Executive Orders 12866 and 13771

This rulemaking does not meet the definition of a significant regulatory action contained in section 3(f) of Executive Order 12866 and is not subject to review by the Office of Management and Budget (OMB). Additionally, because this 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. It is not intended to have retroactive effect.

AMS has assessed the impact of this final rule on Indian tribes and determined that this rule will not, to our knowledge, have tribal implications that require tribal consultation under Executive Order 13175. If a Tribe requests consultation, AMS will work with the Department of Agriculture's (USDA) Office of Tribal Relations to ensure meaningful consultation is provided where changes, additions, and modifications are identified in this final rule.

The Soybean Promotion, Research, and Consumer Information Act (Soybean Act) (7 U.S.C. 6301-6311) provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 1971 of the Soybean Act, a person subject to the Soybean Order may file a petition with USDA stating that the Soybean Order, any provision of the Soybean Order, or any obligation imposed in connection with the Soybean Order, is not in accordance with the law and request a modification of the Soybean Order or an exemption from the Soybean Order. The petitioner is afforded the opportunity for a hearing on the petition. After a hearing, USDA would rule on the petition. The Soybean Act provides that district courts of the United States in any district in which such person is an inhabitant, or has their principal place of business, has jurisdiction to review USDA's ruling on the petition, if a complaint for this purpose is filed within 20 days after the date of the entry of the ruling.

Further, section 1974 of the Soybean Act provides, with certain exceptions, that nothing in the Soybean Act may be construed to preempt or supersede any other program relating to soybean promotion, research, consumer information, or industry information organized under the laws of the United States or any State. One exception in the Soybean Act concerns assessments collected by Qualified State Soybean Boards (QSSBs). The exception provides that to ensure adequate funding of the operations of QSSBs under the Soybean Act, no State law or regulation may limit or have the effect of limiting the full amount of assessments that a QSSB in that State may collect, and which is authorized to be credited under the Soybean Act. Another exception concerns certain referenda conducted during specified periods by a State relating to the continuation of a QSSB or State soybean assessment.

Section 11 of the Beef Research and Promotion Act of 1985 (Beef Act) (7 U.S.C. 2901-2911) provides that nothing in the Beef Act may be construed to preempt or supersede any other program relating to beef promotion organized and operated under the laws of the United States or any State. There are no administrative proceedings that must be exhausted prior to any judicial challenge to the provisions of this rule.

The Soybean Act and the Soybean Order issued thereunder authorize the collection of an assessment from soybean producers of one-half of one percent (0.5 percent) of the net market value of soybeans, processed soybeans, or soybean products. In most cases, these assessments are collected by QSSBs that retain up to half of the assessments as authorized by the Soybean Act. The QSSBs as defined under Section 1967(14) of the Soybean Act will forward the remainder to the United Soybean Board (Soybean Board), which administers the national soybean checkoff program.

The original Soybean Order, which became effective July 9, 1991, mandated that all producers marketing soybeans pay an assessment of one-half of one percent (0.5 percent) of the net market price of the market price of soybeans sold. The original Soybean Order contained a provision in § 1220.228(b)(5)(i), which required QSSBs that were authorized or required to pay refunds to producers to certify to the Soybean Board that they would honor any request from a producer for a refund from the QSSB by forwarding to the Soybean Board those contributions for which the producer received a credit, pursuant to § 1220.223(a)(3). In other words, this section implicitly authorized refunds by the QSSB if State law allowed or required the QSSB to pay refunds; it further directed that the producer receive a credit for those refunds, with the amount sent to the Soybean Board.

In late 1995, 7 CFR 1220.228(b)(5)(i) was removed as part of a referendum process and rulemaking to eliminate obsolete regulatory language. However, the rulemaking inadvertently removed language that should have been retained regarding a producer's ability to redirect funds to the national program should they choose to do so. While this provision was removed from the order, QSSBs were still required to comply with the terms of their certification as a QSSB and, therefore, continued to allow for redirection of funds at the producer's request.

In States where payments to a QSSB are not required by State law, the opportunity for producers to choose, on a monthly basis, to direct the full federal assessment to the Soybean Board is already AMS' current policy and required under a QSSB's certification; this rule is intended to formalize the policy. Therefore, AMS is adding provisions that remedy the removal of the original refund language. A new provision is added to the Soybean Order to (i) require producers in States where refunds are authorized to forward that refund to the Soybean Board and (ii) provide an opportunity for a refund if the QSSB is not authorized by State statute but is organized and operating within a State and is certified by the Soybean Board, as provided by § 1220.228(a)(2). To avail themselves of this option, producers need to submit to their QSSB a form (QSSB-1) postmarked by the 30th day of the month following the month the soybeans were sold. Assessments will not be able to be retroactively redirected from the QSSB to the Soybean Board. Likewise, AMS will require that the QSSB must respond by the last day of the month following the month in which the OMB-approved QSSB-1 form was received.

Regardless of a State's requirements or refunding provisions, a producer is required by the Soybean Act to pay an assessment of one-half of one percent (0.5 percent) of the net market value of soybeans, processed soybeans, or soybean products. Several States have additional producer assessments, mandated by State statutes, that are collected in addition to the assessment required by the Soybean Act. If a QSSB offers a producer refund under a State statute, the QSSB can only refund to the producer any State assessment collected in excess of the assessment that the producer is required to pay under the Soybean Act. AMS will allow the portion of the assessment compelled by the Soybean Act that the QSSB would normally keep to be redirected to the national program by the producer if State law allows.

Examples:

• Example 1—States with no State Law: A soybean producer in California pays an assessment for a soybean sale. The assessment is collected by a certified Western Region Soybean Board, which keeps 50% and forwards the remaining 50% to the Soybean Board. California has no State law requiring a California assessment, so the California producer may request that the 50% of the assessment amount retained by the Western Region Soybean Board be redirected to the Soybean Board.

• Example 2—States with a State Law that Authorizes Refunds: A soybean producer in Iowa pays an assessment for a soybean sale. The assessment is collected by Iowa Soybean Promotion Board, which keeps 50% and forwards the remaining 50% to the Soybean Board. Iowa has a State law with a refund provision, so the Iowa producer may request that the 50% of the assessment amount retained by the Iowa Soybean Promotion Board be redirected to the Soybean Board.

• Example 3—States with a State Law that Does Not Authorize Refunds: A soybean producer in Virginia pays an assessment for a soybean sale. The assessment is collected by the Virginia Soybean Board which keeps 50% and forwards the remaining 50% to the Soybean Board. Virginia has a State law with no refund provision, so the Virginia soybean producer may not request that the 50% of the assessment amount retained by the Virginia Soybean Board be redirected to the Soybean Board.

Similarly, the Beef Promotion and Research Act of 1985 (Beef Act) and the Beef Promotion and Research Order (Beef Order) issued thereunder authorize the collection of an assessment from cattle producers of $1.00 per head of cattle sold. In most cases, these assessments are collected by Qualified State Beef Councils (QSBCs) that retain up to one-half of the assessments, as authorized by the Beef Act. 1 The QSBCs, as defined under Section 3(14) of the Beef Act, are required to forward the remainder to the Cattlemen's Beef Promotion and Research Board (Beef Board), which administers the national beef checkoff program. 2

The original Beef Order, which became effective July 18, 1986, mandated that all producers owning and marketing cattle pay an assessment of $1.00 per head of cattle, to be collected each time cattle are sold. The original Beef Order contained a provision in § 1260.181(b)(5), which required QSBCs that were authorized or required by State law to pay refunds to producers to certify to the Beef Board that they would honor any request from a producer for a refund from the QSBC by forwarding to the Beef Board those contributions for which the producer received a credit, pursuant to § 1260.172(a)(3). In other words, this section authorized refunds by the QSBC if State law allowed or required the QSBC to pay refunds; it further directed that the producer receive a credit for those refunds, with the amount redirected to the Beef Board.

In late 1995, 7 CFR 1260.181(b)(5) was removed as part of rulemaking to eliminate obsolete regulatory language. However, the rulemaking inadvertently removed language that should have been retained regarding a producer's ability to redirect funds to the national program should they choose to do so. While this provision was removed from the order, QSBCs were still required to comply with the terms of their certification as a QSBC and, therefore, continued to allow for redirection of funds at the producer's request. Therefore, AMS is adding provisions to remedy the removal of the original language in § 1260.181.

Furthermore, while the Beef Act and Beef Order authorize QSBCs to retain up to 50 cents per head of cattle assessed, neither the Beef Act nor the Beef Order require producers to contribute a portion of the $1.00-per-head assessment to a QSBC. Thus, unless a State statute requires the collection of the $1.00-per-head assessment set forth in the Beef Act (the federal assessment) or requires producers to contribute a portion of the $1.00-per-head federal assessment to the State beef council, producers are able to choose whether or not to contribute up to 50 cents per head of the federal assessment to their QSBC. While the original Beef Order did not address the specific situation that allows producers to choose whether or not to contribute up to 50 cents per head of the federal assessment to a QSBC, AMS is addressing this in the new language. A new provision is being added to the Beef Order to (i) require QSBCs in States where refunds to producers of the $1.00-per-head assessment collected per the Beef Act and Order are authorized by State statute to forward that refund to the Beef Board, and (ii) provide an opportunity for producers to choose to direct the full $1.00-per-head federal assessment to the Beef Board in States where State law does not require the collection of the $1.00-per-head assessment set forth in the Beef Act (the federal assessment) or in States where State statutes do not require producers to contribute a portion of the $1.00-per head federal assessment to the State beef council.

In States where payments to a QSBC are not required by State law, the opportunity for producers to choose, on a monthly basis, to direct the full $1.00-per-head federal assessment to the Beef Board is already AMS' current policy; this rule is intended to formalize the policy. The Beef Board also conveyed this policy in its July 26, 2018, memo “Obligation to Redirect Assessments Upon Producer Request if Not Precluded by State Law. 3 As QSBCs are responsible for collecting assessments on cattle sold in or originating in their State (§§ 1260.172(a)(5) and 1260.181(b)(3)), producers who are allowed refunds under State statutes and choose to redirect the full $1.00-per-head assessment to the Beef Board must submit to the QSBC a written request on an approved request form (QSBC-1).

QSBCs generally describe the requirements and process for refunds in their Application for Certification that is reviewed and approved by the Beef Board. As part of their certification requirements, QSBCs must certify that any requests from producers for refunds will be honored by forwarding such request to the Beef Board if allowed by state law. In practice, QSBCs follow similar operating procedures for collecting the $1.00-per-head assessment across collection points ( e.g., markets, dealers, brokers) and are required to reconcile transactions on a monthly basis. 4 To align with their monthly reconciliation and budget planning, QSBCs provide for a monthly process through which producers can, if allowed by state law, redirect their assessments to the Beef Board. To avail themselves of this option, producers must submit a QSBC-1 form that is postmarked by the 15th day of the month following the month the cattle were sold. Assessments cannot be retroactively redirected from the QSBC to the Beef Board, and QSBCs will be required to respond to such requests within 60 days. 5

Regardless of a State's requirements or refunding provisions, a producer is required by the Beef Act to pay an assessment of $1.00 on each head of cattle sold. Several States have additional producer assessments, mandated by State statutes, which are collected in addition to the $1.00-per-head assessment required by the Beef Act. If a QSBC offers a producer refund under a State statute, the QSBC can only refund to the producer any State assessment collected in addition to the $1.00-per-head assessment that the producer is required to pay under the Beef Act. This final rule provides that the portion of the $1.00-per-head federal assessment that the QSBC would normally keep under § 1260.181(b)(4) can be redirected to the national program by the producer if State law allows.

Examples:

• Example 1—States with no State Law: A producer in Kansas pays the $1.00 federal assessment for a cattle sale. The Kansas Beef Council collects $1.00, keeps $0.50, and forwards $0.50 to the Beef Board. Since there is no Kansas law compelling producers to contribute to the Kansas Beef Council, the producer may request that the $0.50 of the original $1.00 assessment be redirected to the Beef Board. This example is depicted in Figure 1.

• Example 2—States with a State Law that Authorizes Refunds: A producer in Colorado pays $1.00 in assessments for a cattle sale. The Colorado Beef Council collects $1.00, keeps $0.50, and forwards $0.50 to the Beef Board. Colorado State law requires an assessment but allows a refund. The producer may request that the $0.50 cents of the original $1.00 assessment be redirected to the Beef Board. This example is depicted in Figure 2.

Based on current understanding, AMS believes that most states fall within one of these two examples—either they have no state law compelling them to contribute to a QSBC or they have a state law that provides for refunds. In either case, a producer in these states can request that the $0.50 of the original $1.00 assessment be redirected to the Beef Board.

• Example 3—States with a State Law that Does Not Authorize Refunds: A producer in Arizona pays $1.00 in assessments for a cattle sale. The Arizona Beef Council collects $1.00, keeps $0.50, and forwards $0.50 to the Beef Board. Arizona law compels the collection of the $1.00-per-head assessment and does not provide for a refund. The producer may not request the Arizona Beef Council to redirect any portion of the $0.50 to the Beef Board. This example is depicted in Figure 3.

Based on our current understanding of state laws, AMS believes that a few states fall under this example including Arizona, California, Georgia, Louisiana, Michigan, Oregon, Washington, and Wyoming. Because there is a state law in place that mandates assessments without allowing for a refund, producers in these states may not request that the $0.50 of the original $1.00 assessment be redirected to the Beef Board. In general, AMS recommends stakeholders fully consult state laws as these examples are used for illustrative purposes and are subject to change.

Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Administrator of the AMS has considered the economic effect of this action on small entities and has determined that this final rule will not have a significant economic impact on a substantial number of small entities. The purpose of RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly burdened.

USDA's Farm Service Agency estimates that there are 569,998 soybean producers subject to the Soybean Order. This estimate comes from including all soybean producers engaged in the production of soybeans in the previous 2 years. The majority of producers subject to the Soybean Order are small businesses under the criteria established by the Small Business Administration (SBA) (13 CFR 121.201). SBA defines small agricultural producers as those having annual receipts of less than $750,000.

This final rule imposes no new burden on the soybean industry. This action clarifies that soybean producers, under certain circumstances, have the option to request that their assessments paid to a State board be directed to the national program. This action is not expected to change how producers or QSSBs operate with respect to directing funds when appropriate to the national program.

In the July 15, 2016 proposed rule, AMS provided a chart with estimates by state for the potential amount that could be redirected to the national program (81 FR 45987). The estimates varied depending on whether redirection was possible and the degree to which state law affected refund amounts. AMS received comments indicating that the chart was difficult to follow and, in some cases, inaccurate. As a result, AMS is generalizing its estimate of potential financial impacts to range between $0 (for those states in which redirection is not possible) to up to $14 million (for high producing soybean states in which redirection is possible). However, given that this action is not expected to change how and whether producers choose to exercise the refund provisions in states where redirection of funds is possible, AMS does not anticipate a significant increase in producer requests that would impact the amount of assessments retained by a given state.

The information collection requirements on QSSBs are minimal. QSSBs are already required to remit assessments to the national programs. We have not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

Accordingly, AMS has determined that this final rule will not have a significant economic impact on a substantial number of small soybean entities.

In the February 2013, publication of “Farms, Land in Farms, and Livestock Operations,” USDA's National Agricultural Statistics Service (NASS) estimated that the number of operations in the United States with cattle in 2012 totaled approximately 915,000, down from 950,000 in 2009. The majority of these operations that are subject to the Beef Order may be classified as small entities. According to the NASS website “Farms, Land in Farms, and Livestock Operations,” the issues released between 2005 and 2013 included “Livestock Operations” in the title. Beginning in 2014, livestock operations data will be available in the Census of Agriculture and most recent data can be referenced from Census data.

This final rule imposes no new burden on the beef industry. This action clarifies that producers, under certain circumstances, have the option of requesting that their assessments paid to a State council be directed to the national program. This action is not expected to change how producers or QSBCs operate with respect to directing funds when appropriate to the national program.

In the July 15, 2016, proposed rule, AMS provided a chart with estimates by state for the potential amount that could be redirected to the national program (81 FR 45988). The estimates varied depending on whether redirection was possible and the degree to which state law affected refund amounts. AMS received comments indicating that the chart was difficult to follow and, in some cases, inaccurate. As a result, AMS is generalizing its estimate of potential financial impacts to range between $0 (for those states in which redirection is not possible) to up to $4.6 million (for high producing beef states in which redirection is possible). However, given that this action is not expected to change how and whether producers choose to exercise the refund provisions in states where redirection of funds is possible, AMS does not anticipate a significant increase in producer requests that would impact the amount of assessments retained by a given state. Currently, a few States are in various stages of establishing or amending State laws regarding beef checkoff requirements, so this information may change over time.

The information collection requirements on QSBCs are minimal. QSBCs are already required to remit assessments to the national programs. We have not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

Accordingly, AMS has determined that this final rule will not have a significant economic impact on a substantial number of small producers.

