would be required to adjust the overall budget accordingly. In other words, the Commission could not know with as much predictability how much of the ratepayers' money it would be collectively spending each year on the high-cost program—a situation that as stewards of public funds the Commission aims to avoid. Consequently, the Commission declines to adopt this industry proposal.

76. In the 2018 Rate-of-Return Reform Order and NPRM, the Commission sought comment on when it should next revisit the budget. Commenters support various timeframes. NTCA, WTA, USTelecom, and the Broadband Alliance suggest that the new budget should be in effect until 2026. ADTRAN recommends the Commission assess the budget four years after adoption, and FWA advocates reviewing the budget no later than three years after adoption. By fully funding A-CAM, the Alaska Plan, and CAF ICC, and adopting a legacy budget that annually adjusts for inflation, the Commission expects that rate-of-return carriers will have stable and sufficient budgets for at least the next five years. Although the Commission does not expect to review the budget prior to 2024, it may be appropriate to revisit the budget at the end of five years to reevaluate whether any changes to the budget are appropriate.

77. By May 1, 2019, the Commission directs USAC, in consultation with Bureau, to publish a new legacy budget cap along with the new budget adjustment factor. USAC will calculate 2018 actual unconstrained legacy support claims plus one year of inflation using GDP-CPI, as reported by NECA in the most recent October annual filing. The budget cap will be that total increased by 7%. USAC, in consultation with the Bureau, will calculate the budget adjustment factor using that budget cap pursuant to sections 54.901(f) and 54.1310(d), as modified in this Report and Order to eliminate the per-line reduction calculation. The budget adjustment factor USAC publishes by May 1, 2019 will be in effect from July 1, 2019 to June 30, 2020.

78. By May 1, 2020, the Commission directs USAC to publish the next legacy budget cap along with the next budget adjustment factor to be in effect from July 1, 2020 to June 30, 2021. The budget cap will be set at the previous year's budget cap, i.e., July 1, 2019 to June 30, 2020, plus inflation using GDP-CPI, which will be published in the October 2019 filing by NECA. USAC shall then account for the new model offers as follows. For carriers that accept the new model offer, USAC shall deduct those carriers' 2018 actual unconstrained claims plus the two years of inflation out of the legacy budget. For glide-path carriers, USAC shall calculate the total amount by which their 2018 actual unconstrained claims plus two years of inflation exceeds their model support. If that number is greater than 7% of the 2020 budget, USAC shall increase the budget by the amount in excess of 7%. In addition, prior to publishing the results of the 2020 budget cap, USAC shall compare the capped amount for each carrier with the CAF BLS five-year forecast adopted in this Report and Order. If the cap for any individual study area falls below the CAF BLS forecast for that study area in that year, USAC shall raise the cap for that study area to the amount of the CAF BLS forecast. Thus, carriers are assured of receiving at least the amount of support that will be identified in the forecast.

79. Going forward, for the 2021 budget and beyond, USAC shall annually increase the previous year's budget cap by inflation using GDP-CPI. Each year USAC shall use the budget cap to calculate the budget adjustment factor for that budget year, July 1 to June 30. Also, each year, for CAF BLS, USAC shall calculate the pro rata reductions once per year, and for HCLS, USAC shall calculate the pro rata reductions semiannually, which allows the reduction factor to reflect the new rural growth factor for HCLS that goes into effect January 1 of each calendar year. As noted above, if the cap for any individual study area falls below the CAF BLS forecast for that study area in that year, USAC shall raise the cap for that study area to the amount of the CAF BLS forecast. Based on the Commission's experience in implementing the budget control mechanism, it believes that it will enhance predictability with no discernable cost by setting the budget adjustment factor semiannually rather than quarterly.

80. To maximize the benefit resulting from the Commission's new legacy budget, it revises the deployment obligations for legacy carriers commensurate with the minimum threshold of support that will not be subject to the budget constraint. The Commission also revises the minimum speed obligation to 25/3 Mbps, up from 10/1 Mbps.

81. Discussion. The Commission revises the deployment obligations for legacy carriers commensurate with the revised budget and minimum threshold of support adopted in this Report and Order. The Commission also resets the five-year deployment term and revise the minimum speed obligation to 25/3 Mbps, up from 10/1 Mbps. By increasing the budget for legacy carriers, the Commission expects those carriers to do more to meet consumer demand and its obligations than they did when the budget was first adopted in 2011.