In accordance with OMB regulations (5 CFR part 1320) that implement the Paperwork Reduction Act of 1995 (44 U.S.C Chapter 35 (PRA)), this collection has been submitted to OMB with the reference number 0581-0246. Upon approval, the collection will be merged with OMB number 0581-0093, “National Research, Promotion, and Consumer Information Programs.” This final rule established the use of two new forms, which impose a total annual burden of 2.49 hours. The Producer Redirection of Checkoff Assessment forms, QSBC-1 and QSSB-1, require the minimum information necessary to effectively allow producers in certain states that pay their assessments to a State board or council authorized under their respective statutes, to redirect the assessment to the national program. The information collection requirements in the request are essential to carry out the legislative purpose of the Beef Act and the Soybean Act. Under the Beef and Soybean Orders, producers are required to pay an assessment each time cattle or soybeans are sold. While the Beef and Soybean Orders impose certain recordkeeping requirements, information required under the Beef and Soybean Orders can be compiled from records currently maintained. Such records must be retained for at least 3 years beyond the marketing year of their applicability.

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. As with all Federal promotion programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. In the proposed rule published July 15, 2016, (81 FR 45984) comments were invited on: (a) Whether the proposed collection of information is necessary for the proper performance of functions of the Order and USDA's oversight of the program, including whether the information will have practical utility; (b) the accuracy of USDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. No separate comments were received regarding the information collection section. However, AMS received a few comments that discussed the paperwork burden of the forms. AMS's response to those comments is discussed in the comments section.

A proposed rule concerning this action was published in the Federal Register on July 15, 2016 (81 FR 45984). A 60-day comment period ending September 13, 2016, was provided for interested persons to respond to the proposal. AMS received 14 comments. Of the 14 comments received, 12 commenters referenced proposed changes to the Beef Order, one commenter referenced proposed changes to the Soybean Order, and one commenter referenced both the Soybean and Beef Orders. One commenter did not provide comments within the timeframe provided in the proposed order. However, in general, this commenter provided thoughts similar to those who opposed to the proposed rule.

Of the 12 comments received regarding the Beef Order, over half stated that they opposed the proposed rule while the others recommended clarification, modification, or changes to the proposed rule. The majority of commenters believe that assessments should go to the national program, unless a producer provides affirmative consent that their federal assessment paid to a State council to remain with the State program. In their view, this approach would be consistent with a voluntary contribution as specified in the statute. These commenters suggest that having to request that their assessments paid to a State council be directed to the national program creates a mandatory contribution. Some commenters argued this is unconstitutional. AMS disagrees. This action continues to provide producers with a choice about where they want their funds directed. Since the inception of the national program, few producers have requested redirection of their funds to the national program, instead choosing to keep a portion of the federal assessment to support and invest in local programs and activities. For example, over the last three years, fewer than 20 producers or businesses have requested redirection of their funds to the national program. Thus, the majority of producers prefer that the QSBCs retain their assessments. Requiring the majority of producers to provide prior affirmative consent to keep their funds locally with the QSBCs would create an unnecessary burden to the industry as a whole.

A few commenters recommended that the deadline to request a redirection be extended. However, due to the need for QSBCs to reconcile their financial transactions on a monthly basis, the deadline for a redirection request must remain as a monthly process as stated in the proposed rule.

A few commenters recommended that AMS provide clarification of the individual State laws, clarify any conflicts with state laws, and modify/correct any examples provided in the rule and the tables to accurately reflect the governing state law. Specifically, the commenters requested greater clarification of the application of refunds in each state. AMS believes that application of State laws are best interpreted by the States themselves. The States, not AMS, are responsible for interpretation of their respective laws.

A few commenters pointed out that some QSBC names were incorrect. AMS has updated the list as part of its technical amendments and is reflected in this final rule.

One commenter requested that AMS clarify the terminology in the rule to reflect assessments of cattle producers, not “beef” producers, which, in their view, would include multinational trade associations and packers. That same commenter strongly disagreed with the assumption that only 20 operations would request a redirection. AMS modified terminology in the preamble accordingly and clarifies that it is producers as defined at § 1260.116 who are subject to assessment per the requirements at § 1260.172. Furthermore, while the commenter disagrees that only 20 producers or operations would request redirection and thus that AMS's information collection burden is too low, AMS has reviewed the number of redirection requests received over the last 3 years as the basis for its estimate. Over the last three years, fewer than 20 producers or businesses in total have requested redirection of their funds to the national program. Based on that data, AMS anticipates that the number of redirection requests will be similar to past years. Therefore, we do not believe the burden estimate is too low.

One commenter recommended several rule text changes. First, the commenter recommended changes to proposed rule § 1260.181(b)(5) to correct a perceived syntax error. The commenter recommended adding two new subsections to correct. Additionally, the commenter recommended a change to § 1260.312(c) to provide clarity and consistency with § 1260.181(b)(4). AMS reviewed the comments and believes they have merit. Consequently, these technical amendments are reflected in this final rule.

AMS received two comments respecting the Soybean Order. Both commenters recommended a rule text change to clarify that the proposed rule applies to QSSBs subject to both § 1220.228(a)(1) and (2) of the Soybean Promotion, Research, and Consumer Information Order. Both commenters also raised concerns with how the state refund rules applied to QSSBs. With respect to the commenters' recommended new amendatory language, AMS is unclear on section cross references and believes the suggested changes include an error. Rather than adopt the commenters suggested changes as they proposed, we have made modifications to the amendatory text by adding a new § 1220.228(e) to reflect that this rule applies to all QSSBs ( i.e., those entities that elect to serve due to their state authorization under § 1220.228(a)(1) and those entities that apply for certification under § 1220.228(a)(2)). AMS also moved the proposed text about producers receiving a refund and their obligations to remit this refund to the Board to the appropriate Assessments section at § 1220.223(a)(3). Further, as stated above, states are responsible for interpreting their laws, and AMS advises stakeholders to carefully review the state refund laws applicable to their state.

Accordingly, no changes will be made to the rule as proposed other than the tables and other technical amendments.

In addition, several technical amendments are made to update information in the Beef Promotion and Research Order and rules and regulations:

Section 1260.181(b)(4) currently requires QSBCs to remit assessments to the Beef Board by the last day of the month in which the QSBC received the assessment “unless the Board determines a different date.” The Beef Board's practice has been to require QSBCs to remit assessments by the 15th day of the following month. This section will be updated to reflect actual practice.

Section 1260.315 is amended to reflect the current listing of QSBCs.

For reasons set forth in the preamble, 7 CFR parts 1220 and 1260 are amended as follows:

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain The Boeing Company Model 737-100, -200, -200C, -300, -400, and -500 series airplanes. The NPRM published in the Federal Register on October 16, 2018 (83 FR 52171). The NPRM was prompted by reports that frame web and frame integral inboard chord cracking is occurring on multiple airplanes in multiple locations below the passenger floor. The NPRM proposed to require repetitive detailed, general visual, and HFEC inspections of the section 43 lower lobe frames from station (STA) 380 to STA 520; an inspection to determine if certain repairs are installed; and applicable on-condition actions.

We are issuing this AD to address frame cracking, which could result in the failure of multiple frames or the combination of a severed frame and cracks in fuselage chem-milled pockets in this area, which could lead to uncontrolled decompression of the airplane.

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.

Aviation Partners Boeing stated that accomplishing the Supplemental Type Certificate (STC) ST01219SE does not affect the actions specified in the NPRM.

We concur with the commenter. We have redesignated paragraph (c) of the proposed AD as paragraph (c)(1) of this AD and added paragraph (c)(2) to this AD to state that installation of STC ST01219SE does not affect the ability to accomplish the actions required by this AD. Therefore, for airplanes on which STC ST01219SE is installed, a “change in product” alternative method of compliance (AMOC) approval request is not necessary to comply with the requirements of 14 CFR 39.17.

Commenter Mark Bowen observed that if a crack or “non SRM/Boeing repair” is found as part of inspections accomplished under Boeing Alert Service Bulletin 737-53A1361, the only action given in the proposed AD is to contact Boeing for repair or alternative inspections. He asked whether frame replacement could be considered an alternative option to contacting Boeing for a repair or alternative inspections.

We partially agree with the commenter's request. Frame replacement that removes the cracked or repaired structure may be an option to repair or alternative inspections, provided the replacement can be shown to adequately address the unsafe condition. However, we note that the commenter did not provide sufficient documentation to show that, in regard to the unsafe condition identified in this AD, a frame replacement would adequately address the unsafe condition. In addition, the commenter did not provide details on a proposed method of compliance for accomplishing the proposed frame replacement or post-replacement inspections, nor any evidence of support for the proposal from the Boeing Commercial Airplanes Organization Designation Authorization (ODA). Operators may apply for an alternative method of compliance in accordance with paragraph (i) of this AD, provided they can show that frame replacement adequately addresses the unsafe condition. We have not changed this AD in this regard.

Boeing requested that we change paragraph (i)(4) of the proposed AD to refer to paragraph (h) of the proposed AD instead of (h)(2). We contacted Boeing to clarify the intent of their comment and they stated that they wanted to allow using the phrase “the original issue date of this service bulletin” (rather than “the effective date of this AD”) for determining compliance with this AD only when used in flag notes and notes. Boeing clarified that Boeing Alert Service Bulletin 737-53A1361, dated July 17, 2018, uses the phrase “the original issue date of this service bulletin” in several notes and flag notes. Boeing added that those notes, which are required for compliance (“RC”), specify conditions under which certain airplanes do not have to do certain actions following approved repairs. Boeing noted that if those notes are not excepted in paragraph (h)(1) of this AD, then operators would have to request an AMOC if the applicable repairs were approved after the original issue date of the service bulletin and before the effective date of this AD.

We agree with the commenter's request to allow using the phrase “the original issue date of this service bulletin” for determining compliance with this AD only when used in flag notes and notes. We have revised paragraph (h)(1) of this AD to provide an exception to the phrase “the original issue date of this service bulletin,” in a note or flag note. We have determined it is not necessary to change paragraph (i)(4) of this AD in this regard.

Boeing requested that we change paragraph (g)(1) of the proposed AD to refer to “applicable on-condition actions” instead of “applicable corrective actions.” The commenter suggested that “on-condition actions” would be consistent with current standards.

We agree because this language would be consistent with the preamble of this AD, as well as current terminology standards. We have made the requested change in paragraph (g)(1) of this AD.

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.

We reviewed Boeing Alert Service Bulletin 737-53A1361, dated July 17, 2018. This service information describes procedures for repetitive detailed, general visual, and HFEC inspections of the section 43 lower lobe frames from STA 380 to STA 520; a general visual inspection to determine if certain repairs are installed; and applicable on-condition actions. 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 262 airplanes of U.S. registry. We estimate the following costs to comply with this AD:

We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in 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 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:

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it amends the Class E surface area and Class E airspace extending upward from 700 feet above the surface at Mount Vernon Airport, Mount Vernon, IL, to support IFR operations at this airport.

The FAA published a notice of proposed rulemaking in the Federal Register (84 FR 6708; February 28, 2019) for Docket No. FAA-2019-0041 to amend the Class E surface area and Class E airspace extending upward from 700 feet above the surface at Mount Vernon Airport, Mount Vernon, IL. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. One comment was received supporting this action. No response is provided.

Class E airspace designations are published in paragraph 6002 and 6005 of FAA Order 7400.11C, dated August 13, 2018, and effective September 15, 2018, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in the Order.

This document amends FAA Order 7400.11C, Airspace Designations and Reporting Points, dated August 13, 2018, and effective September 15, 2018. FAA Order 7400.11C is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11C lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 by:

Modifying the Class E surface area to within a 4.1-mile radius (reduced from a 4.2-mile radius) at Mount Vernon Airport, Mount Vernon, IL, and removing the Mount Vernon VOR/DME and the associate extension from the airspace legal description;

And modifying the Class E airspace extending upward from 700 feet above the surface at Mount Vernon Airport, Mount Vernon, IL, by removing the Mount Vernon VOR/DME and the associated extension from the airspace legal description; and by updating the name of the airport (formerly Mount Vernon/Outland Airport) and the geographic coordinates of the airport to coincide with the FAA's aeronautical database.

This action is due to an airspace review caused by the decommissioning of the Mount Vernon VOR, which provided navigation information for the instrument procedures at these airports, as part of the VOR MON Program.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current, is non-controversial and unlikely to result in adverse or negative comments. It, therefore: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

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

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

The Commission issued the Guides for the Nursery Industry in 1979. 1 These Guides address various sales claims for outdoor plants, including representations regarding quantity, size, grade, kind, species, age, maturity, condition, vigor, hardiness, growth ability, price, and origin or place where grown. The Commission amended the Guides in 1994 to update legal terminology, and again in 2007 to make a technical correction. 2

The Commission reviews its rules and guides periodically to seek information about their costs and benefits to consumers and businesses, regulatory and economic impact, and general effectiveness in protecting consumers and helping industry avoid deceptive claims. These reviews assist the Commission in identifying rules and guides that warrant modification or rescission.

On February 22, 2018, the Commission initiated its scheduled regulatory review of the Nursery Guides and solicited public comment on several issues. 3 Specifically, the Commission sought input on the continuing need for the Guides; their economic impact; possible conflict between the Guides and state, local, federal, or international laws; and the effect of any technological, economic, environmental, or other industry changes. The Commission also solicited comment on issues specific to the Guides, such as whether the Commission should update plant classification references. In response, the Commission received one comment from the National Federation of Independent Business (“NFIB”). NFIB argued the Commission should rescind the Guides because they are an unnecessary federal regulatory burden. NFIB also contended that regulation or guidance concerning the nursery business is more properly conducted at the state, rather than federal, level.

Based on the lack of comments, as well as the paucity of consumer complaints and the lack of need for law enforcement action over the past two decades, on September 10, 2018 (83 FR 45582), the Commission published a Notice of Proposed Rulemaking (“NPRM”) seeking comments on a proposed rescission of the Guides. The Commission stated that the Guides no longer appear necessary, and thus serve little purpose to industry or consumers. Specifically, the types of practices detailed in the Guides do not appear to be prevalent in the nursery industry; little evidence exists that industry members currently use the Guides to help avoid deceptive practices; and rescission will have no impact on the FTC's ability to address unfair and deceptive practices in the nursery industry.

In response to the proposed rescission notice, the Commission received five comments, offering conflicting opinions. 4 The National Federation of Independent Business (“NFIB”), which had commented on the initial Notice, supported the proposed rescission, commenting that “federal agencies should refrain from imposing unwarranted burdens on the American people and revoke unnecessary regulation.” AmericanHort, an industry association representing nursery growers, greenhouses, and other garden retailers, supported retaining the Guides but also noted that “the overall need for the Guides has perhaps diminished somewhat based on the general evolution of consumer protection mechanisms in our society.”

Three individual commenters opposed rescinding the Guides. Commenter Harrod argued that, “due to the dishonest nature of some people,” the Guides will always be needed. The commenter also asserted that rescission would imply that it is “now okay to deceive people to make money.” Similarly, commenter Lerner explained that the “average nursery consumer lacks the expertise to identify species of plants” and suggested the lack of complaints may be due to the Guides' effectiveness. 5

The Commission promulgated the R-value Rule in 1979 to address the failure of the home insulation marketplace to provide essential pre-purchase information to consumers, primarily an insulation product's “R-value.”  1 An insulation product's “R-value” represents the product's ability to restrict heat flow and, therefore, reduce energy costs. The higher the R-value, the better the product's insulating ability. R-value ratings vary among types and forms of home insulations and even among products of the same type and form.

For insulation marketed for use in residential structures, the Rule requires R-value disclosures, directs manufacturers to substantiate the claims made in these disclosures, and prohibits certain claims unless they are true and non-misleading. Specifically, the Rule requires insulation sellers to disclose the insulation product's R-value and related information based on uniform, industry-adopted test procedures. 2 This information enables consumers to evaluate the performance and cost-effectiveness of competing products.

The R-value Rule covers all “home insulation products.” Under the Rule, the term “insulation” includes any product “mainly used to slow down heat flow” from, for example, a heated interior through exterior walls to the outside. 3 The Rule covers most types of insulation marketed for use in residential structures. 4 It does not cover insulation marketed solely for use in commercial (including industrial) buildings.

Home insulation falls into two basic categories: “mass” and “reflective.” Mass insulations reduce heat transfer by conduction (through the insulation's mass), convection (air movement within, and through, the air spaces inside the insulation), and radiation. Reflective insulations (primarily aluminum foils) reduce heat transfer by radiation, when the insulation is installed facing an airspace. Within these basic categories, home insulation is made from various materials ( e.g., fiberglass, cellulose, polyurethane, aluminum foil) and comes in various forms ( e.g., batt, dry-applied loose-fill, spray-applied, board stock, multi-sheet reflective).

The Rule applies to home insulation manufacturers, professional installers, retailers who sell insulation for do-it-yourself installation, and new home sellers, including sellers of manufactured housing (“covered entities”). It also applies to laboratories that conduct R-value tests for those who base their R-value claims on these test results.

The Commission first issued the R-value Rule in response to a variety of unfair or deceptive acts or practices in the insulation industry. Specifically, the Commission found that many sellers: (1) Failed to disclose R-values, impeding informed purchasing decisions and misleading consumers who based their purchases on price or thickness alone; (2) exaggerated R-value disclosures and often failed to account for material factors ( e.g., aging, settling) that reduce thermal performance; (3) failed to inform consumers about an R-value's meaning and importance; (4) exaggerated fuel bill savings and failed to disclose that savings vary depending on consumers' particular circumstances; or (5) falsely claimed that consumers' insulation purchases would qualify for tax credits, or that products had been “certified” or “favored” by federal agencies. 5

The Rule requires covered entities to disclose R-value and related information ( e.g., thickness, coverage area per package) on package labels and manufacturers' fact sheets. Covered entities must derive these disclosures from tests conducted according to one of four specified ASTM International (“ASTM”) test procedures that measure thermal performance under “steady-state” ( i.e., static) conditions. 6 Industry members must conduct tests for mass insulation products on the insulation material alone (excluding any airspace) at a mean temperature of 75 °F. The Rule's R-value tests account for factors that can affect insulation's thermal performance. For example, tests for polyurethane, polyisocyanurate, and extruded polystyrene insulation account for aging, and tests for loose-fill insulation products reflect the effect of settling. 7

The Rule also requires specific disclosures on manufacturer product labels and fact sheets, installer receipts, and new home seller contracts. For example, insulation labels must display the product's R-value and the statement “R means resistance to heat flow. The higher the R-value, the greater the insulating power.”  8 The Rule also requires that certain affirmative disclosures appear in advertising and other promotional materials (including those on the internet) containing an R-value, price, thickness, or energy-saving claim, or comparing one type of insulation to another. For example, if an advertisement contains an R-value, it must disclose the type of insulation being sold and the thickness needed to obtain that R-value, as well as the statement: “The higher the R-value, the greater the insulating power. Ask your seller for the fact sheet on R-values.” In addition, if an advertisement contains an energy saving claim, it must disclose: “Savings vary. Find out why in the seller's fact sheet on R-values. Higher R-values mean greater insulating power.”

The Rule also requires manufacturers and other sellers to have a “reasonable basis” for any energy-saving claims they make on labels or in advertising. 9 Although the Rule does not specify how they must substantiate such claims, the Commission explained when issuing the Rule that scientifically reliable measurements of fuel use in actual houses, or reliable computer models or methods of heat flow calculations, would meet the reasonable basis standard. 10 Sellers other than manufacturers can rely on the manufacturer's claims unless they know, or should know, that the manufacturer lacks a reasonable basis for its claims.

The Commission reviews its rules and guides periodically to ascertain their costs and benefits, regulatory and economic impact, and general effectiveness in protecting consumers and helping industry avoid deceptive claims. These reviews assist the Commission in identifying rules and guides warranting modification or rescission. As part of its last review in 2005, the Commission issued several amendments to update and improve the Rule. For example, the Commission added a temperature differential requirement for testing, updated tests for reflective insulation, and required new initial installed thickness disclosures for loose-fill insulation. 11

In 2016, the Commission initiated a new regulatory review through the publication of an Advance Notice of Proposed Rulemaking (ANPR). 12 In the ANPR, the Commission sought comments on, among other things, the economic impact of, and the continuing need for, the Rule; the Rule's benefits to consumers; and the burdens it places on industry, including small businesses, subject to its requirements.

Following the ANPR, the Commission published a Notice of Proposed Rulemaking (NPRM) on January 22, 2018 (83 FR 2934). In the NPRM, the Commission proposed to: (1) Clarify that the Rule covers products marketed for residential applications, even if those products are originally developed for the commercial market; (2) require marketers to use the Rule's testing requirements to substantiate any R-value claims for non-insulation products marketed in whole or in part to reduce residential energy use by slowing heat flow; (3) add information about air sealing and installation to fact sheets; (4) clarify that online retailers must provide labels and fact sheets; (5) eliminate reference to an obsolete aging specification; (6) revise provisions addressing the incorporation by reference of ASTM test procedures; (7) eliminate a provision that automatically updates ASTM test procedures; and (8) exempt space-constrained advertising from certain affirmative disclosures. 13 In response to the NPRM, the Commission received 13 comments. 14 After considering the comments, the Commission now issues final amendments to the Rule, which, as discussed below, largely track the amendments proposed in the NPRM.

In the NPRM, the Commission determined to retain the Rule, given its benefits and minimal costs as reported by commenters. Summarizing comments received in response to the ANPR, the Commission explained that the Rule helps consumers and industry members by combating deceptive and unfair practices, creating a level playing field that promotes competition, fostering a marketplace in which industry can more easily self-regulate, furnishing guidelines to industry for product testing and evaluation, and promoting consumer confidence. The commenters also indicated the Rule does not impose significant, unwarranted costs on industry members or consumers.

In response to the NPRM, several commenters supported the Commission's decision to retain the Rule and reiterated many of their earlier points. 15 No commenters objected to the Rule's retention. Accordingly, the Commission retains the Rule.

Background: The Rule does not cover insulation sold for use in commercial (including industrial) buildings. 16 However, comments submitted in response to the ANPR stated that some products developed and marketed primarily for commercial or industrial structures are also marketed for residential applications. In the NPRM, the Commission proposed amending the Rule to clarify that such products fall within the Rule's existing coverage of “home insulation.”

Comments: Several commenters supported the proposed amendment; none objected. 17 NAIMA explained that the clarification effectively addresses disclosures for products developed initially or primarily for commercial or industrial applications but also marketed in the residential sector. The amendment, according to NAIMA, apprises industry members that commercial and industrial products marketed to homeowners must comply with the Rule.

Discussion: As discussed in the NPRM and the comments, some industry members operating in the residential market appear to be unaware that they must follow the R-value Rule for products marketed for residential applications even if originally developed and intended for the commercial or industrial market. Accordingly, the final amendments clarify that the Rule covers such products.

Background: Since its original promulgation, the Rule has applied only to products marketed primarily as insulation and thus has excluded non-insulation products with insulating characteristics, such as siding, coatings, caulking, weather stripping, garage doors, or draperies. In the NPRM, the Commission proposed expanding the Rule's current testing requirements to R-value claims made for any non-insulation product marketed to reduce energy use by slowing heat flow in residential buildings.

Comments: Commenters supported (and none opposed) the Commission's proposal. 18 XPSA, for example, agreed that marketers must support claims for insulating performance qualities for these types of products. NAIMA observed a prevalence of questionable R-value claims for non-insulation products and argued the amendment would provide clear notice that marketers must substantiate R-value claims for such products. Specifically, NAIMA cited numerous questionable R-value ( e.g., R-24) and insulation-related claims made for paints and ceramic coatings. None of the commenters stated that the Rule's testing requirements in § 460.5 would be inappropriate for substantiating such claims or would otherwise fail to cover R-value claims for these various products. Finally, the Brick Industry Association (BIA) explained that its technical documents contain R-value claims for brick wall assemblies derived from a modified version of ASTM C1363. Asserting that its modified approach is consistent with the intent behind ASTM C1363, BIA urged the Commission to approve its R-value disclosures.

In addition to discussing the proposed amendment, several commenters raised concerns about energy savings claims. 19 NAIMA, for instance, asked the Commission to affirm marketers must substantiate any type of energy savings claim. NAIMA, along with ACC, also recommended the Commission reference the Policy Statement Regarding Advertising Substantiation  20 and remind manufacturers about the need for competent and reliable scientific evidence to back their claims. Such Commission affirmation, in NAIMA's view, would allow members to “more authoritatively” challenge deceptive competitor claims.

Discussion: Consistent with the proposal, the Commission's final amendments direct sellers to use the Rule's existing testing requirements to substantiate R-value claims for non-insulation products, with the exception of fenestration and fenestration attachments. 21 The Commission has observed a prevalence of grossly exaggerated R-value claims for non-insulation products, such as coatings, paint, and housewrap sold primarily for reasons other than their ability to impede heat flow. Because the Rule has not covered these products, the Commission has challenged such practices as false and unsubstantiated under Section 5 of the FTC Act. 22 Commenters confirmed that these questionable R-value claims for non-insulation products are common. 23

To address this problem, the new provision will furnish an effective means to reduce deceptive claims by providing clear guidance for marketers seeking to make truthful, substantiated claims, while establishing a more direct means to combat unsubstantiated R-value claims. The amended rule requires marketers to base any voluntary R-value claim made in advertising for a non-insulation product on the appropriate tests referenced in § 460.5 of the Rule ( i.e., the standard ASTM tests incorporated into the Rule and currently applicable to R-value disclosures for insulation). Accordingly, marketers acting in good faith will have clear notice of the test procedures they should use to substantiate their R-value claims. In addition, the amendment will give the FTC a more efficient and direct means to challenge R-value claims that are not adequately substantiated. The amendment does not impose any disclosure, labeling, or additional requirements for non-insulation products beyond the testing requirements. 24

It is likely most marketers who choose to make R-value claims for various non-insulation products already rely on the appropriate ASTM testing standards. Accordingly, this amendment should pose little or no additional burden. At the same time, it will clarify that marketers must substantiate R-value claims and will provide a check on unscrupulous sellers who seek an unfair advantage by exaggerating product R-values based on faulty tests.

The final amendment does not contain a provision approving specific technical disclosures related to R-value claims made for brick wall assemblies. Without additional details about how such R-values are derived, the Commission cannot address the particular testing BIA described. Should marketers need guidance about testing for this or other products covered by the new provision, they can contact FTC staff.

In response to commenter concerns about energy savings claims, the Commission reaffirms that sellers must substantiate their energy savings claims with competent and reliable scientific evidence. Section 460.19 of the Rule requires manufacturers to have a reasonable basis for savings claims and specifies recordkeeping requirements for data that support such claims. In addition, the Commission has provided general guidance for making truthful and not misleading advertising claims through a variety of means, including the Deception Policy Statement and the Policy Statement Regarding Advertising Substantiation. 25 Marketers may also refer to past Commission cases involving deceptive energy savings claims for further guidance on these issues. 26

Background: In the NPRM, the Commission proposed changing the Rule's fact sheet disclosures to better alert consumers to factors that may affect their heating and cooling costs. The current fact sheets generally advise consumers that their fuel savings depend on a variety of considerations, including their geographic location, type of house, fuel use, and family size. Comments on the ANPR, however, suggested the fact sheets should also mention that proper insulation installation and home air sealing can affect fuel costs. Accordingly, the Commission proposed amending the fact sheets to specifically address these two factors and sought comments on how much time manufacturers would require to make such changes. The Commission also asked whether the Rule should require specific disclosures for R-19 batt insulation, as suggested by some commenters, when installed in typical wall cavities, where compression can reduce R-value.

Comments: Commenters supported including information about installation and home air sealing on fact sheets. 27 ACC, for instance, indicated the two additional disclosures will help improve consumer understanding of building envelope performance. NAIMA added that the new information will assist consumers in choosing insulation.

Although commenters did not identify any significant regulatory burden associated with the changes, a few requested sufficient compliance time. ACC estimated its members could implement the proposed changes within 180 days. However, given that older fact sheets are likely to remain in circulation beyond that date, it asked the Commission to consider a “reasonable approach” to enforcement within the first year. NAIMA, on the other hand, recommended a two-year effective date to allow manufacturers to exhaust existing stock and revise fact sheets for a wide variety of products.

Although ACC did not oppose the proposed fact sheet change, it suggested additional mandatory disclosures related to air sealing. Specifically, it recommended that fact sheets include a link to Department of Energy (“DOE”) information about air sealing for homes and buildings. It also requested additional language in § 460.17 requiring installers to tell customers insulation has been installed in accordance with the manufacturer's instructions. Furthermore, ACC recommended additional disclosures consistent with its assertion in comments to the ANPR that an insulation's air infiltration properties impact overall home efficiency. NAIMA, however, expressed its continued disagreement with ACC on the matter. In its view, insulation does not play a major role in blocking total air infiltration in a home, and resistance to air flow is accomplished largely by other measures required by building energy codes, such as gypsum board, sheathing, house wrap, and sealing of joints and holes.

Finally, NAIMA supported specific disclosures on fact sheets for R-19 batts because such insulation, which is usually 6 1/4 ″ thick, is frequently compressed into 5 1/2 ″ wall cavities, thus reducing R-value. NAIMA suggested requiring that fact sheets disclose the compressed insulation's R-value rounded to the nearest whole number.

Discussion: The final amendments require fact sheets to include installation and air sealing information. As discussed in the NPRM and by the commenters, these changes will better alert consumers to factors that may affect their heating and cooling costs. The final amendments also contain a new provision requiring fact sheets to disclose reductions in the R-value of R-19 batts when such insulation is compressed into typical wall cavities. This new disclosure will help alert building professionals and consumers to the lower R-value resulting from compression in the typical installation of this product. Finally, the Commission sets the effective date of these new disclosures (and all other final amendments) at one year, which gives manufacturers an entire selling season to make the required changes. The one-year compliance period should be sufficient for manufacturers to update their fact sheets posted online as well as those provided to retailers. Should manufacturers confront issues with existing fact sheet stock, they can contact FTC staff for guidance.

Although the final amendments include the general disclosures proposed in the NPRM, the Commission declines to require additional disclosures related to installation and air infiltration as suggested by ACC. Such disclosures do not appear necessary because the Rule already requires information on labels and fact sheets regarding the importance of proper installation in achieving the labeled R-value. In addition, the Commission declines to require disclosures about the air sealing qualities of insulation and associated impacts on overall energy performance. Commenters responding to the ANPR and NPRM disagreed about this issue. For example, while ACC argued the air sealing performance of insulation is important, NAIMA asserted that marketers should not claim a product's ability to block air infiltration, and not its R-value, is paramount. Likewise, NAIMA objected to claims suggesting insulation that limits air infiltration performs better overall than other insulations. 28 Furthermore, on several occasions since the Rule's initial promulgation in 1979, the Commission has acknowledged that R-value tests do not account for many factors, such as the design characteristics and geographic location of the building, the specific application in which the product is installed, outside and inside temperatures, air and moisture movement, installation technique, and others. At the same time, the Commission has also maintained that quantifying and providing uniform comparative ratings to reflect these various factors would significantly complicate the Rule's disclosures and likely confuse consumers without providing commensurate benefits. 29 Accordingly, consistent with the NPRM, the final Rule does not include disclosures addressing these issues. However, the Commission reiterates that under § 460.19 of the Rule, insulation manufacturers must have a reasonable basis for any energy savings claims they make for their insulation products.

Background: In the NPRM, the Commission proposed amending § 305.14 to require online insulation sellers to post labels and fact sheets on their websites for covered insulation products they sell directly to consumers. Large retailers commonly offer insulation for purchase through their websites. Though the current Rule requires retailers to “make fact sheets available to your customers,” it does not specify that fact sheets must be provided for online sales. In the NPRM, the Commission sought comment on the proposed change, including any burdens associated with providing such information online and any other associated issues.

Comments: Two commenters supported the proposal; none opposed it. 30 NAIMA explained that the burden associated with this requirement would be “nominal” and no different than existing burdens on insulation sellers.

Discussion: The final Rule adopts the proposed amendment. The new requirement for online fact sheets will effectuate the Rule's original intent by ensuring online consumers have access to the same information (both fact sheets and labels) as shoppers in stores. Retailers can make these disclosures through a variety of means, such as using expandable thumbnail images of package labels and fact sheets, or with conspicuous links directly to the required information.

Background: In the NPRM, the Commission proposed continuing to require tests on cellular plastic insulations that fully reflect aging on the product's R-value, as currently indicated in § 460.5. In addition, the Commission proposed eliminating the Rule's reference to the rescinded GSA Specification HH-I-530A aging standard, which appears to be obsolete. The Commission did not propose, as requested by several commenters, a new mandate that industry use only ASTM C1303 or CAN/ULC S770 ( i.e., the LTTR (“long-term thermal resistance”) method) to measure aging. As discussed in detail in the NPRM, several commenters urged the Commission to adopt the LTTR method because, in their view, the test is now well-established and would ensure R-value disclosures for cellular plastic insulations accurately reflect aging effects. Others, however, opposed its adoption, questioning the method's R-value results, coverage, and timeframe. In the NPRM, the Commission declined proposing a requirement that manufacturers use these methods in light of the significant disagreements about the tests' accuracy, scope of coverage, and applicable time frames.

Comments: Commenters generally supported the Commission's proposal to retain a general requirement that sellers conduct R-value tests on samples of cellular plastic insulations that fully reflect the effect of aging on the product's R-value. EPS-AI, for instance, stated that the Rule properly requires that tests for thermal resistance of polyurethane, polyisocyanurate, and extruded polystyrene fully reflect aging effects on the product's R-value. AFM agreed the Rule should continue to require that manufacturers determine the full effect of aging on their R-values, describing this provision as “important protection for consumers.” NAIMA similarly supported retaining this provision. Commenters also supported the proposed elimination of the obsolete GSA aging standard. 31 EPS-IA noted that the provision's removal would have no adverse impacts.