82. Under the Commission's rules, a carrier's deployment obligations are based, in part, on its five-year forecasted CAF BLS. The original five-year obligations were based on forecasted CAF BLS pursuant to the budget and rules in effect at the time, and also then-current data. Now that the Commission resets the budget for the legacy carriers and adopt a minimum level of support of no less than a carrier's revised CAF BLS five-year forecast, those original forecasts are outdated, and the Bureau must update them. The Commission disagrees with USTelecom and Blooston to the extent they do not support changing deployment obligations at this time. As NTCA stated, buildout obligations should correspond to the level of support; given that the Commission is increasing the amount of support, broadband deployment obligations should increase as well. The assumptions in the five-year forecast of the total CAF BLS support for each rate-of-return legacy study area for the purposes of determining deployment obligations were provided in Appendix D of the Order.

83. The Commission further finds that it is necessary to provide carriers revised CAF BLS deployment obligations at the time it expects to make the new model offers so that carriers can properly evaluate their options. Because the Commission expects the new offers in early 2019 and actual 2018 claims will not be available until March 2019, projected claims for 2018 may be used for calculating forecasted CAF BLS.

84. In addition to forecasted CAF BLS, part of the calculation for determining deployment obligations is a cost-per-location figure based on one of two methodologies. The Commission updates both methodologies to reflect that 25/3 Mbps is the Commission's new broadband standard. The methodologies also factor in the per-line, per-month cap, which the Commission revises in the Report and Order.

85. Revising deployment obligations at this junction is also consistent with the precedent established in the 2016 Rate-of-Return Reform Order. There, the Commission appropriately decided that at the end of the five-year deployment term, “carriers with less than 80 percent deployment of broadband service meeting then-current standards in their study areas will be required to utilize a specified percentage of their five-year forecasted CAF BLS to deploy broadband service meeting the Commission's standards where it is lacking in subsequent five-year periods.” Because the Commission is increasing the budget for legacy carriers, setting a minimum threshold of support, and implementing the current broadband standard of 25/3 Mbps, the Commission is replacing the prior five-year, 10/1 Mbps deployment obligations with new obligations that reflect the increased budget and broadband speed. Therefore, allowing carriers a full five years—rather than the remaining three years of the original deployment term—to complete deployment is warranted.

86. To ensure that consumers in rural areas enjoy a reasonably comparable quality of broadband as those in urban areas, the Commission revises the deployment obligations to require recipients of CAF BLS to offer broadband service at actual speeds of at least 25/3 Mbps. Broadband of at least 25/3 Mbps is now the Commission standard, and deployment obligations for its legacy program must reflect that.

87. To be consistent with CAF BLS deployment obligations being based on a five-year term, the deployment term will run from the effective date of the Report and Order until December 31, 2023. For administrative convenience, the Commission bases this new term on the calendar year starting January 1, 2019. Further, the Commission will count towards the new five-year obligation any locations CAF BLS carriers deployed to with at least 25/3 Mbps since May 25, 2016, regardless of whether the carriers had defined deployment obligations in the original term. CAF BLS carriers that have not had HUBB portal reporting obligations will be provided an opportunity to certify as needed 25/3 Mbps or higher locations deployed to since May 25, 2016. The Commission also maintains the Commission's prohibition on deploying “terrestrial wireline technology in any census block if doing so would result in total support per line in the study area to exceed” the per-line, per-month cap, as revised in this Report and Order.

88. In the 2016 Rate-of-Return Reform Order, the Commission did not set mandatory deployment obligations for those carriers that had deployed broadband of 10/1 Mbps to 80% or more of their study areas, as determined by FCC Form 477. Rather, the Commission stated that it would monitor the deployment progress of legacy carriers without defined buildout obligations and could “revisit this framework in the future if such carriers do not continue to make reasonable progress on extending broadband.” Although those carriers with 80% or greater deployment of 10/1 Mbps have in many cases reported additional deployment, the Commission is unable to evaluate their progress without an understanding of how this new deployment relates to the mandatory obligations it has set for other carriers. Therefore, the Commission finds that all legacy carriers should be subject to deployment obligations.