Commenters, however, continued to express opposing views about incorporating the LTTR method into the Rule. XPSA agreed with the Commission's decision to forgo adopting the aging standard. Reiterating its previous comments, XPSA stated that evidence does not demonstrate the method provides “a uniform means of accurately comparing different cellular plastic thermal insulations.”  32 Others, however, continued to urge the Commission to mandate the LTTR method. EPS-IA argued that, by not adopting the widely accepted ASTM C1303 test, the Commission is failing to fulfill its mission to prevent deception in the marketing of home insulation products and that there is “very little opposition to this standard test method.” It also submitted commercial product literature that, in its view, demonstrates that the lack of mandatory test method has led to deceptive R-value figures from extruded polystyrene manufacturers. Additionally, EPS-IA characterized the spray polyurethane industry's criticism of the LTTR method as “conjecture and self-serving opposition” that fails to hold up against evidence from Oak Ridge National Laboratories and ASTM. 33 Similarly, PIMA argued the accuracy of ASTM C1303 is well-documented by industry research and DOE studies, and stated that any comments to the contrary are “without merit” and should have no bearing on the Commission's decision. However, PIMA reiterated that the method is not applicable to closed-cell foam insulation products with impermeable facers. PIMA explained that ASTM C518 best measures the R-value of impermeable products ( e.g., foil-faced polyisocyanurate insulation), which are being used more frequently as continuous exterior insulation in new residential construction. PIMA also recognized that other factors may support the FTC's decision to forgo mandating ASTM C1303 for testing closed-cell foam insulation products but did not delineate those factors.

Discussion: Consistent with the NPRM, the final Rule retains the requirement in Section 460.5 that R-values fully reflect the effects of aging on cellular plastics and eliminates that section's reference to the GSA Specification HH-I-530A aging standard. Commenters did not identify any adverse impacts from eliminating the Rule's reference to the canceled GSA test. In addition, the final Rule does not mandate use of the LTTR method. Commenters on both the ANPR and NPRM disagreed about whether the Commission should mandate use of the LTTR method. Moreover, the record demonstrates that significant disagreements and concerns remain about various aspects of ASTM C1303 and CAN/ULC S770, including their accuracy, scope of coverage, and applicable timeframe. Nonetheless, because commenters did not identify a viable alternative test method, the Commission understands that many industry members will continue to use the LTTR method to gauge the effects of aging on R-value. 34 If new developments occur in the future that would warrant its adoption as a regulatory requirement, the Commission may revisit the issue, and interested parties may petition the Commission to consider additional rulemaking.

Background: Reflective insulations, primarily aluminum foils, work by reducing heat transfer when installed facing an airspace. The Rule requires reflective insulation manufacturers to use specific tests to determine R-values, and to disclose those ratings to consumers for particular applications. 35 Section 460.5(c) requires industry members to test single-sheet systems using ASTM E 408-71 (“Standard Test Methods for Total Normal Emittance of Surfaces Using Inspection-Meter Techniques”), or ASTM C 1371-04a (“Standard Test Method for Determination of Emittance of Materials Near Room Temperature Using Portable Emissometers”). For reflective systems with more than one sheet, § 460.5(b) requires the use of ASTM C 1363-97, “ “Standard Test Method for Thermal Performance of Building Materials and Envelope Assemblies by Means of a Hot Box Apparatus”,” in a test panel constructed according to ASTM C1224-03, “Standard Specification for Reflective Insulation for Building Applications,” and under the test conditions specified in ASTM C1224-03. Section 460.12 of the Rule also requires that labels for reflective insulation include “the number of foil sheets; the number and thickness of the air spaces; and the R-value provided by that system when the direction of heat flow is up, down, and horizontal.”

The Rule also covers radiant barrier insulations, which are generally installed in attics facing the open airspace. However, as the Commission has stated, R-value claims are not appropriate for these products because no generally accepted test procedure exists to determine their R-value. 36

In the NPRM, the Commission did not propose new requirements regarding disclosures or testing for reflective insulations. However, the Commission sought comment on whether to replace the term “aluminum” with “reflective material” or a similar term because these insulation systems may not always involve aluminum.

Comments: Commenters generally supported the Commission's decision to retain the Rule's requirements for reflective insulation. NAIMA, for instance, supported the Rule's existing label disclosures for reflective insulation products. RIMA also supported retaining the requirement, but offered several suggestions to improve the Rule's provisions. First, it suggested technical amendments to reflective insulation-related terms. Specifically, it recommended replacing “aluminum foil” with “reflective insulation,” noting that low-emittance surfaces are not limited to aluminum foil or film. It also suggested replacing the term “emissivity” with “emittance,” explaining that, although these two terms often appear interchangeably, the ASTM test procedures incorporated in the Rule generally use the term emittance. Similarly, it suggested replacing the term “difference” with “differential” in the Rule's test procedure section (§ 460.5) to be consistent with the ASTM methods.

RIMA also recommended two substantive changes to the reflective insulation requirements. First, it suggested eliminating the reference to ASTM E408 for measuring emittance, explaining that this procedure measures “normal emittance,” while the other procedure allowed by the Rule, ASTM C1371, measures “hemispherical emittance.” Because “normal emittance” measurements are generally lower than “hemispherical emittance,” RIMA asserted that ASTM E408 results generally lead to higher, and thus “overestimated,” R-values. Second, RIMA argued that § 460.5(b) is overly restrictive because it limits use of the ASHRAE Handbook of Fundamentals to specific air space sizes from one line in Table 3 (pages 26.14 and 26.15). RIMA argued that the Rule should specifically allow “interpolation and moderate extrapolation for air spaces greater than 3.5” as stated in a footnote to the ASHRAE table.

Discussion: Based on the comments, the final Rule includes several technical amendments. First, it replaces references to “aluminum foil” and “foil” and similar words with the more general terms “reflective insulation” and “reflective” because, as noted in the NPRM, these insulation systems may not always involve aluminum. 37 In addition, consistent with RIMA's suggestion, the final Rule replaces the terms “emissivity” with “emittance” and “differential” with “difference” in § 460.5 to be consistent with the terms used in the test procedures incorporated in the Rule. 38 These minor conforming changes have no substantive impact on the existing requirements.

The Commission does not further amend the Rule's reflective insulation provisions. Specifically, the amended Rule will continue to allow the use of ASTM E408 as well as C1371. Although the Commission may consider eliminating the test in the future, it declines to make such a change without providing an opportunity for public comment. Furthermore, RIMA's comments did not indicate whether the inconsistencies between the ASTM E408 and C1371 have caused substantial problems in the marketplace nor did it explain the extent to which the test differences impact advertised R-values. In the future, if retaining ASTM E408 in the Rule creates a substantive problem, stakeholders may petition the Commission to consider further Rule amendments.

Regarding RIMA's proposal to allow extrapolation of values from the ASHRAE table, the Commission has already explained in a 2005 Federal Register final rule that “it does not intend to restrict the use of the tables only to those values specifically printed in the tables themselves.”  39 Instead, the Commission recognized “that explanatory information in the footnotes to the ASHRAE handbook allow for interpolation and moderate extrapolation” and expected “industry members to use this guidance in complying with the Rule.”  40 Commenters have not identified any ongoing problems stemming from this guidance or lack of a specific reference in the Rule. Accordingly, the Commission does not amend this part of the Rule.

Background: In the NPRM, the Commission proposed updating § 460.5 to reflect the most recent versions of the ASTM test procedures. In addition, to ensure consistency with the Office of Federal Register (OFR) regulations, it proposed removing § 460.7 to eliminate automatic updates to the ASTM test procedures incorporated by reference in the Rule. Specifically, OFR regulations state that incorporation by reference is “limited to the edition of the publication that is approved,” and “future amendments or revisions of the publication are not included.”  41 The proposed amendment would also ensure the Rule provides notice and an opportunity to comment on test updates before they are incorporated by reference. The Commission indicated that it would periodically review the Rule's test procedures to ensure the Rule contains the most recent versions.

Comments: Commenters supported the proposed amendments to update the Rule's test procedure provisions. 42 According to NAIMA, the change will ensure the Commission “provides notice and an opportunity to comment on updates before they are incorporated into the regulations.” PIMA expressed support for FTC's continued reliance on consensus-based test standards such as those administered by ASTM because such “standards are continually reviewed by subject-matter experts and allow for broad stakeholder input through transparent development and maintenance processes.” It also encouraged FTC to consider the best method to update test standards “moving forward” and noted the burdensome process involved with updating the Rule's references. AFM added that the Rule should change its ASTM reference to the organization's current name, “ASTM International.” It also recommended the Rule state that the test methods are “developed” rather than “designed” by ASTM.

Discussion: Given the support for the test method updates announced in the NPRM, the Commission amends the Rule to reflect the most current test versions. 43 In addition, the amendments remove § 460.7 to eliminate automatic updates to the ASTM test procedures incorporated by reference in the Rule. The Commission will continue to update the test procedures as part of its routine Rule reviews. In the interim, if interested parties identify the need for any specific updates, they should petition the Commission for an amendment. The final Rule also updates the formal name for ASTM to “ASTM International” and changes the term “designed” to “developed” to better reflect ASTM's role. 44

This document contains final regulations under §§ 1.987-2 and 1.987-4 relating to combinations and separations of QBUs subject to section 987. This document also contains final regulations under § 1.987-12 relating to the recognition and deferral of foreign currency gain or loss under section 987 with respect to a QBU subject to section 987 in connection with certain QBU terminations and certain other transactions involving partnerships (together with the final regulations under §§ 1.987-2 and 1.987-4, the final regulations). In addition, this document withdraws temporary regulations under § 1.987-7T regarding the allocation of assets and liabilities of certain partnerships for purposes of section 987.

On December 8, 2016, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) published Treasury Decision 9794 (the 2016 final regulations) in the Federal Register (81 FR 88806), which contains rules relating to the determination of the taxable income or loss of a taxpayer with respect to a section 987 QBU; the timing, amount, character, and source of any section 987 gain or loss; and other provisions.

On the same date, the Treasury Department and the IRS also published Treasury Decision 9795 (the temporary regulations) in the Federal Register (81 FR 88854) and a notice of proposed rulemaking (REG-128276-12) in the Federal Register (81 FR 88882) by cross-reference to the temporary regulations. The temporary regulations include the following rules that are not specifically affected by this Treasury decision: An annual deemed termination election for a section 987 QBU; an elective method, available to taxpayers that make the annual deemed termination election, for translating all items of income or loss with respect to a section 987 QBU at the yearly average exchange rate; rules regarding the treatment of section 988 transactions of a section 987 QBU; rules regarding QBUs with the U.S. dollar as their functional currency; rules regarding the translation of income used to pay creditable foreign income taxes; and rules under section 988 requiring the deferral of certain section 988 loss that arises with respect to related-party loans.

In addition, the temporary regulations contain the following provisions that are specifically affected by this Treasury decision: §§ 1.987-2T and 1.987-4T, relating to combinations and separations of QBUs; § 1.987-7T, which provides a liquidation value percentage methodology for allocating assets and liabilities of certain partnerships (section 987 aggregate partnerships, as defined in § 1.987-1(b)(5) of the 2016 final regulations); and § 1.987-12T, which requires deferral of foreign currency gain or loss under section 987 with respect to certain transactions defined as deferral events or outbound loss events—transactions that generally include QBU terminations and certain partnerships transactions.

On January 17, 2017, the Treasury Department and the IRS published Notice 2017-07, 2017-3 I.R.B. 423, announcing that certain rules under § 1.987-12T would be modified to prevent potential abuse by taxpayers making retroactive check-the-box elections. Section 1.987-12T(j)(1) states that § 1.987-12T generally applies to any deferral event or outbound loss event that occurs on or after January 6, 2017 (that is, thirty days after the date that § 1.987-12T was filed with the Federal Register ). Under § 1.987-12T(j)(2), however, § 1.987-12T also applies to any deferral event or outbound loss event that occurs on or after December 7, 2016, if such deferral event or outbound loss event is undertaken with a principal purpose of recognizing section 987 loss. Notice 2017-07 indicated that § 1.987-12T(j)(2) would be modified so that § 1.987-12T also will apply to any deferral event or outbound loss event that is undertaken with a principal purpose of recognizing section 987 loss  1 and that occurs as a result of an entity classification election made under § 301.7701-3 that is filed on or after December 22, 2016, and that is effective before December 7, 2016. Additionally, Notice 2017-07 provided that § 1.987-12T(j)(1) would be modified so that § 1.987-12T also will apply to any deferral event or outbound loss event that occurs as a result of an entity classification election made under § 301.7701-3 that is filed on or after January 6, 2017, and that is effective before January 6, 2017.

On October 16, 2017, the Treasury Department and the IRS issued Notice 2017-57, 2017-42 I.R.B. 325, announcing that future guidance would defer the applicability dates of §§ 1.987-2T, 1.987-4T, and 1.987-7T (along with certain other provisions of the 2016 final regulations and temporary regulations) by one year. The temporary regulations provide that these sections apply to taxable years beginning on or after the day that is one year after the first day of the first taxable year following December 7, 2016. See §§ 1.987-2T(e); 1.987-4T(h); 1.987-7T(d).

On June 25, 2018, the Treasury Department and the IRS published Notice 2018-57, 2018-26 IRB 774, announcing that future guidance would defer the applicability dates of §§ 1.987-2T, 1.987-4T, and 1.987-7T (along with certain other provisions of the 2016 final regulations and temporary regulations) by one additional year.

Executive Order 13789, issued on April 21, 2017, instructs the Secretary of the Treasury (the Secretary) to review all significant tax regulations issued on or after January 1, 2016, and to take concrete action to alleviate the burdens of regulations that (i) impose an undue financial burden on U.S. taxpayers; (ii) add undue complexity to the Federal tax laws; or (iii) exceed the statutory authority of the IRS. Executive Order 13789 further instructs the Secretary to submit to the President within 60 days an interim report that identifies regulations that meet these criteria. Notice 2017-38, 2017-30 I.R.B. 147, which was published on July 24, 2017, included the 2016 final regulations in a list of eight regulations identified by the Secretary in the interim report as meeting at least one of the first two criteria specified in E.O. 13789.

E.O. 13789 further instructs the Secretary to submit to the President by September 18, 2017, a final report that recommends specific actions to mitigate the burden imposed by regulations identified in the interim report. On October 16, 2017, the Secretary published in the Federal Register this final report (82 FR 48013), which indicated, among other things, that the Treasury Department and the IRS intend to propose certain modifications to the 2016 final regulations to reduce burden and compliance challenges associated with those regulations and are actively considering other rules in connection with that proposal.

Under the 2016 final regulations, the owner of a section 987 QBU that terminates includes in income all of the net unrecognized section 987 gain or loss with respect to the section 987 QBU in the year it terminates. Under these rules, a termination can result, for example, solely from a transfer of a section 987 QBU from a taxpayer to a related party, notwithstanding that the QBU's assets continue to be used in the same trade or business by the related party.

Because a termination can result in the deemed remittance of all the assets of a section 987 QBU in circumstances in which the assets continue to be used by a related person in the conduct of the same trade or business that formerly was conducted by the section 987 QBU, terminations can facilitate the selective recognition of section 987 losses. In issuing the temporary regulations, the Treasury Department and the IRS determined that terminations of section 987 QBUs generally should not be permitted to facilitate the selective recognition of losses when the assets and liabilities of the section 987 QBU are transferred to a related person and remain subject to section 987 in the hands of the transferee. Similar policy considerations arise when the transfer of a partnership interest to a related person results in deemed transfers that cause the recognition of section 987 loss with respect to a section 987 QBU owned through the partnership, notwithstanding that the trade or business of the section 987 QBU continues without interruption and remains subject to section 987, and in the context of certain outbound transfers even when the assets do not remain subject to section 987 in the hands of the transferee (because, for example, the transferee has the same functional currency as the QBU). In order to address these policy concerns, the temporary regulations defer section 987 losses resulting from certain termination events, partnership transactions, and certain other transactions involving outbound transfers.

In addition, the temporary regulations generally apply to defer the recognition of section 987 gains as well as losses when the transferee is subject to section 987 with respect to the assets of the section 987 QBU. The temporary regulations do not, however, defer gain to the extent the assets of a section 987 QBU are transferred by a U.S. person to a related foreign person, consistent with the policies underlying section 367.

The temporary regulations also include rules to prevent similarly inappropriate results when certain section 987 QBUs are combined or separated. Absent a special rule, the combination of multiple section 987 QBUs that have the same owner, or the separation of a section 987 QBU into two or more section 987 QBUs that have the same owner, would give rise to a transfer between an owner and one or more section 987 QBUs under the 2016 final regulations.

Consistent with the policy of deferring section 987 gain or loss under § 1.987-12T when assets of a section 987 QBU are reflected on the books and records of another section 987 QBU in the same controlled group as a result of certain transactions that result in deemed transfers, the temporary regulations provide that section 987 gain or loss generally is not recognized when two or more section 987 QBUs (combining QBUs) with the same owner combine into a single section 987 QBU (combined QBU) or when a section 987 QBU (separating QBU) separates into multiple section 987 QBUs (each, a separated QBU).

The temporary regulations also include certain mechanical rules applicable in this context, including (i) rules related to determining the net unrecognized section 987 gain or loss of combined QBUs and separated QBUs, and (ii) provisions regarding combining section 987 QBUs that have different functional currencies than their respective combined QBUs.

The 2016 final regulations set forth rules applicable to section 987 aggregate partnerships, which are defined as partnerships for which all of the capital and profits interests are owned, directly or indirectly, by persons that are related within the meaning of section 267(b) or section 707(b). Under the aggregate approach set forth in the 2016 final regulations, assets and liabilities reflected on the books and records of an eligible QBU of a section 987 aggregate partnership are allocated to each partner, which is considered an indirect owner of the eligible QBU. If the eligible QBU has a different functional currency than its indirect owner, then the assets and liabilities of the eligible QBU that are allocated to the partner are treated as a section 987 QBU of the indirect owner.

The temporary regulations provide specific rules for determining a partner's share of the assets and liabilities reflected on the books and records of an eligible QBU owned indirectly through a section 987 aggregate partnership. Specifically, § 1.987-7T(b) provides that, in any taxable year, a partner's share of each asset and liability of a section 987 aggregate partnership is proportional to the partner's liquidation value percentage with respect to the aggregate partnership. A partner's liquidation value percentage is defined as the ratio of the liquidation value of the partner's interest in the partnership to the aggregate liquidation value of all the partners' interests in the partnership. The liquidation value of the partner's interest in the partnership is the amount of cash the partner would receive with respect to its interest if, immediately following the applicable determination date, the partnership sold all of its assets for cash equal to the fair market value of such assets (taking into account section 7701(g)), satisfied all of its liabilities (other than those described in § 1.752-7), paid an unrelated third party to assume all of its § 1.752-7 liabilities in a fully taxable transaction, and then liquidated.

The Treasury Department and the IRS received one comment regarding the temporary regulations. In addition, the Treasury Department and the IRS received several comments in response to Notice 2017-38 pertaining to the temporary regulations. After consideration of all the comments, the regulations under §§ 1.987-2T, 1.987-4T, and 1.987-12T, as revised by this Treasury decision, are adopted as final regulations. In addition, the regulations under § 1.987-7T are withdrawn. The Treasury Department and the IRS are continuing to study the other provisions of the temporary regulations that are not specifically addressed by this Treasury decision. In addition, several comments were received that relate to rules in the 2016 final regulations. Comments on the 2016 final regulations, and provisions of the temporary regulations that are not specifically addressed by this Treasury decision, are beyond the scope of this rulemaking and are not addressed in this preamble. The Treasury Department and the IRS will consider these comments in connection with any future guidance projects addressing the issues discussed in the comments.

A number of comments recommended that all of the temporary regulations, including §§ 1.987-2T, 1.987-4T, and 1.987-12T, be withdrawn. Comments generally indicated that the 2016 final regulations and the temporary regulations are unduly complex and present significant financial and compliance burdens for taxpayers subject to the 2016 final regulations.

As described in the Background section of this Preamble, in its final report to the President in response to E.O. 13789, the Treasury Department indicated that the 2016 final regulations have proved difficult to apply for many taxpayers. The final report indicated that the Treasury Department and the IRS intend to propose modifications to the 2016 final regulations that will reduce the compliance burdens associated with the regulations. While the Treasury Department and the IRS intend to reduce those burdens as described in the final report, the Treasury Department and the IRS continue to consider it inappropriate to permit the selective recognition of section 987 losses and the deferral of section 987 gains. This is particularly true when such selective loss recognition may be accomplished through related-party transactions that do not significantly impact the conduct of the trade or business of a section 987 QBU or its owner but nonetheless generate significant tax benefits, as is true of deferral events and outbound loss events.

Accordingly, the Treasury Department and the IRS have determined that finalizing §§ 1.987-2T, 1.987-4T, and 1.987-12T, while simultaneously deferring the applicability date of the 2016 final regulations and developing guidance to mitigate the complexity and administrative challenges associated with, the 2016 final regulations, appropriately balances taxpayers' burdens with the need to prevent abuse under the 2016 final regulations or under another method of complying with section 987 utilized by a taxpayer during a period for which the 2016 final regulations are not applicable. Accordingly, this Treasury decision finalizes the rules in §§ 1.987-2T, 1.987-4T, and 1.987-12T with certain clarifications.

Comments recommended that the applicability date for the 2016 final regulations and the temporary regulations, including §§ 1.987-2T, 1.987-4T, and 1.987-12T, be delayed for a specified period, such as one or two years. Similarly, comments recommended that the final and temporary regulations, including §§ 1.987-2T, 1.987-4T, and 1.987-12T, be withdrawn in their entirety and reproposed (in one case, with an effective date at least two years after such regulations are finalized) to allow taxpayers time to effectively plan to implement the final and temporary regulations. Generally, the comments indicated that taxpayers required additional time to update and implement existing systems to comply with the 2016 final regulations and the temporary regulations. One comment specifically recommended that the applicability date for § 1.987-12T be delayed until the applicability date of the 2016 final regulations. The comment indicated that, in certain instances, the applicability date of § 1.987-12T prevented the recognition of losses in connection with certain transactions that were in the planning and implementation stages when the temporary regulations were issued. No comments identified specific compliance challenges associated with § 1.987-12T.

The Treasury Department and the IRS decline to delay the applicability date of § 1.987-12T. As discussed in Part I of this Summary of Comments and Explanation of Revisions, § 1.987-12T prevents taxpayers from selectively recognizing section 987 losses through certain technical terminations of a section 987 QBU and similar transactions that would be relatively easy to effect through related-party transactions without meaningfully impacting a taxpayer's business operations. If the applicability date were delayed, taxpayers would be incentivized to engage in such selective recognition of section 987 losses, which would be contrary to the purposes of section 987 and § 1.987-12T. Delaying the application of related provisions under §§ 1.987-2T and 1.987-4T concerning combinations and separations of a section 987 QBU could similarly incentivize transactions designed to accelerate section 987 losses for taxpayers that have elected to apply the 2016 final regulations early. In this regard, the Treasury Department and the IRS observe that the transactions to which §§ 1.987-2T, 1.987-4T, and 1.987-12T are applicable occur exclusively among related persons, such that taxpayers may avoid the application of those sections by avoiding undertaking such transactions.

Accordingly, the final regulations retain the applicability dates of the temporary regulations, as modified by Notice 2017-07, Notice 2017-57, and Notice 2018-57. Specifically, the final regulations provide that §§ 1.987-2(c)(9), 1.987-4(c)(2), and 1.987-4(f) apply to taxable years beginning on or after the day that is three years after the first day of the first taxable year following December 7, 2016. If, however, a taxpayer makes an election under § 1.987-11(b), then §§ 1.987-2(c)(9), 1.987-4(c)(2), and 1.987-4(f) apply to taxable years to which §§ 1.987-1 through 1.987-10 apply as a result of such election.

Similarly, § 1.987-12 incorporates the applicability date provisions of § 1.987-12T, as modified by Notice 2017-07. Thus, the final regulations under § 1.987-12 generally apply to any deferral event or outbound loss event that occurs on or after January 6, 2017. Section 1.987-12 also applies to any deferral event or outbound loss event that occurs as a result of an entity classification election made under § 301.7701-3 that is filed on or after January 6, 2017, and that is effective before January 6, 2017. However, § 1.987-12 applies to any deferral event or outbound loss event occurring on or after December 7, 2016, if such deferral event or outbound loss event was undertaken with a principal purpose of recognizing section 987 loss. Similarly, § 1.987-12 applies to any deferral event or outbound loss event that occurs as a result of an entity classification election made under § 301.7701-3 that was filed on or after December 22, 2016, that was effective before December 7, 2016, and that was undertaken with a principal purpose of recognizing section 987 loss.

Comments recommended alternative approaches for determining a partner's share of the assets and liabilities of a section 987 aggregate partnership. Comments recommended that § 1.987-7 be withdrawn and replaced with the approach of the 2006 proposed regulations under section 987, which provided that a partner's share of assets and liabilities reflected on the books and records of an eligible QBU held indirectly through the partnership must be determined in a manner consistent with how the partners have agreed to share the economic benefits and burdens corresponding to those partnership assets and liabilities, taking into account the rules and principles of subchapter K. The comment indicated that that the liquidation value percentage approach was inconsistent with certain principles of subchapter K, resulting in distortions in the calculation of section 987 gain or loss in certain cases.

The Treasury Department and the IRS have determined that, in the absence of a more comprehensive set of rules for determining a partner's share of assets and liabilities reflected on the books and records of an eligible QBU held indirectly through the partnership that also articulates the interaction of those rules with applicable rules in subchapter K, a more flexible approach is warranted. Moreover, the Treasury Department and the IRS have determined that, in certain instances, the liquidation value percentage methodology set forth in § 1.987-7T may be interpreted as applying in a way that inappropriately distorts the computation of section 987 gain or loss. Specifically, under such an interpretation, certain changes in a partner's liquidation value percentage may introduce distortions in the calculation of net unrecognized section 987 gain or loss under § 1.987-4, giving rise to net unrecognized section 987 gain or loss that is not attributable to fluctuations in exchange rates. For example, an appreciation or depreciation in property value can result in a change in liquidation value percentage that causes a change in owner functional currency net value for purposes of Step 1 of the § 1.987-4(d) calculation of unrecognized section 987 gain or loss for a taxable year without an offsetting adjustment under Step 6 or otherwise that would prevent the change in liquidation value percentage from distorting the calculation of unrecognized section 987 gain or loss. As a result, such unrecognized appreciation or depreciation generally can result in unrecognized section 987 gain or loss for a taxable year being allocated to each partner that indirectly owns a section 987 QBU even when there is no change in exchange rates.

Accordingly, the Treasury Department and the IRS are withdrawing § 1.987-7T (and making a conforming change to an example in § 1.987-12). Until new regulations are proposed and finalized, taxpayers may use any reasonable method for determining a partner's share of assets and liabilities reflected on the books and records of an eligible QBU held indirectly through the partnership. For this purpose, taxpayers may rely on subchapter K principles (consistent with the 2006 proposed regulations under section 987) or an approach similar to the liquidation value percentage method set forth in § 1.987-7T. However, the Treasury Department and the IRS do not believe that it would be reasonable to apply the liquidation value percentage method without corresponding adjustments to the determination of net unrecognized section 987 gain or loss. Thus, for example, a taxpayer using the liquidation value percentage method may be required to adjust its determination of net unrecognized section 987 gain or loss of a section 987 QBU that is owned indirectly through a partnership to prevent the determination of unrecognized section 987 gain or loss that is not attributable to fluctuations in exchange rates. These adjustments may include, for example, treating any change in a partner's owner functional currency net value that is attributable to a change in the partner's liquidation value percentage as resulting in a transfer to or from an indirectly owned section 987 QBU.

Executive Orders 13563 and 12866 direct agencies to assess 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, of reducing costs, of harmonizing rules, and of promoting flexibility.

This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Department of the Treasury and the Office of Management and Budget regarding review of tax regulations. Therefore, a regulatory impact assessment is not required.

This regulation does not establish a new collection of information nor modify an existing collection that requires the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the Regulatory Flexibility Act (5 U.S.C. chapter 6). Accordingly, a regulatory flexibility analysis is not required. This certification is based on the fact that these regulations will primarily affect U.S. corporations that have foreign operations, which tend to be larger businesses. Accordingly, a regulatory flexibility analysis under the Regulatory Flexibility Act is not required.

Pursuant to section 7805(f), the notice of proposed rulemaking preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small businesses. No comments were received.

Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a state, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2018, that threshold is approximately $150 million. This rule does not include any Federal mandate that may result in expenditures by state, local, or tribal governments, or by the private sector in excess of that threshold.

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on state and local governments, and is not required by statute, or preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This proposed rule does not have federalism implications, does not impose substantial direct compliance costs on state and local governments, and does not preempt state law within the meaning of the Executive Order.

The principal author of these final regulations is Steven D. Jensen of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

This document contains amendments to 26 CFR part 300 regarding user fees.

The Independent Offices Appropriations Act of 1952 (IOAA) (31 U.S.C. 9701) authorizes each agency to promulgate regulations establishing a charge for services the agency provides (user fees). The charges must be fair and must be based on the costs to the government, the value of the service to the recipient, the public policy or interest served, and other relevant facts. Under the IOAA, user fee regulations are subject to policies prescribed by the President. Those policies are currently set forth in the Office of Management and Budget (OMB) Circular A-25, 58 FR 38142 (July 15, 1993).

Under OMB Circular A-25, Federal agencies that provide services that confer special benefits on identifiable recipients beyond those accruing to the general public are to establish user fees that recover the full cost of providing the special benefit. An agency that seeks to impose a user fee for government-provided services must calculate the full cost of providing those services, review user fees biennially, and update them as necessary. Section 330(a)(1) of title 31 of the United States Code authorizes the Secretary of the Treasury to regulate the practice of representatives before the Department of the Treasury (Treasury Department). Pursuant to section 330 of title 31, the Secretary has published regulations governing practice before the IRS in 31 CFR part 10 and reprinted the regulations as Treasury Department Circular No. 230 (Circular 230). Section 10.3 of Circular 230 defines who may practice before the IRS and includes individuals who have been granted enrollment to practice as enrolled agents and enrolled retirement plan agents. Section 10.4 of Circular 230 authorizes the IRS to grant enrollment as an enrolled agent or enrolled retirement plan agent to individuals who demonstrate special competence in tax matters by passing a written examination administered by, or under the oversight of, the IRS and who have not engaged in any conduct that would justify suspension or disbarment under Circular 230. Section 10.4 also authorizes the IRS to grant enrollment as an enrolled agent or an enrolled retirement plan agent to a qualifying former IRS employee by virtue of past IRS service and technical experience if the former employee has not engaged in any conduct that would justify suspension or disbarment under the provisions of Circular 230 and meets certain other requirements. The ability to practice before the IRS is a special benefit that is conferred on enrolled agents and enrolled retirement plan agents that does not accrue to the general public.

Once eligible for enrollment as an enrolled agent, whether by examination or former employment with the IRS, an individual must file an application for enrollment with the IRS and pay a $30 nonrefundable user fee. To maintain active enrollment and eligibility to practice before the IRS, an individual who has been enrolled as an enrolled agent or enrolled retirement plan agent must file an application to renew enrollment every three years and pay a $30 nonrefundable user fee. 31 CFR 10.6(d).

As required by the IOAA and OMB Circular A-25, the IRS Return Preparer Office (RPO) completed its 2017 biennial review of the enrollment and renewal user fees associated with enrolled agents and enrolled retirement plan agents. As discussed in section B of this preamble, during its review the RPO took into account the increase in labor, benefits, and overhead costs incurred in connection with providing services to individuals who enroll or renew enrollment as enrolled agents and enrolled retirement plan agents since the user fee was last changed in 2011. In addition, RPO determined that costs associated with Federal tax-compliance checks and suitability checks on enrolled individuals should be recovered as part of the user fee for administering the enrollment and renewal programs. The 2017 biennial review also took into account new costs associated with administering the program for enrolled agents and enrolled retirement plan agents, including the costs of operating a dedicated toll-free helpline in the RPO for enrollment and renewal matters.

The IRS follows generally accepted accounting principles (GAAP) in calculating the full cost of administering the program for enrollment or renewal. GAAP is established by the Financial Accounting Standards Board (FASB). Recognition of costs is based on Statement of Federal Financial Accounting Standards (SFFAS) No. 4: Managerial Cost Accounting Concepts and Standards for the Federal Government, issued by the Federal Accounting Standard Advisory Board (FASAB). The FASAB Handbook of Federal Accounting Standards and Other Pronouncements, as Amended, is available at https://files.fasab.gov/pdffiles/2018_fasab_handbook.pdf.

The IRS determines the cost of its services and activities using a cost-accounting system that tracks costs to organizational units. The lowest organizational unit in the IRS's cost-accounting system is a cost center. Cost centers are usually separate offices that are distinguished by subject-matter area of responsibility or geographic region. Costs of operating a cost center are recorded in the IRS's cost-accounting system. Costs of user fees include direct costs, such as labor, and indirect costs. Indirect costs are not easily traceable and are allocated using a method or by applying an overhead rate.

To establish the per-unit cost, the total cost of providing the service is divided by the volume of services provided.

Not all cost centers are fully devoted to one service for which the IRS charges user fees. Some cost centers work on a number of different services across the IRS. In these cases, the IRS uses various cost-measurement techniques to estimate the cost incurred in those cost centers attributable to the program. These techniques include using various timekeeping systems to measure the time required to accomplish activities, or using information provided by subject-matter experts on the time devoted to a program. Once the IRS has estimated the average time required to accomplish an activity, it multiplies that time estimate by the relevant organizational unit's average labor and benefits cost per unit of time to determine the labor and benefits cost incurred to provide the service. To determine the full cost, IRS then adds overhead as discussed below.

Overhead is an indirect cost of operating an organization that cannot be immediately associated with an activity that the organization performs. Overhead includes costs of resources that are jointly or commonly consumed by one or more organizational unit's activities but are not specifically identifiable to a single activity.

These costs can include:

• General management and administrative services of sustaining and supporting organizations.

• Facilities management and ground maintenance services (security, rent, utilities, and building maintenance).

• Procurement and contracting services.

• Financial management and accounting services.

• Information technology services.

• Services to acquire and operate property, plants and equipment.

• Publication, reproduction, and graphics and video services.

• Research, analytical, and statistical services.

• Human resources/personnel services.

• Library and legal services.

To calculate the overhead allocable to a service, the IRS multiplies a Corporate Overhead rate by the labor and benefits costs determined as discussed previously. The IRS calculates the Corporate Overhead rate annually based on cost elements underlying the Statement of Net Cost included in the IRS Annual Financial Statements, which are audited by the Government Accountability Office. The Corporate Overhead rate is the ratio of the sum of the IRS's indirect labor and benefits costs from the supporting and sustaining organizational units—those that do not interact directly with taxpayers—and all non-labor costs to the IRS's labor and benefits costs of its organizational units that interact directly with taxpayers.