89. As the Commission did in 2016, it finds that carriers' mandatory deployment obligations should be determined based on a percentage their CAF BLS, with those carriers with greater deployment devoting a lower percentage of support to new deployment and those with relatively lower levels of deployment devoting a higher percentage to new deployment. Therefore, legacy rate-of-return carriers with less than 20% deployment of25/3 Mbps broadband service in their entire study area, based on the most recently available FCC Form 477 data, will be required to use 35% of their five-year forecasted CAF BLS support specifically for the deployment of 25/3 Mbps broadband service where it is currently lacking. Rate-of-return carriers with 20% or greater but less than 40% deployment of 25/3 Mbps broadband service in their entire study areas, will be required to use 25% of their five-year forecasted CAF BLS support specifically for the deployment of 25/3 Mbps broadband service where it is currently lacking. Rate-of-return carriers with 40% or greater deployment of 25/3 Mbps broadband service in their entire study areas, will be required to use 20% of their five-year forecasted CAF BLS support specifically for the deployment of 25/3 Mbps broadband service where it is currently lacking. Once a carrier has deployed broadband service of 25/3 Mbps to all locations within the study area, it has satisfied its deployment obligation, although the Commission encourages such carriers to continue to look for ways to increase the speed and reduce the latency of their services. Because all legacy carriers will have defined deployment obligations, all will be required to report their locations deployed in the HUBB portal.

90. The Commission finds that the capital investment allowance should be eliminated because its burdens and inefficiencies outweigh any benefits.

91. Discussion. The Commission finds that the capital investment allowance should be eliminated because the burdens it imposes outweigh the benefits. To show compliance with the capital investment allowance, legacy carriers must track every capital expenditure and allocate it to locations affected by that expenditure—something carriers were not required to do previously. While carriers always account for their capital expenditures, the requirement to tie these expenditures to particular locations is difficult and time consuming. In addition, the capital investment allowance may discourage marginal capital expenditures that are economically efficient. For instance, the capital investment allowance, which limits the total amount a carrier can spend on a project, may prevent a carrier from deploying broadband to an additional location or locations as part of an existing project if such expenditures would exceed the capital investment allowance. Accordingly, the Commission agrees with commenters that the capital investment allowance does not encourage efficient spending and is creating unnecessary burdens. Moreover, the Commission has found no evidence that the capital investment allowance has encouraged additional capital investment by those carriers below the average level of broadband deployment. Because the burdens and disincentives on deployment in the current capital investment allowance outweigh the purported benefits, the Commission finds that elimination of the capital investment allowance is appropriate.

92. The Commission declines to adopt NTCA's proffer of an engineer's certification and record retention. Carriers are already required to retain documentation for auditing purposes so that USAC can determine whether support is being used for its intended purpose, and NTCA's proposal appears to increase the paperwork burden on carriers without much benefit.

93. In this section, the Commission modifies sections 54.901(f) and 54.1310(d) and eliminate the per-line reduction calculation that is part of the budget control mechanism.

94. Discussion. The Commission eliminates the per-line reduction calculation that is part of the budget control mechanism. The previous Commission adopted the per-line and pro rata calculation on grounds that it struck a “fair balance among differently-situated carriers.” Although NTCA argues that incorporating the per-line reduction is part of a “carefully designed balance” or “carefully struck balance” between larger and smaller rate-of-return incumbent local exchange carriers (LECs), the Commission finds that this two-part calculation has resulted in some carriers bearing an unreasonably large share of the support limit.

95. When adopting the budget control mechanism with both the per-line and pro rata mechanisms, the Commission expected a “fair balance” among the legacy carriers, large and small. Data since adoption of this mechanism show, however, that the per-line reduction has resulted in an increasingly wide variation of cuts to carriers' support. The table in the following details across all legacy carriers over different time periods reductions in support due to the budget control mechanism with the per-line reduction.

The coastal migratory pelagics fishery in the Atlantic region is managed under the FMP and includes cobia, along with king and Spanish mackerel. The FMP was prepared by the Councils and is implemented by NMFS through regulations at 50 CFR part 622 under authority of the Magnuson-Stevens Act.

On October 11, 2018, NMFS published a notice of availability for Amendment 31 and requested public comment (83 FR 51424). On November 9, 2018, NMFS published a proposed rule for Amendment 31 and requested public comment (83 FR 56039). The proposed rule and Amendment 31 outline the rationale for the actions contained in this final rule. A summary of the management measures described in Amendment 31 and implemented by this final rule is provided below.

Through the CMP FMP, cobia is managed in two distinct migratory groups. The first is the Gulf migratory group of cobia that ranges both in the Gulf from Texas through Florida as well as in the Atlantic off the east coast of Florida (Gulf cobia). The second is the Atlantic migratory group of cobia that is managed from Georgia through New York (Atlantic cobia). The boundary between these two migratory groups is the Georgia-Florida state boundary. Both the Gulf and the Atlantic migratory groups of cobia were assessed through SEDAR 28 in 2013 and neither stock was determined to be overfished or experiencing overfishing.

The majority of Atlantic cobia landings occur in state waters and, despite closures in Federal water in recent years, recreational landings have exceeded the recreational annual catch limit (ACL) and the combined stock ACL. This has resulted in shortened fishing seasons, which have been ineffective at constraining harvest. Following overages of the recreational and combined stock ACLs in 2015 and 2016, Federal waters closures for recreational harvest occurred in both 2016 (June 20) and 2017 (January 24). Additionally, Federal waters were closed to commercial harvest of Atlantic cobia in 2016 (December 5) and 2017 (September 4), because the commercial ACL was projected to be reached during the fishing year.

Allowable harvest in state waters following the Federal closures varied by time and area. Harvest in state waters during the Federal closures contributed to the overage of the recreational ACL and the combined stock ACL. The South Atlantic Council requested that the Atlantic States Marine Fisheries Commission (ASMFC) consider complementary management measures for Atlantic cobia, as constraining harvest in Federal waters has not prevented the recreational and combined ACLs from being exceeded. The ASMFC consists of 15 Atlantic coastal states that manage and conserve their shared coastal fishery resources.

In April 2018, the ASFMC implemented the Interstate FMP, which established state management for Atlantic cobia with the purpose of improving cobia management in the Atlantic. Each affected state developed an implementation plan that included regulations in their state waters. In addition, the ASMFC is currently amending the Interstate FMP for Atlantic cobia to establish a mechanism for recommending future management measures to NMFS. Upon implementation of Amendment 31, such management measures would need to be implemented in Federal waters through the authority and process defined in the Atlantic Coastal Act.

The management measures contained within the ASMFC's Interstate FMP are consistent with the current Federal regulations for Atlantic cobia. Under the ASMFC plan, regulations in each state must match, or be more restrictive than, the Interstate FMP management measures. Georgia, South Carolina, North Carolina, and Virginia have implemented more restrictive regulations for the recreational sector in their state waters than those specified in the Interstate FMP. Those regulations include recreational bag and vessel limits, and minimum size limits, in addition to allowable fishing seasons. The Interstate FMP also provides the opportunity for states to declare de minimis status for their Atlantic cobia recreational sector if a state's recreational landings for 2 of the previous 3 years is less than one percent of the coastwide recreational landings for the same time period. States in a de minimis status would be required to adopt the regulations (including season) of the closest adjacent non- de minimis state or accept a 1 fish per vessel per day trip limit and a minimum size limit of 29 inches (73.7 cm), fork length. Maryland, Delaware, and New Jersey have declared a de minimis status.

The Magnuson-Stevens Act requires a council to prepare an FMP for each fishery under its authority that requires conservation and management. Any stocks that are predominately caught in Federal waters and are overfished or subject to overfishing, or likely to become overfished or subject to overfishing, are considered to require conservation and management (50 CFR 600.305(c)(1)). Beyond such stocks, councils may determine that additional stocks require conservation and management. Thus, not every fishery requires Federal management and the NMFS National Standard Guidelines at 50 CFR 600.305(c) provide factors that NMFS and the Councils should consider when considering removal of a stock from an FMP. This analysis is contained in Amendment 31.