The Corporate Overhead rate of 68.00 percent for costs reviewed during FY 2017 was calculated based on FY 2016 costs (which are assumed to be fixed and reoccurring) as follows:

The IRS used projections for fiscal years 2018 through 2020 to determine the direct costs associated with enrolled agent enrollment and renewal and enrolled retirement plan agent renewal. Direct costs are incurred by the RPO and include labor costs for enrollment and renewal submission processing; tax compliance and background checks; continuing education and testing-related activities; and communications, which include the new toll-free helpline.

The labor and benefits for the work performed related to administering the program for enrolled agent enrollment and renewal and enrolled retirement plan agent renewal is projected to be $2,708,603 in total over fiscal years 2018 through 2020. The labor and benefits costs include the cost to perform background checks and tax compliance checks, which are services that were not included in the previous $30 user fee. The number of enrollment and renewal applications is based on the FY2016 numbers adjusted by the anticipated increase in enrollment. Adding Corporate Overhead expenses to the total labor and benefits results in total costs of $4,550,453 as shown below:

Dividing this total cost by the projected population of initial enrollment and renewal applications for fiscal years 2018 through 2020 results in a cost per application of $67 as shown below:

Taking into account the full amount of these costs, the RPO determined that the full cost of administering the program for enrolled agents and enrolled retirement plan agents has increased from $30 to $67 per application for enrollment or renewal. The user fee complies with the directive in OMB Circular A-25 to recover the full cost of providing a service that confers special benefits on identifiable recipients beyond those accruing to the general public.

On November 19, 2018, a notice of proposed rulemaking (REG-122898-17) proposing to amend the regulations relating to imposing user fees for enrolled agents and retirement plan agents was published in the Federal Register (83 FR 58202). The document proposed removing the initial enrollment user fee for enrolled retirement plan agents because the IRS no longer offers initial enrollment as an enrolled retirement plan agent.

The document also proposed increasing the amount of the renewal user fee for enrolled retirement plan agents from $30 to $67. In addition, the document proposed increasing the amount of both the enrollment and renewal user fees for enrolled agents from $30 to $67. The notice of proposed rulemaking contains a detailed explanation regarding the amendments to these regulations.

Two comments responding to the notice of proposed rulemaking were received. A public hearing on the notice of proposed rulemaking was scheduled for January 24, 2019. As stated in the notice of proposed rulemaking, requests to speak and outlines of topics to be discussed at the hearing were required to be submitted by January 18, 2019. On January 22, 2019, the public hearing was cancelled due to a lapse in appropriations (IR-2019-05). Because no requests to speak at the hearing had been received, the hearing was not rescheduled. After consideration of the comments, this Treasury Decision adopts the regulations proposed by the notice of proposed rulemaking without change.

Two comments were submitted on the notice of proposed rulemaking. The comments are available at www.regulations.gov or upon request.

One of the comments agreed with the proposed user fee regulations because the commenter's status as an enrolled agent allows him to earn income by representing taxpayers before the IRS. The comment stated that the commenter supported the increase, so long as the user fees comply with the relevant authorities. As discussed in the background section of this preamble, the IOAA authorizes each agency to promulgate regulations that impose user fees for services the agency provides to identifiable recipients. User fee regulations under the IOAA are subject to policies prescribed by the President, which are set forth in OMB Circular A-25. As described in the background section of this preamble, the Treasury Department and IRS complied with the requirements of the IOAA and OMB Circular A-25 in promulgating these regulations. The notice of proposed rulemaking and the background section of this preamble provide a detailed analysis of how the RPO determined the full cost of providing services to enrolled agents and enrolled retirement plan agents (83 FR 58202). Accordingly, the user fee complies with the relevant authorities.

The other comment generally disagreed with enrollment and renewal user fees associated with enrolled agents and enrolled retirement plan agents. The comment stated that the Federal government should bear the full cost of administering programs related to tax professionals. This comment was not accepted because it is contrary to the policies prescribed by the President as set forth in OMB Circular A-25. Accordingly, the proposed regulations are adopted without change.

Executive Orders 13563 and 12866 direct agencies to assess 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, of reducing costs, of harmonizing rules, and of promoting flexibility.

OIRA has determined that this regulation is significant and subject to review under section 6(b) of Executive Order 12866.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this regulation will not have a significant economic impact on a substantial number of small entities. The user fee primarily affects individuals who are enrolled agents, apply to become enrolled agents, or are enrolled retirement plan agents. Only individuals, not businesses, can be enrolled agents or enrolled retirement plan agents. Thus, any economic impact of the user fee on small entities generally will occur only when an enrolled agent or enrolled retirement plan agent owns a small business or when a small business employs enrolled agents or enrolled retirement plan agents and reimburses them for their renewal fees. The Treasury Department and IRS estimate that approximately 22,781 individuals will apply annually for enrollment as an enrolled agent, renewal as an enrolled agent, or renewal as an enrolled retirement plan agent. Due to the relatively small number of small businesses that employ enrolled agents or enrolled retirement plan agents, a substantial number of small entities are not likely to be affected. Further, the economic impact on any small entities affected would be limited to paying the $37 difference in cost between the $67 user fee and the previous $30 user fee for each enrolled agent or enrolled retirement plan agent that a small entity employs and reimburses, or otherwise pays for, the cost of the user fee. The total economic impact of this regulation is thus approximately $842,897 annually, which is the product of the approximately 22,781 individuals and the $37 increase in the fee which is not a significant economic impact. Accordingly, it is certified that the rule will not have a significant economic impact on a substantial number of small entities.

It is not anticipated that the increase in user fee that is paid every three years and averages to $12.33 per year will negatively affect enrollment, which has historically remained steady as user fee amounts have changed. Pursuant to section 7805(f), the notice of proposed rulemaking was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business (83 FR 58202). No comments on the notice of proposed rulemaking were received from the Chief Counsel for Advocacy of the Small Business Administration.

The principal author of these regulations is Mark Shurtliff of the Office of the Associate Chief Counsel (Procedure and Administration). Other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR part 300 is amended as follows:

The Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 (2015 Act), Public Law 114-74, 129 Stat. 584, amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (1990 Act), Public Law 101-410, 104 Stat. 890 (28 U.S.C. 2461 note), to improve the effectiveness of civil monetary penalties and to maintain their deterrent effect. Section 3 of the 1990 Act specifically includes the Postal Service in the definition of “agency” subject to its provisions.

Beginning in 2017, the 2015 Act requires the Postal Service to make an annual adjustment for inflation to civil penalties that meet the definition of “civil monetary penalty” under the 1990 Act. The Postal Service must make the annual adjustment for inflation and publish the adjustment in the Federal Register by January 15 of each year. The Postal Service did not complete the annual adjustments for 2018 or 2019 due to an oversight. In order to satisfy the annual adjustment requirement, the Postal Service will be making both the 2018 and 2019 annual adjustments at this time. Each penalty will be adjusted as instructed by the Office of Management and Budget (OMB) based on the Consumer Price Index (CPI-U) from the most recent October. OMB has furnished detailed instructions regarding the annual adjustment for 2018 in memorandum M-18-03, Implementation of Penalty Inflation Adjustments for 2018, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (December 15, 2017), https://www.whitehouse.gov/wp-content/uploads/2017/11/M-18-03.pdf. OMB provided detailed instructions regarding the annual adjustment for 2019 in memorandum M-19-04, Implementation of Penalty Inflation Adjustments for 2019, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (December 14, 2018), https://www.whitehouse.gov/wp-content/uploads/2017/11/m_19_04.pdf. For 2018, OMB has advised that an adjustment multiplier of 1.02041 will be used. For 2019, OMB has advised that an adjustment multiplier of 1.02522 will be used. The Postal Service will first apply the 2018 adjustment multiplier. The Postal Service will then apply the 2019 adjustment multiplier on the 2018 adjusted amount. The new penalty amount must be rounded to the nearest dollar after each adjustment multiplier is applied. The new penalty amounts will take effect immediately upon publication in the Federal Register .

The 2015 Act allows the interim final rule and annual inflation adjustments to be published without prior public notice or opportunity for public comment.

Civil monetary penalties may be assessed for postal offenses under sections 106 and 108 of the Deceptive Mail Prevention and Enforcement Act, Public Law 106-168, 113 Stat. 1811, 1814 ( see, 39 U.S.C. 3012(a), (c)(1), (d), and 3017(g)(2), (h)(1)(A)); and section 1008 of the Postal Accountability and Enhancement Act, Public Law 109-435, 120 Stat. 3259-3261 ( see, 39 U.S.C. 3018 (c)(1)(A)). The statutory civil monetary penalties subject to the 2015 Act and the amount of each penalty the annual adjustment for inflation are as follows:

Under 39 U.S.C. 3005(a)(1)-(3), the Postal Service may issue administrative orders prohibiting persons from using the mail to obtain money through false representations or lotteries. Persons who evade, attempt to evade, or fail to comply with an order to stop such prohibited practices may be liable to the United States for a civil penalty under 39 U.S.C. 3012(a). The regulations implemented pursuant to this section currently imposes a $69,463 penalty for each mailing less than 50,000 pieces, $138,925 for each mailing of 50,000 to 100,000 pieces, and $13,893 for each additional 10,000 pieces above 100,000 not to exceed $2,778,505. The new penalties will be as follows: $72,669 for each mailing less than 50,000 pieces, $145,335 for each mailing of 50,000 to 100,000 pieces, and $14,535 for each additional 10,000 pieces above 100,000 not to exceed $2,906,718.

In lieu of or as part of an order issued under 39 U.S.C. 3005(a)(1)-(3), the Postal Service may assess a civil penalty. Currently, the amount of this penalty, set in the implementing regulations to 39 U.S.C. 3012(c)(1), is $34,731 for each mailing that is less than 50,000 pieces, $69,463 for each mailing of 50,000 to 100,000 pieces, and an additional $6,946 for each additional 10,000 pieces above 100,000 not to exceed $1,389,252. The new penalties will be: $36,334 for each mailing that is less than 50,000 pieces, $72,669 for each mailing of 50,000 to 100,000 pieces, and an additional $7,267 for each additional 10,000 pieces above 100,000 not to exceed $1,453,359.

Persons sending certain deceptive mail matter described in 39 U.S.C. 3001(h)-(k), including:

• Solicitations making false claims of Federal Government connection or approval;

• Certain solicitations for the purchase of a product or service that may be obtained without cost from the Federal Government;

• Solicitations containing improperly prepared “facsimile checks”; and

• Certain solicitations for “skill contests” and “sweepstakes” sent to individuals who, in accordance with 39 U.S.C. 3017(d), have requested that such materials not be mailed to them;

Under 39 U.S.C. 3017(g)(2), the Postal Service may impose a civil penalty against a person who provides information for commercial use about individuals who, in accordance with 39 U.S.C. 3017(d), have elected not to receive certain sweepstakes and contest information. Currently, this civil penalty may not exceed $2,778,505 per violation. The new penalty may not exceed $2,906,718 per violation.

Currently, under 39 U.S.C. 3017(h)(1)(A) and its implementing regulations, any promoter who recklessly mails nonmailable skill contest or sweepstakes matter may be liable to the United States in the amount of $13,893 per violation for each mailing to an individual. The new penalty is $14,535 per violation.

Under 39 U.S.C. 3018(c)(1)(A), the Postal Service may impose a civil penalty payable into the Treasury of the United States on a person who knowingly mails nonmailable hazardous materials or fails to follow postal laws on mailing hazardous materials. Currently, this civil penalty is at least $300, but not more than $119,786 for each violation. The new penalty is at least $314, but not more than $125,314 for each violation.

For the reasons set out in this document, the Postal Service amends 39 CFR part 233 as follows:

Table of Contents I. Background II. Basis and Purpose of Final Rules III. Final Rules I. Background

On March 1, 2019, the Commission proposed specific reporting requirements to facilitate measuring and tracking cost and service performance issues related to flats. The Commission adopts final rules on these requirements, with minor revisions to the proposed rules as described below.

The Commission initiated this proceeding to explore potential enhancements to the Postal Service's data systems and to facilitate the development of consistent reporting requirements to measure, track, and report cost and service performance issues related to flats. With the adoption of these rules, the Postal Service will be required to annually file data at the national, and facility level data (when specified). These reporting requirements are designed to provide sufficient information to improve transparency into the cost and service issues associated with flats. In addition, the reporting requirements will increase the accountability of the Postal Service related to operational initiatives related to flats.

The final rules incorporate many of the suggestions identified by commenters, as well as additional clarifying language added by the Commission; however, the substance of the rules remains unchanged.

The Commission revises paragraphs (b) through (g) to extend the filing date to 95 days after the end of the fiscal year.

Paragraph (b) of proposed § 3050.50 is modified in several ways. First, in § 3050.50(b)(2), the Commission removes the word “estimate,” as the Commission expects the Postal Service to use the actual unit attributable costs for each product. Second, in § 3050.50(b)(4), the Commission clarifies that the comparison should be conducted as the percentage change in unit attributable costs, and the Commission makes additional minor clarifications to the language. Third, in § 3050.50(b)(5), the Commission removes the word “current” and adds the word “changes” after “mail mix” for clarity. The Commission expands the reporting requirement for § 3050.50(b)(5) to provide data from FY 2013 to present. In addition, the Commission clarifies in § 3050.50(b)(5)(ii) through (iii) that the calculation should be for combined flat-shaped products rather than each flat-shaped product. Fourth, the Commission adds a requirement in § 3050.50(b)(5) that the Postal Service explain the methodology used to calculate mail mix changes. Finally, the Commission modifies § 3050.50(b)(6) and (7) to make clear that that the Postal Service must identify the drivers of changes in the result of the analyses.

Paragraph (e) of proposed § 3050.50 is clarified, as suggested by the Postal Service, to indicate the appropriate five years of historical data that the Commission is requesting. In addition, paragraph (e) of proposed § 3050.50 is supplemented with a rule for instances where a specific report name may change, and additional reporting required when a report name change occurs.

Paragraph (f) of proposed § 3050.50 is modified to ensure that the Postal Service reports on operational changes and/or initiatives that will have any impact on flat-shaped mail operations, flat-shaped mail costs, and/or flat-shaped mail service.

Paragraph (g) of proposed § 3050.50 is modified to ensure that the Postal Service reports on data enhancements that will have any impact on measuring, tracking, and/or reporting on flat-shaped mail costs, operations, and/or service.

Finally, the Commission incorporates the majority of the suggested formatting edits to the rules provided by the Public Representative in Attachment A to her comments.

The Commission places the reporting requirements for flat-shaped mail products in a new section in 39 CFR part 3050.

For the reasons stated in the preamble, the Commission amends chapter III of title 39 of the Code of Federal Regulations as follows:

On March 28, 2018, (83 FR 13192), EPA published a final rulemaking action announcing approval of several amendments to the Code of Maryland Regulations (COMAR) into the Maryland SIP. The amendments included (but were not limited to): (1) NO X RACT for cement kilns for the 2008 ozone national ambient air quality standards (NAAQS); (2) the removal of obsolete provisions related to the NO X Budget Trading Program; and (3) amendments to the requirements for Portland cement plants and natural gas compressor stations.

In the final rulemaking, EPA inadvertently omitted COMAR 26.11.29.05 from the regulations incorporated by reference into the Code of Federal Regulations at 40 CFR 52.1070. The intent of the rule was to incorporate COMAR 26.11.29 in its entirety, consistent with Maryland's November 24, 2015 submittal, as well as EPA's original analysis of the submittal. 1 This document corrects the erroneous omission.

In the final rulemaking document published in the Federal Register on March 28, 2018 (83 FR 13192), on page 13195, in the second and third columns, the revised rule language should have read—“d. Adding the subheading “26.11.29 Control of NO X Emissions from Natural Gas Pipeline Stations” and the entries ”26.11.29.01” through “26.11.29.05”.” Additionally, the table in paragraph (c) of section 52.1070, under the newly-added heading “26.11.29 Control of NO X emissions from Natural Gas Pipeline Stations” should have included COMAR 26.11.29.05.

As published, the final rule failed to fully incorporate Maryland's proposed SIP revision as it was submitted and as EPA intended to approve. Section 553 of the Administrative Procedure Act, 5 U.S.C. 553(b)(3)(B), provides that, when an agency for good cause finds that notice and public procedure are impracticable, unnecessary or contrary to the public interest, the agency may issue a rule without providing notice and an opportunity for public comment. EPA has determined that there is good cause for making this rule final without prior proposal and opportunity for comment because we are merely correcting an incorrect citation in a previous action which underwent notice and comment rulemaking. Thus, notice and public procedure are unnecessary. EPA finds that this constitutes good cause under 5 U.S.C. 553(b)(3)(B).

In this Final rule: Correction, EPA is amending 40 CFR 52.1070 to incorporate COMAR 26.11.29.05 by reference, as was initially intended.

In this rule, EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, EPA is finalizing the incorporation by reference of the revisions to Maryland regulations at COMAR 26.11.29 as discussed in this final action, and EPA's original, May 28, 2018 final action (83 FR 13192). EPA has made, and will continue to make, these materials generally available through http://www.regulations.gov and at the EPA Region III Office (please contact the person identified in the For Further Information Contac t section of this preamble for more information). Therefore, these materials have been approved by EPA for inclusion in the SIP, have been incorporated by reference by EPA into that plan, are fully federally enforceable under sections 110 and 113 of the CAA as of the effective date of the final rulemaking of EPA's approval, and will be incorporated by reference by the Director of the Federal Register in the next update to the SIP compilation. 2

Under Executive Order (E.O.) 12866 (58 FR 51735, October 4, 1993), this action is not a significant regulatory action and is therefore not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). Because the agency has made a good cause finding that this action is not subject to notice-and-comment requirements under the Administrative Procedures Act or any other statute as indicated in the Supplementary Information section above, it is not subject to the regulatory flexibility provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), or to sections 202 and 205 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4). In addition, this action does not significantly or uniquely affect small governments or impose a significant intergovernmental mandate, as described in sections 203 and 204 of UMRA. This rule also does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), nor will it 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 governments, as specified by Executive Order 13132 (64 FR 43255, August 10, 1999). This rule also is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because it is not economically significant.

This technical correction action does not involve technical standards; thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. The rule also does not involve special consideration of environmental justice related issues as required by Executive Order 12898 (59 FR 7629, February 16, 1994). In issuing this rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct, as required by section 3 of Executive Order 12988 (61 FR 4729, February 7, 1996). EPA has complied with Executive Order 12630 (53 FR 8859, March 15, 1998) by examining the takings implications of the rule in accordance with the “Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings” issued under the executive order. This rule does not impose an information collection burden under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq ).

The Congressional Review Act (5 U.S.C. 801 et seq. ), as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. Section 808 allows the issuing agency to make a rule effective sooner than otherwise provided by the CRA if the agency makes a good cause finding that notice and public procedure is impracticable, unnecessary or contrary to the public interest. This determination must be supported by a brief statement. 5 U.S.C. 808(2). As stated previously, EPA had made such a good cause finding, including the reasons therefore, and established an effective date of May 13, 2019. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This correction to 40 CFR 52.1070 for Maryland is not a “major rule” as defined by 5 U.S.C. 804(2).

40 CFR part 52 is amended as follows:

This is a summary of the Commission's Fifth Report and Order GN Docket No. 14-177, FCC 19-30, adopted on April 12, 2019 and released on April 15, 2019. The complete text of this document is available for public inspection and copying from 8 a.m. to 4:30 p.m. Eastern Time (ET) Monday through Thursday or from 8 a.m. to 11:30 a.m. ET on Fridays in the FCC Reference Information Center, 445 12th Street SW, Room CY-A257, Washington, DC 20554. The complete text is available on the Commission's website at https://docs.fcc.gov/public/attachments/FCC-19-30A1.pdf, or by using the search function on the ECFS web page at http://www.fcc.gov/cgb/ecfs/ . Alternative formats are available to persons with disabilities by sending an email to fcc504@fcc.gov or by calling the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (tty).

The Regulatory Flexibility Act (RFA) requires that an agency prepare a regulatory flexibility analysis for notice and comment rulemakings, unless the agency certifies that “the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.” Accordingly, the Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) concerning the possible impact of the rule changes contained in this Fifth Report and Order on small entities.

The requirements in revised § 25.136 (e), (f), and (g) constitute new or modified collections subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. They will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies will be invited to comment on the new information collection requirements contained in this proceeding. This document will be submitted to OMB for review under section 3507(d) of the PRA. In addition, the Commission notes that, pursuant to the Small Business Paperwork Relief Act of 2002, the Commission previously sought, but did not receive, specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees. The Commission describes impacts that might affect small businesses, which includes more businesses with fewer than 25 employees, in the Final Regulatory Flexibility Analysis. In the present document, the Commission has assessed the effects of its filing requirements on satellite providers and finds that these requirements will not impose undue burdens on businesses with fewer than 25 employees. The filing requirements the Commission is imposing are necessary to ensure that the proposed operations will comply with the technical rules the Commission has established and not unduly preclude possible future terrestrial operation in the band.

The Commission will send a copy of the Fifth Report and Order, including this FRFA, in a report to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see U.S.C. 801(a)(1)(A).

In addition, the Commission will send a copy of the Fifth Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the Fifth Report and Order, and FRFA (or summaries thereof) will also be published in the Federal Register .

1. The Commission takes two actions that continues its efforts to make available millimeter wave (mmW) spectrum, at or above 24 GHz, for 5G wireless, Internet of Things (IoT), and other advanced spectrum-based services, including satellite broadband services. First, the Commission establishes rules authorizing FSS operators such as satellite broadband service operators, to license individual earth stations in the 50.4-51.4 GHz band using criteria identical to those applicable in the 24.75-25.25 GHz band. This action will allow FSS operators to provide additional capacity that can be used to provide faster and more advanced services to their customers. Second, the Commission establishes a process for the Department of Defense (Department) to operate on a shared basis in the Upper 37 GHz band (37.6-38.6 GHz) in limited circumstances. This action will provide certainty to potential applicants as the Commission begins the auction process for the Upper 37 GHz band, the 39 GHz band (38.6-40 GHz band), and the 47 GHz band (47.2-48.2 GHz) later this year.

2. On June 8, 2018, the Commission released the Third Report & Order ( Third R&O ), 83 FR 34478, Memorandum Opinion and Order ( MO&O ), and Third Further Notice of Proposed Rulemaking ( Third FNPRM ), 83 FR 34520, in this proceeding. In relevant parts, the Third FNPRM proposed permitting the licensing of individual FSS earth stations in the 50.4-51.4 GHz band using criteria identical to those applicable in the 24.75-25.25 GHz band. With respect to the 37 GHz band, the Commission noted that it had adopted rules that establish coordination zones for 14 military sites and three scientific sites identified by the National Telecommunications and Information Administration (NTIA), and it sought comment on “on how best to accommodate coordination zones for future Federal operations at a limited number of additional sites.” In contrast, for the Lower 37 GHz band, the Commission sought comment on a proposed coordination mechanism and alternatives to facilitate co-equal shared use of the Lower 37 GHz band between Federal and non-Federal users, as well as among non-Federal users.

3. The 50.4-51.4 GHz band includes primary Federal and non-Federal allocations for fixed and mobile services, as well as primary Federal and non-Federal allocations for fixed-satellite (Earth-to-space) and mobile satellite (Earth-to-space) services. In 1998, the Commission designated the 50.4-51.4 GHz band for use by wireless (fixed and mobile) services. In the Spectrum Frontiers FNPRM, 81 FR 79894, the Commission proposed to authorize fixed and mobile operations throughout the 50.4-52.6 GHz band in accordance with the part 30 Upper Microwave Flexible Use Service (UMFUS) rules. The Commission also proposed to use geographic area licensing to license UMFUS stations in the band on a Partial Economic Area (PEA) basis and sought comment on sharing with satellite services. The Commission received ten satellite applications or market access requests and 20 earth station applications seeking to use the existing FSS (Earth-to-space) allocation in the 50.4-51.4 GHz band for delivery of broadband services.

4. In the Third FNPRM, the Commission proposed rules that would permit licensing of individual FSS earth stations in the 50.4-51.4 GHz band using criteria identical to those applicable in the 24.75-25.25 GHz band Specifically, the Commission proposed to apply the permitted aggregate population limits within the specified earth station Power Flux Density (PFD) contour on a per-county basis, similar to the requirement in the 27.5-28.35 GHz band, and to adopt constraints on the number of permitted earth stations on both a per county and a per PEA basis. To reflect these requirements, the Commission proposed to modify § 25.136 of the Commission's rules to include the 50.4-51.4 GHz band. The Commission also proposed to amend footnote NG65 to the U.S. Table of Allocations to include the 50.4-51.4 GHz band, making clear the relative interference protection obligations between the co-primary services.

5. With respect to the Upper 37 GHz band, the entire 37 GHz band is allocated to the fixed and mobile services on a primary basis for Federal and non-Federal use. In the Spectrum Frontiers R&O, 81 FR 79894, the Commission made five decisions addressing the Federal and non-Federal use of the band that are relevant here. First, it adopted service rules to permit non-Federal fixed and mobile terrestrial operation throughout the 37 GHz band. Second, it divided the band into two segments: a lower band segment from 37.0-37.6 GHz (Lower 37 GHz band) and an upper band segment from 37.6-38.6 GHz (Upper 37 GHz band). Third, it made the Lower 37 GHz band available for coordinated co-primary sharing between Federal and non-Federal users. Fourth, it adopted rules to license the Upper 37 GHz band geographically by PEAs in 200 megahertz channel blocks (but changed the band plan to 100 megahertz blocks in the Spectrum Frontiers Fourth R&O, 84 FR 1618). Fifth, it established the coordination zones throughout the entire 37-38.6 GHz band for the 14 military sites and three scientific sites identified by NTIA. While the Commission noted that Federal agencies still had the ability to add future sites on a coordinated basis, it did not indicate how this could be done.

6. In the Third FNPRM, the Commission sought comment on how best to accommodate coordination zones for future Federal operations at a limited number of additional sites. The Commission asked whether it should amend its rules to add more specific sites for Federal operations, or whether it should establish a process that would permit Federal entities in the future to identify a limited number of additional sites on an as-needed basis. The Commission also asked whether the coordination zones previously established in its rules might be reduced to better accommodate nearby non-Federal operations without adversely impacting Federal operations at those sites.

7. The Commission received 26 comments and 17 reply comments on the Third FNPRM . A list of commenters, reply commenters, and parties filing ex parte submissions relating to the issues are addressed in this Fifth Report and Order . No petitions for reconsideration of the Third R&O were filed.

8. AT&T, Boeing, EchoStar, SES, SpaceX, Telesat, TIA, and Viasat, support licensing of individual FSS earth stations in the 50.4-51.4 GHz band. Although not specifically opposed to the idea of allowing earth stations to operate in the 50.4-51.4 GHz band, CTIA, Nokia, and T-Mobile argue that it is premature to adopt rules for sharing between terrestrial and FSS operations before UMFUS service rules are adopted. They urge the Commission to adopt UMFUS service rules either first or simultaneously. In contrast, most satellite operators, asserting that there is no need to delay adopting FSS earth station sharing rules, point to workability in other bands, imminent plans for 50.4-51.4 GHz band satellite deployment, and the need to alleviate the current regulatory uncertainty, which the operators describe as debilitating, particularly given the high cost and long lead time involved in designing and building next-generation satellites. EchoStar and Boeing further encourage the Commission not only to swiftly adopt the proposed rules, but also to proceed with processing pending earth station applications in this band conditioned upon the outcome of the proceeding.

9. With respect to the terms under which the 50.4-51.4 GHz band would be made available for individually licensed earth stations, there is a split between commenters who support using the same criteria applicable in the 24.75-25.25 GHz band and those who ask the Commission to adopt more permissive criteria. EchoStar, TIA, and AT&T support the criteria contained in the Third FNPRM, which would allow up to three earth station locations in a given county and a maximum of 15 earth station locations in a given PEA. AT&T, in addition, expressly opposes any relaxation in sharing criteria proposed in the Third FNPRM, asserting a lack of evidence and justification for disturbing the existing balance between services achieved by the rules introduced in other bands. T-Mobile similarly cautions that the Commission should go no further than the current sharing framework adopted for the 24 GHz band, which it characterizes as a consistent approach across already allocated bands. In contrast, Boeing, SES, SpaceX, and Telesat ask the Commission to adopt more permissive or flexible sharing criteria than the Commission proposed, and they assert that the shorter propagation distances of the 50.4-51.4 GHz band make it suitable for more robust sharing. Similarly, Viasat supports individual licensing of earth stations in the 50.4-51.4 GHz band consistent with the more liberal sharing framework applicable in the 47.2-48.2 GHz band, and it further asks the Commission to clarify that smaller earth stations may be permitted to operate in the 47.2-48.2 GHz and 50.4-51.4 GHz bands on a secondary basis with respect to terrestrial services. Other parties request that the Commission add an allocation for FSS in the 51.4-52.4 GHz band. CCA contends that the Commission should not adopt rules that could prejudice future mobile use.

10. The Commission adopts its proposal to permit licensing of individual FSS earth stations in the 50.4-51.4 GHz band using the criteria the Commission adopted for the 24.75-25.25 GHz band. This action will allow FSS operators to provide faster and more advanced services to their customers. Under those criteria, there may be no more than three earth stations in the 50.4-51.4 GHz band in a county and no more than 15 earth stations in any PEA. The area in which the earth station generates a PFD, at 10 meters above ground level, of greater than or equal to −77.6 dBm/m 2 /MHz, together with the similar area of any other earth station operating in the 50.4-51.4 GHz band in the same county, may not cover, in the aggregate, more than the amount of population specified below:

11. Although the 50.4-52.6 GHz band remains under consideration for UMFUS licensing, establishing UMFUS service rules will require us to address issues concerning sharing with co-primary Federal services in the 50.4-52.6 GHz band, as well as protection of passive services in the adjacent 50.2-50.4 GHz and 52.6-54.25 GHz bands. In the meantime, the Commission notes that a significant number of FSS operators seek to license space stations and earth stations in the band. As in the case of other bands shared between co-primary terrestrial and fixed-satellite services, ( e.g., 24.75-25.25 GHz, 37.5-40 GHz and 47.2-48.2 GHz), the Commission finds that, where an FSS allocation already exists in the 50.4-51.4 GHz band, a limited number of individually licensed FSS earth stations can share the 50.4-51.4 GHz band with minimal impact on terrestrial operations in this band. Both the 24 GHz and 50 GHz bands are satellite uplink bands. As in 24 GHz, the limits, the Commission will impose on FSS earth stations in the 50 GHz band will “better provide FSS with additional capacity for satellite services while permitting substantial terrestrial use of the band.” Throughout this proceeding, the Commission has sought to promote spectrum efficiency by permitting spectrum made available for UMFUS to be shared with other allocated services when possible. The Commission recognizes there are a significant number of pending FSS earth station applications for the 50.4-51.4 GHz band. The Commission agrees that operators in this co-primary service seeking to proceed with system development need this degree of regulatory certainty and should not have to wait while the more complex issues associated with UMFUS licensing are addressed and resolved. Thus, the Commission adopts the proposed rules, which will facilitate sharing between FSS and UMFUS, while the Commission continues to consider the rules for terrestrial operations in the band.

12. At this time, the Commission will not adopt any of the various proposals for increased flexibility for FSS earth station licensing. The Commission recognizes the differences in propagation characteristics between the 50 GHz band and lower frequency bands, 1 but the Commission concludes that, prior to the adoption of UMFUS licensing rules, it would be premature to extend FSS earth station flexibility beyond the more conservative limits adopted in the 24.75-25.25 GHz band. Accordingly, the Commission modifies § 25.136 of its rules to include the 50.4-51.4 GHz band, thereby applying the identical licensing criteria to these FSS earth stations as are applicable to those in the 24.75-25.25 GHz band. The Commission also makes a minor conforming modification to § 25.130(b)(4) to include this newly modified rule section in the list of rule sections with which FSS transmitting earth station applicants must comply when seeking authorization in bands shared with UMFUS. In addition, the Commission amends footnote NG65 to the U.S. Table of Allocations as proposed to include the 50.4-51.4 GHz band, making clear the relative interference protection obligations between the co-primary services.

13. In response to the Third FNPRM, NTIA, on behalf of the Department, has identified one additional Federal site in the Upper 37 GHz band beyond the 14 military sites and three scientific sites identified in the Commission's rules. Specifically, it requests a small coordination zone around Edwards Air Force Base to the south of Federal facilities in China Lake, California. In addition, NTIA requests the conversion into a single area of the four overlapping coordination zones currently listed in the Table under the China Lake site. NTIA indicates that these changes would simplify the Table to ensure sufficient protection is available for the Department's operations in the China Lake coordination area, as well as ensuring sufficient protection for nearby Edwards Air Force Base, without impacting any Upper 37 GHz licensees' access to the surrounding population centers in southern California. The Commission amends the Table to consolidate the China Lake coordination zones and accommodate Edwards Air Force Base.

14. Further, the Department expects to deploy at additional sites in the future, and the lower 37 GHz band (37.0-37.6 GHz) may not be sufficient. Because of the Commission's forthcoming plans to auction spectrum in this band before the end of the year and because failure to address possible coordination with Federal users could create uncertainty for potential non-Federal bidders in the auction for spectrum in the Upper 37 GHz band, the Commission believes it's critical to address these needs for coordination here.

15. The Commission recognizes that 5G and other advanced technologies will support a wide variety of applications, including applications that can be used by Federal users. Although the Commission's rules identify the current military sites where licensees would be required to coordinate within a distance of 30 kilometers, the Department expects that there likely will be additional sites where it will need to use the band, but the Department cannot specifically identify these other locations at this time. Unlike the current sites where non-Federal licensees must coordinate with the Department of Defense, the Department seeks to coordinate its use of these additional sites with non-Federal licensees.

16. Accordingly, the Commission establishes a process that accommodates the military's needs, while protecting the interests of non-Federal licensees in the Upper 37 GHz spectrum band. The Department may submit requests for access to the Upper 37 GHz band for specific additional military bases and ranges, for the purpose of defense applications or national security. Such requests must include a justification regarding why the proposed operations could not be accommodated in the Lower 37 GHz band. The Department is willing to limit its requests to operations that cannot be accommodated in the Lower 37 GHz band. FCC staff will review the request to assess any potential impact on non-Federal licensees, contacting the potentially affected licensees and facilitating direct coordination with the Department and NTIA (including establishing a mechanism for appropriate notice to prospective future successors-in-interest to the affected licensees). The FCC will determine whether the request for access can be accommodated without creating a significant risk of harmful interference to current or planned deployments by potentially affected non-Federal licensees. NTIA would provide the applicable military departments any new or revised frequency assignments that are successfully coordinated. The Commission finds that this process strikes a reasonable balance among the stakeholders.

17. The Commission recognizes the concerns of commenters that increasing the number of Federal sites in the Upper 37 GHz band, or establishing a process for future Federal sites that lacks sufficient certainty, might negatively affect an auction of the Upper 37 GHz band and the value of the spectrum. The Commission nonetheless finds that the process it adopts here addresses the need for greater certainty for bidders in an auction, especially given the technical characteristics and expected deployments in the Upper 37 GHz band. First, requests by the Department are likely to be relatively rare, as the Commission anticipates that most such operations can be accommodated in the Lower 37 GHz band. 2 Second, military use, if it cannot be accommodated in the Lower 37 GHz band, will be limited to military bases and ranges, for the purpose of defense applications or national security, and most likely will be in remote areas. Third, the technical characteristics of operations in this region of the spectrum, marked by high path losses and use of advanced antennas and adaptive power control, can minimize any significant impact on licensees' operations. Fourth, as noted above, the FCC, after consultation with potentially affected licensees, NTIA, and the Department, will determine whether the request for access can be accommodated without creating a significant risk of harmful interference to current or planned deployments by potentially affected non-Federal licensees. Although commenters suggest that the Department's needs can be accommodated by secondary market transactions with non-Federal licensees, the Commission does not find that it would be appropriate for secondary markets to be the sole mechanism for addressing future needs for defense and national security applications. Moreover, the same argument that AT&T raises to support the likelihood of successful Department negotiations on the secondary market—that the Department already has the practical ability to control the deployment of facilities on its military bases and ranges—also supports the likelihood that, under the process described above, non-Federal licensees could successfully negotiate coordination agreements with the Department regarding access to the Upper 37 GHz band at such military sites. Accordingly, the Commission believes that the process it establishes will protect winning bidders from harmful interference while enabling the Department to carry out operations in the Upper 37 GHz band for specific additional military sites on a limited basis.

18. The Commission disagrees with T-Mobile's assertion that the process it establishes for coordination of future Department access to the Upper 37 GHz band is inconsistent with the Administrative Procedure Act. First, the Commission provided ample notice in the Third FNPRM for its decisions. In the Third FNPRM, the Commission asked not only whether it should amend its rules to add more specific sites for Federal operations, but also whether it should establish a process that would permit Federal entities in the future to identify a limited number of additional sites on an as-needed basis. Second, T-Mobile's assertion that the process the Commission adopts is arbitrary and capricious is based on a description that does not match the process its adopt in light of the record generated, and its need to balance competing objectives under section 309(j) of the Act. The statutory factors the Commission promotes here include, e.g., “development and rapid deployment of new technologies, products, and services for the benefit of the public, including those residing in rural areas, without administrative or judicial delays;” and “efficient and intensive use of the electromagnetic spectrum . . . .” T-Mobile claims that “the proposed process would not include any guidelines for the location or number of additional military sites.” However, the process the Commission adopts is limited to specific locations, i.e., military bases and ranges, limits requests solely for the purpose of defense applications or national security, and only in those instances where the Department can justify that its proposed operations cannot by accommodated in the Lower 37 GHz band.

19. In addition, the Commission notes that the Department and the wireless industry are working together to advance spectrum-based technologies through various collaborative efforts, such as their participation in the National Spectrum Consortium and engagement in the Defense Advanced Research Projects Agency Spectrum Collaboration Challenge. Further, the Department and the wireless industry are working together to coordinate operations across many frequency bands, such as in the 3.5 GHz band. The Commission anticipates that those working relationships can facilitate successful coordination of operations in the 37 GHz band.

20. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Third FNPRM released in June 2018 in this proceeding. The Commission sought written public comment on the proposals in the Third FNPRM, including comments on the IRFA. No comments were filed addressing the IRFA. This present FRFA conforms to the RFA.

21. In the Fifth Report and Order, the Commission authorizes FSS use of the 50.4-51.4 GHz band for individually licensed earth stations, which will allow FSS operators to provide additional capacity that can be used to provide faster and more advanced services to their customers. In authorizing FSS use of the 50.4-51.4 GHz band for individually licensed earth stations, the Commission will apply the licensing criteria it adopted for the 24.75-25.25 GHz band. Accordingly, in the Fifth Report and Order the Commission modify § 25.136 of its rules to include the 50.4-51.4 GHz band and make a minor conforming modification to § 25.130(b)(4) to include this newly modified rule section in the list of rules sections that FSS transmitting earth station applicants must comply with when seeking authorization in bands shared with UMFUS. Additionally, the Commission amends footnote NG65 to the U.S. Table of Allocations as proposed to include the 50.4-51.4 GHz band, making clear the relative interference protection obligations between the co-primary services.

22. With regard to Federal use in the 37 GHz band, the Commission establishes a process that accommodates the military's needs, while protecting the interests of non-Federal licensees in the Upper 37 GHz spectrum band. The Department may submit requests for access to the Upper 37 GHz band for specific additional military sites, such as military bases and ranges. Such requests must include a justification regarding why the proposed operations could not be accommodated in the Lower 37 GHz band. The FCC will review the request to assess any potential impact on non-Federal licensees, contacting the potentially affected licensees and facilitating direct coordination with the Department and NTIA (including establishing a mechanism for appropriate notice to prospective future successors-in-interest to the affected licensees). The FCC will determine whether the request for access can be accommodated without creating a significant risk of harmful interference to current or planned deployments by potentially affected non-Federal licensees. This action will accommodate military needs while providing certainty to potential applicants as the Commission begins the auction process for the Upper 37 GHz band, the 39 GHz band (38.6-40 GHz band), and the 47 GHz band (47.2-48.2 GHz) later this year.

23. There were no comments filed that specifically addressed the proposed rules and policies presented in the IRFA.

24. Pursuant to the Small Business Jobs Act of 2010, which amended the RFA, the Commission is required to respond to any comments filed by the Chief Counsel for Advocacy of the Small Business Administration (SBA), and to provide a detailed statement of any change made to the proposed rules as a result of those comments.

25. The Chief Counsel did not file any comments in response to the proposed rules in this proceeding.

26. The RFA requires the Commission to describe and to estimate the number of small entities that may be affected by the rules adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act.” A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.

27. Small Businesses, Small Organizations, Small Governmental Jurisdictions. The Commission actions, over time, may affect small entities that are not easily categorized at present. The Commission therefore describes here, at the outset, three broad groups of small entities that could be directly affected herein. First, while there are industry specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the SBA's Office of Advocacy, in general a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States which translates to 28.8 million businesses.

28. Next, the type of small entity described as a “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Nationwide, as of August 2016, there were approximately 356,494 small organizations based on registration and tax data filed by nonprofits with the Internal Revenue Service (IRS).

29. Finally, the small entity described as a “small governmental jurisdiction” is defined generally as “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” U.S. Census Bureau data from the 2012 Census of Governments indicate that there were 90,056 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States. Of this number there were 37,132 General purpose governments (county, municipal and town or township) with populations of less than 50,000 and 12,184 Special purpose governments (independent school districts and special districts) with populations of less than 50,000. The 2012 U.S. Census Bureau data for most types of governments in the local government category show that the majority of these governments have populations of less than 50,000. Based on this data the Commission estimates that at least 49,316 local government jurisdictions fall in the category of “small governmental jurisdictions.”

30. Wireless Telecommunications Carriers (except Satellite). This industry comprises establishments engaged in operating and maintaining switching and transmission facilities to provide communications via the airwaves. Establishments in this industry have spectrum licenses and provide services using that spectrum, such as cellular services, paging services, wireless internet access, and wireless video services. The appropriate size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. For this industry, U.S. Census Bureau data for 2012 show that there were 967 firms that operated for the entire year. Of this total, 955 firms had employment of 999 or fewer employees and 12 had employment of 1,000 employees or more. Thus, under this category and the associated size standard, the Commission estimates that the majority of wireless telecommunications carriers (except satellite) are small entities.

31. Fixed Microwave Services. Microwave services include common carrier, private-operational fixed, and broadcast auxiliary radio services. They also include the UMFUS, the mmW service, Local Multipoint Distribution Service (LMDS), the Digital Electronic Message Service (DEMS), and the 24 GHz Service, where licensees can choose between common carrier and non-common carrier status. At present, there are approximately 66,680 common carrier fixed licensees, 69,360 private and public safety operational-fixed licensees, 20,150 broadcast auxiliary radio licensees, 411 LMDS licenses, 33 24 GHz DEMS licenses, 777 39 GHz licenses, and five 24 GHz licensees, and 467 mmW licenses in the microwave services. The Commission has not yet defined a small business with respect to microwave services. The closest applicable SBA category is Wireless Telecommunications Carriers (except Satellite) and the appropriate size standard for this category under SBA rules is that such a business is small if it has 1,500 or fewer employees. For this industry, U.S. Census Bureau data for 2012 shows that there were 967 firms that operated for the entire year. Of this total, 955 had employment of 999 or fewer, and 12 firms had employment of 1,000 employees or more. Thus, under this SBA category and the associated standard, the Commission estimates that the majority of fixed microwave service licensees can be considered small.

32. The Commission does not have data specifying the number of these licensees that have more than 1,500 employees, and thus is unable at this time to estimate with greater precision the number of fixed microwave service licensees that would qualify as small business concerns under the SBA's small business size standard. Consequently, the Commission estimates that there are up to 36,708 common carrier fixed licensees and up to 59,291 private operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services that may be small and may be affected by the rules and policies adopted herein. The Commission notes, however, that both the common carrier microwave fixed, and the private operational microwave fixed licensee categories includes some large entities.

33. Satellite Telecommunications. This category comprises firms “primarily engaged in providing telecommunications services to other establishments in the telecommunications and broadcasting industries by forwarding and receiving communications signals via a system of satellites or reselling satellite telecommunications.” Satellite telecommunications service providers include satellite and earth station operators. The category has a small business size standard of $32.5 million or less in average annual receipts, under SBA rules. For this category, U.S. Census Bureau data for 2012 shows that there were a total of 333 firms that operated for the entire year. Of this total, 299 firms had annual receipts of less than $25 million. Consequently, the Commission estimates that the majority of satellite telecommunications providers are small entities.

34. All Other Telecommunications. The “All Other Telecommunications” category is comprised of establishments primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing internet services or voice over internet protocol (VoIP) services via client-supplied telecommunications connections are also included in this industry.” The SBA has developed a small business size standard for “All Other Telecommunications,” which consists of all such firms with gross annual receipts of $32.5 million or less. For this category, U.S. Census Bureau data for 2012 shows that there were a total of 1,442 firms that operated for the entire year. Of these firms, a total of 1400 firms had gross annual receipts of under $25 million and 42 firms had gross annual receipts of $25 million to $49, 999,999. Thus, the Commission estimates that a majority of “All Other Telecommunications” firms potentially affected by its actions can be considered small.

35. Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing. This industry comprises establishments primarily engaged in manufacturing radio and television broadcast and wireless communications equipment. Examples of products made by these establishments are: Transmitting and receiving antennas, cable television equipment, GPS equipment, pagers, cellular phones, mobile communications equipment, and radio and television studio and broadcasting equipment.” The SBA has established a size standard for this industry of 1,250 employees or less. U.S. Census Bureau data for 2012 shows that 841 establishments operated in this industry in that year. Of that number, 828 establishments operated with fewer than 1,000 employees, 7 establishments operated with between 1,000 and 2,499 employees and 6 establishments operated with 2,500 or more employees. Based on this data, the Commission concludes that a majority of manufacturers in this industry is small.

36. The Commission expects the rules adopted in the Fifth Report and Order will impose new or additional reporting or recordkeeping and/or other compliance obligations on small entities as well as other applicants and licensees. FSS earth station applicants and licensees in the 50.4-51.4 GHz band will be subject to the reporting, recordkeeping, and compliance requirements applicable in the 24.75-25.25 GHz band. When they submit applications for authority to operate earth stations in the 50.4-51.4 GHz band, they will be required to demonstrate that the proposed earth stations comply with technical criteria designed to ensure that the earth stations would not unduly limit possible future terrestrial service. These demands are necessary to ensure that the proposed operations will comply with the technical rules, and not unduly preclude possible future terrestrial operation in the band and will require small businesses as well as other entities that intend to offer such satellite telecommunications services to use professional, accounting, engineering or survey services in order to meet these requirements. To attain consistency with the existing application of the Commission's rules, the reporting, recordkeeping, and other compliance requirements resulting from the Commission's actions in the Fifth Report and Order will apply to all entities in the same manner.

37. The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in reaching its approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.

38. Rather than creating a new framework for the licensing of FSS earth stations in the 50.4-51.4 GHz band, the Commission chose to apply the identical licensing criteria applicable to the 24.75-25.25 GHz band and adopt existing rule sections that FSS transmitting earth station applicants must comply with when seeking authorization in bands shared with UMFUS. These steps will minimize the significant economic impact on small entities by not increasing the cost of compliance with an entirely new set of rules and regulations. Moreover, to the extent an entity is already licensed and operating the 24.75-25.25 GHz band, they may have the processes and procedures and infrastructure in place to facilitate compliance with the Commission's rules, and therefore may only incur minimal incremental costs to comply with the rules adopted for the 50.4-51.4 GHz band.

39. Accordingly, it is ordered, pursuant to sections 1, 2, 3, 4, 5, 7, 301, 302, 302a, 303, 304, 307, 309, and 310 of the Communications Act of 1934, 47 U.S.C. 151, 152, 153, 154, 155, 157, 301, 302, 302a, 303, 304, 307, 309, and 310, section 706 of the Telecommunications Act of 1996, as amended, 47 U.S.C. 1302, and § 1.411 of the Commission's Rules, 47 CFR 1.411, that this Fifth Report and Order is hereby adopted.

40. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Fifth Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

41. It is further ordered that the amendments of the Commission's rules as set forth under Final Rules are adopted, effective thirty days from the date of publication in the Federal Register . Section 25.136(e), (f), and (g) contain new or modified information collection requirements that require review by OMB under the PRA. The Commission directs the Bureau to announce the compliance date for those information collections in a document published in the Federal Register after OMB approval and directs the Bureau to cause § 25.136(h) to be revised accordingly.

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 2, 25 and 30 as follows:

NMFS published measures for the Northeast multispecies common pool fishery for fishing year 2019 on April 26, 2019 (84 FR 17926). These measures included possession and trip limits for all stocks of regulated multispecies.

The document incorrectly listed the trip limit for Gulf of Maine (GOM) winter flounder as 2,000 lb (907 kg) per trip, instead of the correct trip limit of 1,000 lb (454 kg) per trip. This correction will not adversely affect fishing operations. The corrected trip limit of 1,000 lb (454 kg) is the same as the 1,000 lb (454 kg) trip limit for the stock in the previous year. The 1,000 lb (454 kg) limit is based on past experience and anticipated fishing effort. There was no discussion of any increase because there was intended to be no change in the limit from the previous fishing year to prevent an overage from occurring in Trimester 1. This correction is necessary to prevent early trimester closures and overages of common pool quotas while facilitating optimized harvest.

In the Federal Register of April 26, 2019, in FR Doc. 2019-08441, on page 17927, table 1, is corrected to read as follows:

The Assistant Administrator for Fisheries, NOAA, finds good cause pursuant to 5 U.S.C. 553(b)(B) and 5 U.S.C. 553(d)(3) to waive prior notice and the opportunity for public comment and the 30-day delayed effectiveness period because it would be contrary to the public interest. This action corrects an error that inadvertently identified the trip limit of GOM winter flounder for the Northeast multispecies common pool fishery at 2,000 lb (907 kg) per trip rather than the correct 1,000 lb (454 kg) per trip.

Delay of this action would leave the common pool fishery with a trip limit for GOM winter flounder that is too high to control catch and may lead to early closure of a trimester and quota overages. Any overage of the quota for either of the first two trimesters must be deducted from the Trimester 3 quota, which could substantially disrupt the trimester structure and intent to distribute fishing effort across the entire fishing year. An overage reduction in Trimester 3 would further reduce fishing opportunities for common pool vessels and likely result in early closure of Trimester 3. Additionally, any overage of the annual quota would be deducted from common pool's quota for the next fishing year, to the detriment of the fishery.

For the reasons above, delay of this action for prior notice and the opportunity for public comment and the 30-day delayed effectiveness period would undermine management objectives of the FMP and cause unnecessary negative economic impacts to the common pool fishery.