Based on this analysis, the Councils and NMFS have determined that Atlantic cobia is no longer in need of conservation and management within the South Atlantic Council's jurisdiction and the stock is eligible for removal from the CMP FMP. The majority of Atlantic group cobia landings are in state waters and the stock is not overfished or undergoing overfishing. Additionally, the CMP FMP has proven ineffective at resolving the primary ongoing user conflict between the recreational fishermen from different states, and it does not currently appear to be capable of promoting a more efficient utilization of the resource. Most significantly, the harvest of Atlantic cobia is adequately managed in state waters by the ASMFC and their Interstate FMP, which was implemented in April 2018. For the commercial sector, the ASMFC's Interstate FMP specified management measures for Atlantic cobia that are consistent with the current ACL and accountability measure (AM) specified in the Federal regulations implemented pursuant to the CMP FMP.

Therefore, NMFS and the Councils have determined that management by the states, in conjunction with the ASMFC and Secretary of Commerce, will be more effective at constraining harvest and preventing overfishing, offering greater biological protection to the stock and decreasing adverse socioeconomic effects to fishermen. Further, management of Atlantic cobia by the ASMFC is expected to promote a more equitable distribution of harvest of the species among the states.

This final rule removes Atlantic cobia from Federal management under the Magnuson-Stevens Act. At the same time, it implements comparable regulations, in Federal waters, under the Atlantic Coastal Act.

Current commercial management measures for Atlantic cobia include a minimum size limit of 33 inches (83.8 cm), fork length and a commercial trip limit of two fish per person per day, not to exceed six fish per vessel per day. Federal regulations for recreational harvest of Atlantic cobia in Federal waters include a minimum size limit of 36 inches (91.4 cm), fork length and a bag and possession of one fish per person per day, not to exceed six fish per vessel per day.

Under the authority of the Atlantic Coastal Act, this final rule implements these same minimum size limits, recreational bag and possession limits, and commercial trip limits in Federal waters. Additionally, this final rule implements regulations consistent with current CMP FMP regulations for the fishing year, general prohibitions, authorized gear, and landing fish intact provisions specific to Atlantic cobia.

The current Atlantic cobia commercial ACL is 50,000 lb (22,680 kg) and the recreational ACL is 620,000 lb (281,227 kg). The removal of Atlantic cobia from Federal management under the Magnuson-Stevens Act removes these sector ACLs. Under this final rule, a commercial quota of 50,000 lb (22,280 kg) is implemented consistent with the current commercial ACL. The current commercial AM requires that if commercial landings reach or are projected to reach the ACL, then commercial harvest will be prohibited for the remainder of the fishing year. This final rule implements commercial quota closure provisions through the Atlantic Coastal Act to prohibit commercial harvest once the commercial quota is reached or projected to be reached.

The ASMFC's Interstate FMP has specified a recreational harvest limit (RHL) of 613,800 lb (278,415 kg) in state and Federal waters and state-by-state recreational quota shares (harvest targets) of the coastwide RHL. During the development of the Interstate FMP, one percent of the amount of the recreational allocation of the current Federal ACL (initially 6,200 lb (2,812 kg)) was set aside to account for harvests in de minimis states (Maryland, Delaware, and New Jersey). The harvest targets for each state, in both state and Federal waters, are 58,311 lb (26,449 kg) for Georgia, 74,885 lb (33,967 kg) for South Carolina, 236,316 lb (107,191 kg) for North Carolina and 244,292 lb (110,809 kg) for Virginia. Percentage allocations are based on states' percentages of the coastwide historical landings in numbers of fish.

The removal of Atlantic cobia from Federal management under the Magnuson-Stevens Act removes the recreational sector AM for Atlantic cobia. The current recreational AM requires that if both the recreational ACL and the stock ACL are exceeded in a fishing year, then in the following fishing year recreational landings will be monitored for a persistence in increased landings. Also, if necessary, the recreational vessel limit will be reduced to no less than 2 fish per vessel to ensure recreational landings achieve the recreational annual catch target, but do not exceed the recreational ACL in that fishing year. Additionally, if the reduction in the recreational vessel limit is determined to be insufficient to ensure that recreational landings will not exceed the recreational ACL, then the length of the recreational fishing season will be reduced.

In place of the current recreational AM, state-defined regulations and seasons implemented consistent with the ASMFC's Interstate FMP are designed to keep harvest within the state harvest targets. If a state's average annual landings over the 3-year time period are greater than their annual harvest target, then the Interstate FMP requires the state to adjust their recreational season length or recreational vessel limits for the following 3 years, as necessary, to prevent exceeding their harvest target in the future years.

Upon implementation of Amendment 31, Atlantic cobia will be managed under the ASMFC's Interstate FMP in state waters and through Atlantic Coastal Act regulations in Federal waters. This will ensure that Atlantic cobia continues to be managed in Federal waters and that there will be no lapse in management of the stock. These regulations are being implemented concurrently with the removal of Atlantic cobia from the CMP FMP and serve essentially the same function as the current CMP FMP based management measures. NMFS expects that the Interstate FMP and Atlantic Coastal Act will provide adequate management of Atlantic cobia in state and Federal waters and ensure that the stock has sufficient conservation and management measures in place.

NMFS received 14 comments on the proposed rule and Amendment 31 from members of the public and fishing associations. Of these comments, two supported the actions in the proposed rule and Amendment 31, with which NMFS agrees. Another comment related to potential future measures in Florida state waters along the east coast, which is unrelated to the Atlantic cobia stock and beyond the scope of the actions contained in Amendment 31. NMFS refers the commenter to the State of Florida for potential future changes to state regulations.

NMFS received 11 comments questioning the recreational and commercial management measures contained in the proposed rule. These comments questioned the basis for the less restrictive size and bag limits for commercial vessels, as compared to recreational vessels, harvesting Atlantic cobia. Initially, NMFS notes that all of the management measures contained in this rule are merely continued under the Atlantic Coastal Act from existing Magnuson-Stevens Act based regulations, and none of the size and bag restrictions originate from Amendment 31. The more restrictive recreational size and bag limits were implemented via the final rule associated with Framework Amendment 4 to the FMP (82 FR 36344, August 4, 2017). Prior to that final rule, the size and possession limits were the same for recreational and commercial vessels. The CMP FMP allocates over 90 percent of the harvest of the Atlantic cobia stock to the recreational sector; thus, recreational harvest can easily lead to exceeding acceptable harvest levels for the entire stock, potentially leading to overfishing. Increasing recreational harvest in 2015 and 2016 did exactly that, with recreational landings being more than double the total stock ACL in each year, which resulted in extended Federal closures for the recreational sector. The more restrictive recreational management measures questioned in the comments were implemented to reduce recreational harvest to acceptable levels and promote more equitable fishing opportunities for all anglers through avoiding prolonged Federal closures. Without continuing the more restrictive recreational measures under the Atlantic Coastal Act, NMFS could not expect management measures in Federal waters to constrain the harvest of Atlantic cobia to acceptable levels, thereby helping to prevent overfishing.

No changes were made to this final rule as a result of public comment.

The Regional Administrator, Southeast Region, NMFS has determined that this final rule is consistent with Amendment 31, the FMP, the Magnuson-Stevens Act, and other applicable laws. Additionally, this final rule is compatible with the effective implementation of the ASMFC's Interstate FMP for Atlantic cobia.

This final rule has been determined to be not significant for purposes of Executive Order 12866. NMFS expects this final rule would reduce regulatory complexity and administrative costs, as well as provide economic benefits to recreational anglers through expanded harvest opportunities in Federal waters and a more stable recreational fishing season for Atlantic cobia.

The Magnuson-Stevens Act and Atlantic Coastal Act provide the statutory basis for this final rule. No duplicative, overlapping, or conflicting Federal rules have been identified. In addition, no new reporting, record-keeping, or other compliance requirements are introduced by this final rule. Accordingly, the Paperwork Reduction Act does not apply to this final rule.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration during the proposed rule stage that this rule would not have a significant economic impact on a substantial number of small entities. The factual basis for this determination was published in the proposed rule and is not repeated here. None of the public comments that were received specifically addressed the certification and NMFS has not received any new information that would affect its determination that this rule would not have a significant economic impact on a substantial number of small entities. As a result, a final regulatory flexibility analysis was not required and none was prepared.

For the reasons set out in the preamble, 50 CFR parts 600, 622, and 697 are amended as follows: