On September 18, 2018, the OCC published a proposed rule  1 to implement section 206 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), Public Law 115-174, 132 Stat. 1310. Section 206 of EGRRCPA amended the Home Owners' Loan Act (HOLA) (12 U.S.C. 1461 et seq. ) to add a new section 5A (12 U.S.C. 1464a). Section 5A allows a Federal savings association with total consolidated assets equal to or less than $20 billion, as reported by the association to the Comptroller as of December 31, 2017, to elect to operate as a covered savings association. A covered savings association has the same rights and privileges as a national bank that has its main office situated in the same location as the home office of the covered savings association. A covered savings association is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to such a national bank. However, a covered savings association retains its Federal savings association charter and continues to be treated as a Federal savings association for purposes of governance, including procedures and requirements for incorporation, charters and bylaws ( e.g., form, amendments), boards of directors ( e.g., elections, term of service), shareholders ( e.g., meetings, voting requirements, requirements for stakeholders such as mutual members), and distribution of dividends ( e.g., payment, prior approval, and other restrictions). A covered savings association also is treated as a Federal savings association for purposes of consolidation, merger, dissolution, conversion (including conversion to a stock bank or another charter), conservatorship, and receivership, as well as for other purposes determined by OCC regulation. A covered savings association may continue to operate any branch or agency that the covered savings association operates on the date an election to operate as a covered savings association takes effect. A covered savings association will continue to be treated as a covered savings association even if its total consolidated assets exceed $20 billion after it makes an election.

The OCC received 16 comments in response to the notice of proposed rulemaking. The commenters included Federal savings associations, industry trade associations, an unincorporated association, a U.S. Senator, a law firm (on behalf of a client), and a grandfathered unitary savings and loan holding company.

The comments generally supported the proposed rule implementing section 5A of HOLA. One commenter urged the OCC to focus on the underlying purpose of section 5A, which the commenter believes is to provide flexibility for Federal savings associations without imposing undue impediments. As explained in the preamble to the proposed rule, the OCC views section 5A of HOLA as a way to provide Federal savings associations with additional flexibility to adapt to new economic conditions and business environments without the cost and time involved in a change of charter. 2 The OCC has considered various factors in implementing section 5A, including the importance of providing an effective regulatory framework for Federal savings associations seeking to make an election and ensuring that the institutions that make an election can continue to operate safely and soundly. The final rule balances these considerations. To that end, consistent with section 5A, the final rule provides a regulatory framework that ensures that covered savings associations that make an election are treated in the same manner as similarly located national banks except where differences are necessary or appropriate to permit covered savings associations to retain their existing charter and governance framework.

Four commenters requested that the OCC work closely with other federal regulators to ensure consistency in the interpretation of section 5A. Several commenters specifically raised questions regarding the treatment of savings and loan holding companies, including grandfathered unitary savings and loan holding companies. In addition, a number of commenters recommended that the OCC clarify that covered savings associations would not be required to be members of the Federal Reserve System, with some adding that membership should be voluntary. The Board of Governors of the Federal Reserve System (FRB) has primary responsibility for supervising savings and loan holding companies and administering Federal Reserve membership. The OCC will continue to consult with the FRB on interpretive issues regarding the application of section 5A to savings and loan holding companies and regarding issues related to membership. The OCC recommends that individuals or institutions with specific questions about membership or the treatment of holding companies of Federal savings associations that elect to operate as covered savings associations contact the FRB.

Several other commenters were concerned about how covered savings associations would be treated within the Federal Home Loan Bank (FHLBank) system. Two commenters asserted that the FHLBanks rate institutions that meet the qualified thrift lender (QTL) test under HOLA higher than institutions that do not meet the QTL test. Another commenter requested that the OCC work with the FHLBanks to ensure that an election does not negatively impact membership privileges. The OCC understands that the Gramm-Leach-Bliley Act amended the Federal Home Loan Bank Act to eliminate certain provisions applicable only to non-QTL compliant members. 3 The OCC recommends that individuals or institutions with specific questions about the activities and authorities of the FHLBanks contact either the Federal Housing Finance Agency, which has primary responsibility for supervising the FHLBank system, or the appropriate FHLBank.

As discussed more fully in subsequent sections of this preamble, the OCC has revised the final rule in response to issues raised by commenters. These revisions and explanations that address other comments received are described in the section-by-section description of the final rule.

101.1 Authority and purposes. Section 101.1(a) of the proposed rule provided that the rule would be issued pursuant to sections 3, 4, 5, and 5A of HOLA (12 U.S.C. 1462a, 1463, 1464, and 1464a), section 5239A of the Revised Statutes (12 U.S.C. 93a), and section 312(b)(2)(B) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5412(b)(2)(B)).

Section 101.1(b) of the proposed rule described the purposes of the proposed rule. Those purposes were to establish standards and procedures for a Federal savings association's election to operate as a covered savings association, to clarify the requirements that apply to covered savings associations, and to establish standards and procedures for terminations of elections and for reelections.

The OCC did not receive comment on this section of the proposed rule. The OCC adopts this section of the proposed rule without change.

101.2 Definitions and computation of time. Section 101.2(a) of the proposed rule set out definitions for the final rule. Section 101.2(b) of the proposed rule provided that, for purposes of the rule, the OCC would compute time in the same manner as set forth in 12 CFR 5.12. Section 5.12 provides that, in computing a period of days, the OCC does not include the day of the act (in this case, the date the OCC receives a Federal savings association's notice of election or termination) from which the period begins to run. If the last day of the time period is a Saturday, Sunday, or Federal holiday, the time period runs until the end of the next day that is not a Saturday, Sunday, or Federal holiday. The OCC did not receive comment on the definitions included in this section or the manner of computation of time. The OCC adopts this section as proposed, with one change. As discussed in more detail later in this preamble, because the final rule refers consistently to “the OCC” throughout, the final rule does not include a definition of the term “appropriate OCC supervisory office.”

101.3 Procedures. Section 101.3 of the proposed rule set out streamlined procedures and standards of review for a Federal savings association's election to operate as a covered savings association.

Section 101.3(a)(1) of the proposed rule would have allowed a Federal savings association that had total consolidated assets of $20 billion or less as of December 31, 2017, to make an election to operate as a covered savings association by submitting a notice to the appropriate OCC supervisory office. The OCC proposed to use the Consolidated Reports of Condition and Income (Call Reports) submitted for the quarter ending December 31, 2017, to determine if a Federal savings association met this threshold.

The proposal provided that institutions that were not Federal savings associations as of December 31, 2017, would not be eligible to make an election to operate as covered savings associations. Therefore, under the proposed approach, an institution that was a credit union, state savings association, or state bank on December 31, 2017, but that later converted to a Federal savings association charter, would not be eligible to make an election to operate as a covered savings association. Similarly, a de novo Federal savings association chartered after December 31, 2017, would not be eligible to make an election. The proposal noted that a Federal savings association in stock form could convert directly to a national bank charter, but for institutions in mutual form, a national bank charter is not available without first converting to stock form. The OCC invited comment on whether the option to elect to operate as a covered savings association should be limited to institutions that were Federal savings associations on December 31, 2017.

One commenter supported the proposed approach, but four commenters expressed concern. Three were concerned about limiting the ability of state-chartered institutions and credit unions to make elections following a conversion to a Federal savings association charter. Two urged the OCC to allow state savings associations, savings banks, or cooperative banks that were in existence prior to December 31, 2017, to make an election following a conversion, and the third urged the OCC to support legislative efforts to eliminate the eligibility date. Another commenter argued that Congress did not intend to exclude de novo savings associations from eligibility.

The OCC is adopting § 101.3(a)(1) as proposed, with one technical change to ensure that the final rule consistently refers to “the OCC” rather than to “the appropriate OCC supervisory office.” Section 5A of HOLA provides that “a Federal savings association” with total consolidated assets of $20 billion or less “as reported by the association to the Comptroller as of December 31, 2017,” may make an election to operate as a covered savings association. Based on this statutory language, the OCC believes that section 5A precludes institutions that were not Federal savings associations as of December 31, 2017, from making an election. Although commenters identified potentially undesirable policy implications of this approach, no commenter offered a legal argument that would allow the OCC to disregard the limits imposed by the statute.

The OCC notes that de novo institutions, state savings associations, and state savings banks that are not in mutual form may apply for a national bank charter if they are seeking a Federal charter and want to exercise the powers of a national bank. This option would not be available to state savings associations or state savings banks that are in mutual form unless they first convert to stock form.

The OCC also received comments on other aspects of § 101.3(a)(1). One commenter asked the OCC to clarify whether institutions that are not eligible to make an election can become eligible by merging into an eligible Federal savings association. Under section 5A of HOLA and the final rule, an institution that was a Federal savings association with total consolidated assets of $20 billion or less as of December 31, 2017, is eligible to make an election, regardless of whether that institution later grows in asset size as a result of a merger with another institution or otherwise. If an institution that is not otherwise eligible to make an election merges into a Federal savings association that is eligible to make an election, and the eligible Federal savings association is the surviving charter, then that Federal savings association would not lose its eligibility to operate as a covered savings association because of the acquisition.

Another commenter requested the OCC to clarify that a Federal savings association that meets the asset threshold as of December 31, 2017, remains eligible to make an election or reelection even if it subsequently grows beyond the threshold. Neither section 5A of HOLA nor the final rule imposes an expiration date on a Federal savings association's eligibility to make an election, nor do they require that a Federal savings association maintain assets equal to or less than $20 billion to retain its eligibility. This means that a Federal savings association that was in existence and met the asset threshold as of December 31, 2017, may make an election at any time after implementation of the final rule. The Federal savings association does not lose its eligibility even if it has grown beyond the $20 billion asset threshold at the time of its election. The OCC does not believe that it is necessary to include language to this effect in the rule. Instead, the OCC has added a paragraph (c) to § 101.4 of the final rule to highlight the express language of section 5A(g) of HOLA. Section 5A(g) provides that a covered savings association may continue to operate as a covered savings association if, after the date of the election, the covered savings association has total consolidated assets greater than $20 billion.

Section 101.3(a)(2) of the proposed rule would have required that a Federal savings association's notice of an election: Be signed by a duly authorized officer of the Federal savings association; identify each branch or agency that the Federal savings association will operate on the effective date of the election that has not been the subject of an application or notice under 12 CFR part 5; and identify and describe each nonconforming subsidiary, asset, or activity that the Federal savings association operates, holds, or conducts at the time it submits the notice, each of which must be divested, conformed, or discontinued pursuant to § 101.5. The OCC received several comments regarding the contents of the notice.

Four commenters requested that the OCC make clear that no shareholder or member vote would be required to make an election, with several commenters noting that boards of directors are responsible for business plans. As explained in the preamble of the proposed rule, the statute does not require that a Federal savings association obtain shareholder or member approval to make an election to operate as a covered savings association. For this reason, the OCC did not include any requirements for a shareholder or member vote in the proposed rule and will not include any such requirement in the final rule. Nevertheless, the election to operate as a covered savings association could have implications not only for the electing association but also for its savings and loan holding company, shareholders, or members. Therefore, each Federal savings association that makes an election should review its respective charter and bylaws, as well as any other applicable law, to determine whether an election to operate as a covered savings association will require shareholder or member approval or additional changes to the association's charter and bylaws.

Two commenters asserted that the requirement to provide information relating to existing branches and agencies under § 101.3(a)(2)(ii) is unduly burdensome. One commenter argued that the proposed regulatory text could be read to require Federal savings associations to submit information on a significant number of branches and agencies, not just newly established ones. The commenter noted that many branch applications or notices were submitted prior to the integration of 12 CFR part 5. This commenter also noted that applications or notices are generally not required for a Federal savings association to establish an agency. The commenter believes such a requirement would be unnecessary, would require time and cost that do not serve a compelling supervisory or regulatory purpose, and would require a covered savings association to disclose more information than a Federal savings association or national bank would be required to disclose. This commenter recommended that the OCC either eliminate this requirement or further clarify its scope. Another commenter stated that the requirement to provide information on existing branches and agencies is unnecessary and burdensome, noting that it may be difficult to provide information on branches that have been operational for a number of years. This commenter suggested that all branches that are open or operational or that have received regulatory approval or non-objection should be presumed to be compliant and documentation should not be required. Neither commenter believes that the OCC has clearly indicated why it needs this information.

The final rule does not require Federal savings associations to identify branches or agencies in a notice of an election. The OCC believes that it can obtain sufficient information about the branches and agencies of a prospective covered savings association by reviewing information the association submits on its nonconforming subsidiaries, assets, or activities. 4 This information will allow the OCC to monitor covered savings associations for compliance with the final rule without imposing any additional burden that could be associated with submitting information identifying branches and agencies. After an election, a covered savings association seeking to establish new branches will be subject to the terms and conditions for the establishment of branches applicable to a similarly located national bank. 5 A covered savings association seeking to establish new non-branch offices ( e.g., loan or deposit production offices) will also be subject to any terms and conditions (including limitations) on the operation of non-branch offices applicable to a similarly located national bank. 6

Section 101.3(a)(2)(iii) of the proposed rule would have required Federal savings associations to identify nonconforming subsidiaries, assets, and activities because these are the subsidiaries, assets, and activities the Federal savings association would need to divest, conform, or discontinue pursuant to section 5A(f)(3) of HOLA and § 101.5 of the rule after an election takes effect. The OCC solicited feedback on whether the final rule should specify metrics for determining the size or scope of a subsidiary, asset, or activity. The OCC did not receive any comments responding to this solicitation and is adopting this provision (which is designated as § 101.3(a)(2)(ii) in the final rule) as proposed. The OCC did receive comments on the proposed treatment of nonconforming subsidiaries, assets, and activities. These comments are addressed in the discussion of § 101.5 later in this preamble.

Section 101.3(b) of the proposed rule provided that a Federal savings association's election to operate as a covered savings association would automatically take effect 60 days after the OCC receives a notice from the Federal savings association, unless the OCC notifies the Federal savings association that it is not eligible in accordance with paragraph (c). The proposal also provided that the OCC could notify a Federal savings association that it is eligible to operate as a covered savings association before 60 days have elapsed. The OCC did not receive any comments on this provision of the proposal. The OCC is adopting § 101.3(b) with one conforming change to reflect the elimination of § 101.3(c) as discussed later in this preamble.

Section 101.3(c) of the proposed rule would have permitted the OCC to notify a Federal savings association in writing that it is not eligible to make an election to operate as a covered savings association if the Federal savings association is not an “eligible savings association” as that term is defined in 12 CFR 5.3(g). Under the definition in 12 CFR 5.3(g), an eligible savings association is a Federal savings association that (1) is well capitalized as defined in 12 CFR 6.4; (2) has a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System (CAMELS); (3) has a Community Reinvestment Act (CRA) rating of “outstanding” or “satisfactory,” if applicable; (4) has a consumer compliance rating of 1 or 2 under the Uniform Interagency Consumer Compliance Rating System; and (5) is not subject to a cease and desist order, consent order, formal written agreement, or Prompt Corrective Action directive or, if subject to any such order, agreement, or directive, is informed in writing by the OCC that the savings association may be treated as an “eligible savings association” for purposes of 12 CFR part 5. Because the purposes of 12 CFR part 5 and the purposes of the proposed rule were different, the proposed rule specified that a Federal savings association that is subject to a cease and desist order, consent order, formal written agreement, or Prompt Corrective Action directive would not be eligible to elect to operate as a covered savings association unless the OCC informed it in writing that it is eligible for purposes of part 101 (that is, for purposes of the proposed rule).

The preamble to the proposed rule noted that the concept of an “eligible savings association” as described in 12 CFR 5.3(g) is well understood and relatively straightforward to apply. In the licensing context, an “eligible savings association” may receive expedited review of filings because it is generally the type of savings association that can operate safely and soundly. The preamble to the proposed rule explained that a Federal savings association that meets the definition of “eligible savings association” typically would not raise the types of concerns that would suggest it should not operate as a covered savings association.

The OCC invited comment on whether there are standards other than those in the definition of “eligible savings association” in 12 CFR 5.3(g) that would allow the OCC to determine, without imposing undue burden, whether a Federal savings association is eligible to operate as covered savings association. The OCC also invited comment on whether there are situations in which, or Federal savings associations for which, it would not be appropriate to use the definition of “eligible savings association” to make determinations about the eligibility of a Federal savings association to operate as a covered savings association. Additionally, the OCC invited comment on whether the rule should identify other factors for consideration when determining a Federal savings association's eligibility to operate as a covered savings association.

Although one commenter supported the OCC's proposed approach, four commenters disagreed with the use of the “eligible savings association” criteria as the basis for eligibility, noting that the criteria are not expressly required by the statute. Some commenters also contended that these criteria would be inconsistent with the purpose of section 5A because they would add hurdles to making an election. The commenters also suggested that the OCC has the expertise to supervise a covered savings association following an election.

The OCC agrees with the commenters who expressed concern with the proposed approach and is eliminating the “eligible savings association” criteria in the final rule. The OCC believes that elimination of these criteria is consistent with section 5A, which directs the OCC to establish “streamlined standards and procedures . . . for an election.” Removal of these criteria will increase the number of institutions that can elect to operate as covered savings associations. The OCC believes that it can use its existing supervisory and enforcement mechanisms, as appropriate, to address any concerns that may arise when an institution elects to operate as a covered savings association, regardless of the condition of the institution at the time of an election. In light of this change, the OCC is also changing the heading of § 101.3 from “Procedures and Standards of Review” to “Procedures.”

The OCC also received several comments asking about the impact of a failure to meet the “eligible savings association” criteria on an ongoing basis after an election. Because the final rule eliminates these criteria, this is no longer an issue.

Although the final rule, like the proposed rule, does not require the OCC to send written notice to a Federal savings association that becomes a covered savings association by operation of law 60 days after an election, the OCC would expect to send such notice as a matter of course. The notice would include a reminder that covered savings associations are subject to the same laws, regulations, and safety and soundness expectations as a similarly located national bank, including any appropriate enforcement action for failure to comply with applicable laws and regulations.

101.4 Treatment of covered savings associations. Section 5A(c) of HOLA provides that a covered savings association has the same rights and privileges as a similarly located national bank and is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to such a national bank. Section 5A(d) further provides that a covered savings association will be treated as a Federal savings association for purposes of the governance of the savings association, as well as for purposes of consolidation, mergers, dissolution, conversion, conservatorship, and receivership. A covered savings association also will be treated as a Federal savings association for any other purposes the Comptroller identifies by regulation.

Section 101.4(a)(1) of the proposed rule offered two alternative ways of explaining what it means for a covered savings association to have the rights and privileges of a similarly located national bank while being subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations as a similarly located national bank. The first alternative (option A) would have required a covered savings association to comply with the same provisions of law that would apply to a similarly located national bank and would not have required the covered savings association to comply with the provisions of law that apply to Federal savings associations, except in specific areas. The second alternative (option B) focused on the activities that would be permissible for a covered savings association. It was modeled on the language used in the OCC's regulations on national bank and Federal savings association operating subsidiaries set out in 12 CFR 5.34(e) and 5.38(e). This alternative would have provided that a covered savings association may engage in any activity that is permissible for a national bank to engage in as part of, or incidental to, the business of banking, or explicitly authorized by statute for a national bank, subject to the same authorization, terms, and conditions that would apply to a similarly located national bank, as determined by the OCC. Both options would have been subject to specific categories of Federal savings association law that would apply to covered savings associations.

The OCC invited comment on which of these alternatives would best clarify the requirements for the treatment of covered savings associations, including the provisions of law that would apply to covered savings associations. Five commenters supported option A, which they considered to be a broader and less definitive approach that would permit timely creativity and innovation by covered savings associations. They also noted that updating a list of applicable laws by regulatory action can take time and that guidance is of limited reliability.

Two commenters supported option B, while two others appeared to support option B but were less definitive. One commenter believed option B would provide greater flexibility for the OCC, which the commenter argued would be preferable even if it would be less certain and would require more consultation with the OCC. Two commenters that supported option B would also support option A if it included a reservation of authority to allow the OCC to determine that a provision of national bank law does not apply to covered savings associations.

The OCC is adopting option B to clarify the requirements for the treatment of covered savings associations. This option provides general guidance about the types of activities in which a covered savings association would be permitted to engage. Covered savings associations would be able to refer to OCC publications to find activities that are permissible for national banks and understand the authorization, terms, and conditions that apply to those activities. 7 Option B is more narrowly tailored than option A, and it preserves the OCC's authority to determine that a particular provision of national bank law does not apply to covered savings associations.

Section 101.4(a)(2) of the proposed rule set out specified areas in which a covered savings association would have continued to be treated as a Federal savings association. These included the categories specifically identified in the statute (governance of the covered savings association (including incorporation, bylaws, boards of directors, shareholders, and distribution of dividends), consolidation, merger, dissolution, conversion (including conversion to a stock bank or to another charter), conservatorship, and receivership). The proposed rule also identified three additional areas in which it would be appropriate to treat covered savings associations as Federal savings associations. These areas were: (1) Provisions that allow Federal mutual savings associations to conduct business as mutual institutions; (2) provisions that set out procedural and operational requirements for Federal savings associations but that do not result in substantively different outcomes for Federal savings associations and national banks; and (3) areas where there is a specific Federal savings association rule with no corresponding specific national bank rule, but the Federal savings association rule sets out requirements that are consistent with supervisory expectations for national banks or is substantially similar to an interagency rule. In the preamble to the proposed rule, the OCC provided several charts to illustrate the types of provisions that the OCC would expect to identify in guidance as provisions of law that apply to Federal savings associations.

The OCC invited comment on whether particular provisions should be considered provisions of law that relate to governance (including incorporation, bylaws, boards of directors, shareholders, and distribution of dividends), consolidation, merger, dissolution, conversion (including conversion to a stock bank or to another charter), conservatorship, and receivership and whether there are other provisions of law that the OCC should identify. The OCC also invited comment on whether these provisions should be specifically identified in the rule rather than in guidance. The OCC received a number of comments on this section of the proposed rule.

Five commenters requested clarification that covered savings associations would not be required to change their name to include the word “National.” National banks are required by statute to include the word “National” in their name. 8 Although section 5A of HOLA provides flexibility for certain Federal savings associations to engage in activities permissible for national banks, these covered savings associations are not national banks and, as such, retain their Federal savings association charter. Because covered savings associations retain their Federal savings association charters, covered savings associations will not be required to change their names to include the word “National.”

One commenter requested that the OCC clarify that the rules governing directors remain the same for Federal savings associations that elect to operate as covered savings associations, noting in particular that electing directors is a governance requirement. As discussed in the preamble to the proposed rule, section 5A of HOLA sets out specific categories of Federal savings association laws that will continue to apply to covered savings associations, including those governance provisions relating to boards of directors ( e.g., elections, term of service). Accordingly, covered savings associations will continue to be required to comply with Federal savings association laws with respect to boards of directors and will not be subject to national bank laws with respect to boards of directors. For example, covered savings associations will not be subject to the statutory citizenship and residence requirements that apply to directors of national banks. 9

Another commenter agreed that provisions of Federal savings association law that relate to members of a Federal mutual savings association should continue to apply to mutual covered savings associations. However, the commenter was concerned that the preamble's justification for this treatment could suggest that the rights of members of a Federal mutual savings association are the same as the rights of shareholders of a Federal stock savings association. The OCC does not intend to use this rule to change the rights of members of a Federal mutual savings association or equate those rights to the rights of shareholders of a Federal stock savings association. Rather, the OCC believes that the term “shareholder,” as it is used in the specific context of section 5A(d)(1) of HOLA and this rule, indicates that provisions of Federal savings association law that relate to governance by the Federal savings association's stakeholders—including shareholders and members—should continue to apply to stock and mutual covered savings associations, respectively. This includes provisions of Federal savings association law that describe the rights of members of Federal mutual savings associations. This interpretation of the term “shareholder” is specific to section 5A of HOLA and is not intended to be applied outside that context. To clarify this interpretation, the OCC is adding “members” to the list of types of Federal savings association governance provisions that apply to covered savings associations in § 101.4(a)(2)(i).

One commenter supported two of the categories of Federal savings association law that the OCC proposed to apply to covered savings associations: (1) Operational and procedural requirements that do not create substantively different outcomes; and (2) certain requirements for which there is no corresponding national bank requirement. Another commenter supported the proposal's application of laws with particular relevance for Federal mutual savings associations, such as those regarding mutual capital certificates. These provisions of the proposed rule remain unchanged in the final rule. The OCC has updated § 101.4(a)(2)(xiii) of the final rule to expressly include the accounting and disclosure standards in 12 CFR part 162.

Another commenter suggested that the OCC should preserve the differences between national banks and Federal savings associations unless section 5A expressly provides otherwise. The OCC does not believe this approach is consistent with the language of section 5A of HOLA, which provides that covered savings associations have the same rights and privileges and are subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations as national banks except where section 5A or the OCC's rules specifically provide otherwise.

Three commenters requested that the OCC clarify that the preemption standards for national banks and Federal savings associations are the same and would not change following an election. Another commenter requested that the OCC permit covered savings associations to rely on whichever law most supports the OCC's preemptive authority, expressing concern that covered savings associations would not benefit from any preemption determinations applicable only to Federal savings associations. The commenter also argued that Federal savings associations benefit from more expansive preemption of state law through established case law and authority reserved to the OCC, even following the changes to preemption made in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The OCC agrees with commenters who stated that the preemption standards applicable to national banks and Federal savings associations are the same. Section 1046 of the Dodd-Frank Act added a new section 6 to HOLA (12 U.S.C. 1465), which provides that Federal savings associations are subject to the same laws and legal standards as national banks regarding the preemption of state law. This amendment is codified in the OCC's regulations at 12 CFR 7.4010 and 34.6.

Two commenters recommended that the OCC include a mechanism that would allow the agency to identify additional provisions of Federal savings association law applicable to covered savings associations. One of these commenters believes that this approach would provide the OCC with flexibility to tailor the applicable regulations and that publishing interpretive letters or updating relevant publications, with accompanying public notice, would provide sufficient clarity. Although the OCC agrees that this approach would provide additional flexibility, section 5A(d) of HOLA requires that the additional purposes for which a covered savings association is treated as a Federal savings association be “determined by regulation of the Comptroller.” If the OCC identifies additional categories of Federal savings association law that should be applicable to covered savings associations, the OCC will initiate a rulemaking to amend part 101.

Several commenters requested that the OCC clarify that covered savings associations will not be subject to Federal savings association regulations on interest rate risk management procedures and asset classification, with two commenters asserting that these regulations do not fall within the governance category. In the preamble to the proposed rule, the OCC characterized the interest rate risk management provisions in 12 CFR 163.176 as governance provisions that apply to boards of directors because the provisions set out board responsibilities with respect to interest rate risk management. On further consideration, the OCC agrees that 12 CFR 163.176 should not be classified as a governance provision for purposes of section 5A of HOLA. 10 Although 12 CFR 163.176 sets out requirements for the board of directors and management, it is more appropriately viewed as a duty that applies to a Federal savings association's activities. The interest rate risk management provisions reflect the unique risk profile of Federal savings associations, which historically often held balance sheet concentrations in longer-term assets. Because of these concentrations, Federal savings associations had to more closely monitor sensitivity to market risk. A covered savings association may be able to diversify its portfolio and therefore its interest rate risk exposure. The risk-based examination approach taken by the OCC includes supervision for interest rate risk. Further, all insured OCC-supervised institutions, including covered savings associations, other Federal savings associations, and national banks, continue to be subject to the operational and managerial standards under 12 CFR part 30, Appendix A, which specifically include standards for managing interest rate risk exposure. This approach will give the OCC the flexibility to tailor its supervision of a covered savings association to risks associated with the business model of that covered savings association.

The proposed rule did not specifically address asset classification regulations. The final rule does not subject covered savings associations to the asset classification regulations applicable solely to Federal savings associations, such as 12 CFR 160.160, as these regulations do not fall within the categories of Federal savings association laws that the final rule makes applicable to covered savings associations ( e.g., it is not a governance provision or a merger provision, nor is it specifically designated in the final rule as a provision of Federal savings association law that applies to covered savings associations). In addition, covered savings associations and OCC examiners can use the standards under 12 CFR part 30, appendix A, and the real estate lending standards under 12 CFR part 34 applicable to national banks to identify, classify, and otherwise address problem assets as needed, consistent with safety and soundness.

One commenter recommended that a November 1, 2000, Office of Thrift Supervision memorandum with supervisory and examiner guidance be supplemented and not superseded by national bank examination guidance. The OCC rescinded CEO Memo 153, “Examinations of Mutual Savings Associations” in 2012. 11

Six commenters requested clarification on how covered savings associations would be treated for purposes of the QTL requirements in HOLA and requested that the OCC's final rule expressly state that covered savings associations are not required to comply with QTL. One commenter added that compliance with QTL should not be required absent a safety and soundness concern.

As discussed in the preamble to the proposed rule, unlike national banks, Federal savings associations  12 are required to comply with the QTL test set forth in section 10(m) of HOLA, which requires a Federal savings association to qualify as a domestic building and loan association as defined in 26 U.S.C. 7701(a)(19) or to maintain a certain percentage of qualified thrift investments in the Federal savings association's portfolio. 13 The preamble described the QTL test as a key difference between the rights and privileges of a savings association and a national bank. The OCC continues to believe that a covered savings association will not be able to exercise the rights and privileges conferred on it under section 5A while simultaneously being subject to the limitations of the QTL test. 14

Section 101.4(a) of the final rule provides that a covered savings association may engage in any activity that is permissible for a similarly located national bank to engage in, subject to the same authorization, terms, and conditions that would apply to a similarly located national bank. Lending and investment are activities that national banks are permitted to engage in as part of the business of banking. 15 When making loans and investments, covered savings associations are subject to the same authorization, terms, and conditions that would apply to similarly located national banks. There are no authorizations, terms, or conditions that require national banks to maintain status as qualified thrift lenders. Furthermore, unlike governance, conservatorship, and receivership, lending and investment are not purposes for which section 5A(d) of HOLA or the final rule require that a covered savings association be treated as a Federal savings association. Accordingly, a covered savings association operating under section 5A is not subject to, among other things, the penalties in 12 U.S.C. 1467a(m)(3) for failing to meet the QTL test. The OCC believes this is consistent with both the language of § 101.4(a) of the final rule and the statutory mandate that covered savings associations exercise the rights and privileges of similarly located national banks. Requiring compliance with the QTL test would be inconsistent with and frustrate the purpose of allowing Federal savings associations to make an election. The OCC does not believe it is necessary to state explicitly in the final rule that the QTL test does not apply to a covered savings association.

The OCC applies a similar analysis to section 5(c) of HOLA. Section 5(c) sets out lending and investment restrictions that apply to Federal savings associations. These authorizations, terms, and conditions do not apply to the activities of national banks. Consequently, they do not apply to covered savings associations.

The OCC also applies a similar analysis to public welfare and community development investments. One commenter argued that covered savings associations should be treated as Federal savings associations for purposes of public welfare and community development investments. Four commenters also suggested that the OCC consider grandfathering public welfare or community development projects existing at the time of an election. National banks are permitted to make public welfare investments, subject to specific authorization, terms, and conditions (namely, limits on the total amount of such investments). Covered savings associations also will be permitted to make public welfare investments, subject to the same authorization, terms, and conditions (including the limits on the total amount of such investments) as a national bank. Any public welfare or community development projects existing at the time of an election that would not comply with the authorizations, terms, and conditions applicable to a national bank will be subject to § 101.5 of this final rule, which the OCC believes provides adequate time and flexibility for divestiture or conformance.

In the preamble to the proposed rule, the OCC applied a similar analysis to the affiliate transaction restrictions in section 11(a) of HOLA. While two commenters agreed that covered savings associations should not be subject to the affiliate transaction rules specific to Federal savings associations, they requested that the OCC clarify this in the final rule. Affiliate transaction restrictions for savings associations are set out in section 11(a) of HOLA and 12 CFR 223.72. These provisions present potential complications that the QTL restrictions, community development restrictions, and lending and investment restrictions do not. The OCC will continue to consult with the FRB on interpretive issues regarding the application of these provisions to covered savings associations. The OCC recommends that individuals or institutions with specific questions about the application of these provisions to covered savings associations contact the FRB.

Several commenters requested that the OCC clarify in the final rule which merger provisions would apply when a covered savings association merges with another entity. One commenter asserted that the proposed rule could limit a covered savings association's ability to engage in certain interstate merger transactions if covered savings associations are treated as national banks for purposes of interstate merger laws. The commenter asked the OCC to confirm that covered savings associations are subject only to the merger provisions that apply to Federal savings associations and not to interstate or other provisions applicable to national banks. Several commenters noted that the proposal does not clarify how applicable branching laws and merger requirements will work together.

National banks and Federal savings associations are subject to different laws regarding business combinations. 16 For instance, national banks are subject to a specific statutory framework that sets out the authorization, terms, and conditions for merger and consolidation activities. 17 There are fewer statutory requirements for the merger and consolidation activities of Federal savings associations. 18 The OCC has detailed regulations to address the authority of national banks and Federal savings associations to engage in mergers and consolidations, including procedural requirements. Where consistent with underlying statutory authorities, the OCC has harmonized the regulations for business combination activities of national banks and Federal savings associations, respectively, although some differences remain. 19 The regulations for business combination activities involving national banks and Federal savings associations are set forth in 12 CFR 5.33.

Section 5A of HOLA provides that a covered savings association shall be treated as a Federal savings association for purposes of consolidation and merger. 20 In the preamble to the proposed rule, the OCC explained that where the business combination provisions in 12 CFR 5.33 set out different requirements for Federal savings associations and national banks, the Federal savings association requirements would apply to a covered savings association.

However, the OCC understands that merger provisions and branching provisions can intersect in certain situations, such as the interstate branch acquisition provisions covered by 12 U.S.C. 1831u. This can lead to additional complications because, under the final rule, covered savings associations may engage in any activity that is permissible for a similarly located national bank to engage in as part of, or incidental to, the business of banking, or explicitly authorized by statute for a national bank, subject to the same authorization, terms, and conditions that would apply to a similarly located national bank. 21 Branching is such an activity. As a result, under the final rule, a covered savings association will be permitted to establish or retain new branches, or to close branches, subject to the authorization, terms, and conditions that apply to a similarly located national bank. This is true whether or not the branch is retained or closed as part of a merger. The OCC has concluded that, for purposes of section 5A of HOLA and the final rule, the provisions of law relating to retention of branches in mergers and those that establish interstate branching restrictions in the merger context should be considered branching requirements rather than merger requirements. For a covered savings association, this means that while the authority to engage in a proposed merger or consolidation transaction will be governed under the laws applicable to Federal savings associations, the ability to establish or retain branches will be subject to the same authorization, terms, and conditions that would apply to a similarly located national bank (including conditions on the establishment of interstate branches). Any other interpretation could permit covered savings associations to acquire, through a merger, new branches under terms or conditions that would not be permissible for a similarly located national bank to acquire. Allowing covered savings associations to engage in branching activities under terms or conditions that are not available for similarly located national banks would be counter to the language of section 5A of HOLA.

Several commenters requested that the OCC clarify in the final rule that trust-only covered savings associations would not be required to maintain deposit insurance where similarly located trust-only national banks would not be subject to this requirement. The proposed rule did not explicitly address whether a trust-only covered savings association must have deposit insurance, although it did provide that a covered savings association would be required to comply with 12 CFR 5.20, which requires deposit insurance as a condition of obtaining a Federal savings association charter. The commenters argued that the requirement to have deposit insurance is a “condition,” “limitation,” and “restriction” on a “right” or “privilege” and, therefore, should not apply to trust-only covered savings associations. One commenter noted that this disparity in the treatment of non-depository Federal savings associations and national banks should be eliminated absent a safety and soundness concern. One commenter argued that deposit insurance is a restriction, condition, and limitation similar to the QTL requirements, which the proposal makes inapplicable. The commenter believes that providing parity on deposit insurance requirements would advance the goal of uniform treatment. The commenter also believes that the OCC's authority to determine the laws applicable to covered savings associations is limited by the requirement that trust-only covered savings associations be treated the same as comparable national banks.

Two commenters noted that the proposal lists 12 CFR 5.20 as a governance provision but argued that 12 CFR 5.20(e)(3), which addresses deposit insurance, is not properly viewed as a governance provision. These commenters requested that the OCC clarify that 12 CFR 5.20(e)(3) is not a governance provision and does not apply to trust-only covered savings associations. One commenter made several arguments in support of this view: (1) Governance provisions are the standards that govern incorporation and the relationship between a Federal savings association and its shareholders, members, and management, not the laws implicating substantive areas of banking or savings association powers, authorities, and activities; (2) unlike deposit insurance, the other governance provisions identified in the proposal are analogous to state corporate governance laws; (3) unlike other identified governance provisions, deposit insurance is not included in the OCC's model charter or bylaws; (4) deposit insurance is not analogous to the other examples of governance provisions identified in the statute or the proposal; and (5) it would be simpler for a trust-only covered savings association to drop its deposit insurance than to comply with new governance requirements.

One commenter articulated the burdens associated with being required to maintain deposit insurance as a trust-only entity, including (1) the requirement to have a minimum of $500,000 in insured deposits to retain deposit insurance; (2) the requirement to have 99% of deposits be trust funds to qualify for the trust-only savings and loan holding company exclusion;  22 (3) and the costs associated with seeking trust-only carve outs from laws that apply to “insured depository institutions.”  23 One commenter addressed the OCC's enforcement, receivership, and conservatorship authority over an uninsured trust-only covered savings association, arguing that section 5A provides the OCC with the full array of such authority. The commenter argued that the OCC's enforcement authorities in section 8 of the Federal Deposit Insurance Act (FDIA) are clearly “restrictions, penalties, liabilities, conditions, and limitations” and, therefore, should apply to uninsured covered savings associations in the same way as they apply to uninsured national banks. The commenter also recommended that the OCC rely on its authority to issue rules that clarify the provisions of law applicable to covered savings associations and in the interest of safety and soundness to provide that uninsured covered savings associations would be subject to section 8. The commenter argued that the OCC's authority to issue rules “in the interest of safety and soundness” provide the agency with sufficient authority to issue regulations for appointing conservators and receivers of uninsured covered savings associations. The commenter cited the OCC's rule for receiverships of uninsured national banks as a model.

For the reasons that follow, the OCC concludes that HOLA requires all savings associations, whether they elect to operate as covered savings associations or not, to have deposit insurance. The OCC bases this determination on the language of HOLA rather than a determination that 12 CFR 5.20(e)(3) is a governance provision. Under the HOLA definition of “savings association,” all Federal savings associations, including those that engage only in trust activities and those that elect to operate as covered savings associations, are required to have deposit insurance. 24 Under section 5A of HOLA and §§ 101.2(a)(2) and 101.3(a)(1) of the final rule, only Federal savings associations are eligible to elect to operate as covered savings associations. An election to operate as a covered savings association does not change a Federal savings association's charter, its status as a savings association, or its stock or mutual form. Because only Federal savings associations can elect to operate as covered savings associations, and because all Federal savings associations are required to have deposit insurance, a Federal savings association must have deposit insurance in order to elect to operate as a covered savings association. The OCC does not believe that the “rights and privileges” or “duties, restrictions, penalties, liabilities, conditions, and limitations” language in section 5A is sufficient to overcome the requirement that a covered savings association be a Federal savings association. Therefore, because a trust-only covered savings association still retains its Federal savings association form and charter, HOLA's definitional deposit insurance requirement continues to apply after an election and a trust-only covered savings association must continue to maintain deposit insurance.

The language of section 5A of HOLA supports the conclusion that covered savings associations must continue to maintain deposit insurance after making an election. Section 5A states that a covered savings association shall be treated as a Federal savings association for purposes of “conservatorship” and “receivership.”  25 The existing conservatorship and receivership framework for Federal savings associations (including trust-only institutions) only covers insured Federal savings associations, and HOLA contemplates “only the Federal Deposit Insurance Corporation as receiver for a savings association for the purpose of liquidation or winding up the affairs of such savings association.”  26 Moreover, the plain language of section 5A prevents the OCC from applying the national bank conservatorship and receivership rules (including those that cover uninsured trust-only national banks) to covered savings associations. For these reasons, the final rule does not include a new receivership and conservatorship framework for trust-only covered savings associations.

Six commenters requested that the OCC allow covered savings associations to continue to engage in any activities and retain any investments grandfathered under section 5(i)(4) of HOLA. That provision of HOLA (1) allows any Federal savings bank chartered as such prior to October 15, 1982, to continue to make any investment or engage in any activity not otherwise authorized under section 5 of HOLA, to the degree it was permitted to do so as a Federal savings bank prior to October 15, 1982; and (2) allows any Federal savings bank in existence on August 9, 1989, and formerly organized as a mutual savings bank under State law to continue to make any investment or engage in any activity not otherwise authorized under section 5 of HOLA, to the degree it was authorized to do so as a mutual savings bank under State law. Four commenters stated that eliminating this authority would disproportionately impact institutions with grandfathered equity powers, with three adding that forcing divestiture may have unintended consequences. One commenter requested that the OCC consider a more flexible approach by reviewing long-term investment portfolios on a case-by-case basis. The commenter noted that these activities were reaffirmed as safe and sound in 1991 in section 24 of the FDIA and that many associations use the authority for long-term investing, not active trading. One commenter asserted that there is no indication that Congress intended to repeal section 5(i)(4) and that OCC should not interpret section 5A to eliminate this authority.

The OCC agrees that a Federal savings association engaged in activities or retaining investments grandfathered under section 5(i)(4) of HOLA should continue to be permitted to engage in those activities and retain those investments if the association elects to be treated as a covered savings association. The volume of these activities and the amount of these investments are capped by the language of section 5(i)(4) of HOLA, and those limits would continue to apply after an election. The OCC has, on at least one prior occasion, permitted a state bank with activities and investments permitted by the state to continue to engage in those activities and retain those investments after converting to a national bank. Section 101.4(a)(2) of the final rule provides that covered savings associations can continue to engage in the specific, limited types of grandfathered nonconforming activities and investments permitted under section 5(i)(4) of HOLA.

Several commenters argued that covered savings associations should not be precluded from operating or investing in service corporations that engage only in activities permissible for national banks. One commenter argued that allowing covered savings associations to operate new and existing service corporations that engage only in national bank permissible activities is critical to achieving the full exercise of the election. Another commenter argued that if a service corporation's activities are permissible for both FSAs and national banks, CSAs should not be required to re-characterize the investment to rely on national bank authority or to change documentation to reflect that authority. The commenter believes that this would be inconsistent with a streamlined process and would result in material burden. A third commenter recommends that the OCC not require a change in legal form for any subsidiary, asset, or activity that is permissible for a national bank, unless the OCC can demonstrate that a material adverse financial effect would be imminent following the election.

Other commenters asked whether a service corporation would automatically become an operating subsidiary or whether this would be an unnecessary governance change. One commenter believes that service corporations should be allowed to continue their operations following an election.

Under the final rule, covered savings associations are not permitted to retain nonconforming subsidiaries, assets, or activities. A nonconforming subsidiary, asset, or activity includes an investment in a subsidiary or other entity that is not permissible for a covered savings association. Federal savings associations have authority to invest in service corporations under section 5 of HOLA. 27 National banks do not have express statutory authority to invest in service corporations. Consequently, a covered savings association may not retain an existing service corporation or establish and invest in a new service corporation.

A Federal savings association that elects to operate as a covered savings association would be required to comply with § 101.5 of the final rule by divesting or conforming any investment in a service corporation within the timeframe set out in § 101.5. The covered savings association could do so simply by divesting any investment in a service corporation. The covered savings association could also choose to conform the investment by redesignating the service corporation as an operating subsidiary, because national banks are permitted to have operating subsidiaries.

An operating subsidiary of a covered savings association is only permitted to engage in the activities permissible for the covered savings association to engage in directly ( i.e., those permissible for a national bank). A covered savings association that chooses to redesignate a service corporation as an operating subsidiary must ensure that the operating subsidiary is only engaged in such permissible activities—in other words, it must discontinue any nonconforming activities.

The OCC did not receive comment on § 101.4(b) of the proposed rule, which would have implemented section 5A(e) of HOLA by providing that a covered savings association may continue to operate any branch or agency that the covered savings association operated on the effective date of the election. The OCC adopts this provision of the proposed rule without change.

As discussed in the preamble to the proposed rule, a covered savings association seeking to establish a de novo branch or to relocate or close an existing branch would be subject to the authorization, terms, and conditions that govern the establishment or closing of a national bank branch. Furthermore, if a branch of a covered savings association engages in activities that are included in the definition of a branch under the national bank branching regulation, 12 CFR 5.30, that branch may continue to operate subject to the same authorization, terms, and conditions as a similarly located branch of a similarly located national bank. If an agency of a covered savings association engages in activities that would qualify the agency as a branch under the national bank branching regulation, 12 CFR 5.30, those activities would be considered nonconforming activities, and the covered savings association would be required to discontinue or conform the activities or submit an application and obtain OCC approval under 12 CFR 5.30 to establish the agency as a branch. 28 If a covered savings association wishes to establish a new branch, it would be required to do so under the rules for national bank branches in 12 CFR 5.30. The OCC believes this approach best allows covered savings associations to continue to operate the branches and agencies they operated on the date on which an election was approved but subject to the same authorization, terms, and conditions that would apply to a similarly located national bank.

As noted earlier in this preamble, the final rule adds a new § 101.4(c) to reflect the language of section 5A(g) of HOLA.

The proposed rule provided that the Federal savings associations regulations applicable to the issuance of subordinated debt and mandatorily redeemable preferred stock for inclusion in tier 2 capital would apply to covered savings associations. Title 12 CFR 5.56(a) provides that Federal savings associations must comply with the requirements of 12 CFR 163.80 (Borrowing limitations) when issuing subordinated debt or mandatorily redeemable preferred stock that is not included in tier 2 capital. The OCC has revised the final rule to clarify that § 163.80 applies to covered savings associations when the covered savings association's issuance of subordinated debt or mandatorily redeemable preferred stock is not included in tier 2 capital.

For the convenience of readers, the following chart summarizes the provisions of law discussed in this preamble and the preamble to the proposed rule and their applicability to covered savings associations. It includes provisions in the categories specifically listed in the statute (governance (including incorporation, bylaws, boards of directors, shareholders and members, and distribution of dividends), consolidation, merger, dissolution, conversion (including conversion to a stock bank or to another charter), conservatorship, and receivership). It also includes: (1) Provisions that allow Federal mutual savings associations to conduct business as mutual institutions; (2) provisions that set out procedural and operational requirements for Federal savings associations but that do not result in substantively different outcomes for Federal savings associations and national banks; and (3) areas where there is a specific Federal savings association rule with no corresponding specific national bank rule, but the Federal savings association rule sets out requirements that are consistent with supervisory expectations for national banks or is substantially similar to an interagency rule. This chart is not an exhaustive list of the statutes and regulations that apply to covered savings associations. In addition, the provisions of law included in the chart may change, whether as a result of amendments to a statute or future OCC rulemaking. For example, if the OCC later issues a rule integrating the national bank and Federal savings association rules for adjudicative procedures, the references in this chart to parts 19, 108, and 109 may no longer be accurate.

101.5 Nonconforming subsidiaries, assets, and activities. Section 101.5 of the proposed rule established a transition process for bringing nonconforming subsidiaries, assets, and activities into conformance with the requirements for national banks.

Section 101.5(a) of the proposed rule would have required a covered savings association to divest, conform, or discontinue nonconforming subsidiaries, assets, and activities at the earliest time that prudent judgment dictates but not later than two years after the effective date of an election. Paragraph (a) also would have provided that the OCC may require a covered savings association to submit a plan to divest, conform, or discontinue a nonconforming subsidiary, asset, or activity, to assist OCC supervisory staff in assessing compliance with the proposed rule. Section 101.5(b) of the proposed rule would have allowed the OCC to grant a covered savings association extensions of not more than two years each up to a maximum of eight years if the OCC determined that: (1) The covered savings association has made a good faith effort to divest, conform, or discontinue the nonconforming subsidiaries, assets, or activities; (2) divestiture, conformance, or discontinuance would have a material adverse financial effect on the covered savings association; and (3) retention or continuation of the nonconforming subsidiaries, assets, or activities is consistent with the safe and sound operation of the covered savings association. This paragraph was intended to provide the OCC with flexibility when a covered savings association, despite its best efforts, is unable to divest or conform assets or subsidiaries or discontinue activities within the two-year period.

Several commenters generally addressed the timeframes for divestiture, conformance, and discontinuance. One commenter believed that the initial two-year period is reasonable and the ability to seek extensions provides sufficient flexibility for complex investments or depressed market conditions. Another commenter recommended a “reasonable time” standard for divesture to account for extraordinary circumstances. This commenter noted that service corporation investments in real estate may require longer divestiture periods and that these are not always comparable to other real estate owned (OREO). A third commenter suggested that a timeframe committed to supervisory discretion would be preferable to a specific regulatory deadline.

One commenter asserted that there may be situations where a covered savings association should be allowed to continue a long-standing nonconforming activity. One commenter believes that the statute requires the OCC to establish conditions under which a covered savings association can retain nonconforming subsidiaries, assets, and activities in perpetuity. The commenter believes that retention should be subject to review at election and periodically thereafter but that retention should be presumed permissible.

The OCC adopts the proposed § 101.5(a) and (b) without change. The OCC believes that the standard in the final rule provides sufficient flexibility to address extraordinary circumstances while emphasizing the OCC's expectation that, in the normal course of events, nonconforming subsidiaries, assets, or activities will be divested, conformed, or discontinued as soon as prudent judgment dictates. The OCC is not persuaded that a responsibly managed service corporation investment in real estate is materially different from real estate held by a national bank, a Federal savings association, or an operating subsidiary, such that more than 10 years would be required to fully divest. Commenters did not clarify what standard the OCC should use to determine when a service corporation investment in real estate would need to be divested. Furthermore, for the reasons explained earlier in this preamble, the final rule requires that covered savings associations either divest their service corporations or conform their service corporations by redesignating them as operating subsidiaries. Any real estate activities in the operating subsidiaries would need to be activities permissible for a covered savings association operating subsidiary. Without additional detail about the specific types of situations in which additional time might be needed, the OCC declines to extend the 10-year limitation in the final rule.

The OCC does not agree that section 5A of HOLA creates a presumption that nonconforming subsidiaries, assets, and activities are permissible. On the contrary, the statute requires covered savings associations to bring nonconforming assets and subsidiaries into conformance with the requirements for national banks and provides only a mechanism for covered savings associations to apply to the OCC to hold nonconforming assets or subsidiaries after an election. The statute does not require the OCC to grant permission to hold or continue nonconforming assets or subsidiaries indefinitely. Consequently, the final rule permits covered savings associations to request permission to hold or continue nonconforming subsidiaries, assets, and activities for additional two-year periods, up to a total of 8 years, if they are unable to divest, conform, or discontinue within two years as otherwise required.

The timeframes in the rule should, in most cases, provide a covered savings association with sufficient lead-time to minimize potential undue financial harm from divesting, conforming, or discontinuing nonconforming subsidiaries, assets, and activities. This period also is short enough to ensure that covered savings associations are not allowed to gain an advantage by holding or operating assets or subsidiaries or conducting activities that would not be permissible for a national bank. Additionally, the timeframe is generally consistent with the timeframe that the OCC provides for Federal savings associations to divest nonconforming subsidiaries and assets and discontinue nonconforming activities when they convert to national banks.

Proposed § 101.5(c) provided that Federal savings association law would continue to apply to nonconforming subsidiaries, assets, and activities during the period before the covered savings association divests, conforms, or discontinues the subsidiary, asset, or activity. The OCC did not receive any comments on this provision and adopts it with one clarifying change. The final rule specifies that the provisions of Federal savings association law that continue to apply before divesting, conforming, or discontinuing a subsidiary, asset, or activity include any amendments to those provisions of law. This change is intended to ensure that covered savings associations are not subject to outdated Federal savings association requirements if Federal savings association laws change between the time the covered savings association makes an election and the time it divests, conforms, or discontinues a nonconforming subsidiary, asset, or activity.

101.6 Termination. This section of the proposed rule would have established standards and procedures to allow a covered savings association to terminate an election after an appropriate period. The OCC would generally view an appropriate period to be relatively soon after an election takes effect (for example, 60 or 90 days). However, the OCC might determine that a longer period is appropriate where there is evidence that a covered savings association is attempting to use a termination to evade the requirements or purposes of section 5A of HOLA, such as the requirement to divest, conform, or discontinue nonconforming subsidiaries, assets, and activities.

The OCC did not receive any comments on this section and is adopting § 101.6 of the proposed rule with one technical change to ensure that the final rule refers consistently to “the OCC” rather than to “the appropriate OCC supervisory office.”

101.7 Reelection. This section of the proposed rule would have allowed a covered savings association to make a subsequent election after terminating an election. Under the proposed rule, a Federal savings association that wishes to make a subsequent election after terminating a previous election would have been subject to the same requirements as a Federal savings association making an election for the first time. However, a Federal savings association that previously made and terminated an election to operate as a covered savings association would have been required to wait five years after the termination before making a subsequent election.

The OCC did not receive any comments on this section and is adopting § 101.7 of the proposed rule without change.

101.8 Evasion. This section of the proposed rule would have provided that the OCC may disapprove a notice of election, termination, or reelection if the OCC has reasonable cause to believe the notice is made for the purpose of evading § 101.5 of the proposed rule, including as that section applies to a termination. For example, the OCC might disapprove a covered savings association's notice of termination if it determined the covered savings association was attempting to terminate to take unfair advantage of an overlap between the period to divest, conform, or discontinue nonconforming subsidiaries, assets, and activities provided for an election and the period to divest, conform, or discontinue nonconforming subsidiaries, assets, and activities provided for a termination.

The final rule provides that the OCC may disapprove a notice of election, termination, or reelection if the OCC determines that notice is made for the purpose of evading § 101.5. This change clarifies that the OCC's determination that a notice is made for purposes of evasion is subject to review under the standards set out in 5 U.S.C. 706(2).

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., (RFA), requires an agency, in connection with a final rule, to prepare a Final Regulatory Flexibility Analysis describing the impact of the rule on small entities (defined by the Small Business Administration (SBA) for purposes of the RFA to include commercial banks and savings institutions with total assets of $550 million or less and trust companies with total revenue of $38.5 million or less) or to certify that the rule would not have a significant economic impact on a substantial number of small entities. The OCC supervises approximately 886 small entities, of which 258 are Federal savings associations. 30 Because the rule does not contain any new recordkeeping, reporting, or compliance requirements, we anticipate that it will not impose costs on OCC-supervised institutions unless they elect to operate as a covered savings association. 31 Therefore, the OCC certifies that the final rule would not have a significant economic impact on a substantial number of OCC-supervised small entities.

The OCC has analyzed the final rule under the factors set forth in the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532. Under this analysis, the OCC considers whether the Federal mandates imposed by the rule may result in an expenditure of $100 million or more by state, local, and tribal governments, or by the private sector, in any one year (adjusted annually for inflation). The rule does not impose new mandates. Therefore, the OCC concludes that the rule will not result in an expenditure of $100 million or more annually by state, local, and tribal governments, or by the private sector. Accordingly, the OCC has not prepared a written statement to accompany this rule.

Under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq., the OCC may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid OMB control number. The OCC has submitted the information collection requirements imposed by this final rule to OMB for review, as requested by OMB in its notice of action regarding the OCC's submission at the proposed rule stage. The OCC received two comments regarding the information collection.

Two commenters stated that submitting information relating to existing branches and agencies is unduly burdensome. One commenter argued that the rule could be interpreted to require Federal savings associations to submit information on a significant number of branches and agencies, not just newly established ones. The commenter noted that many branch applications or notices were submitted prior to the integration of 12 CFR part 5. The commenter also stated that applications or notices are generally not required for a Federal savings association to establish an agency. The commenter believes the requirement would be unnecessary, would require time and cost that do not serve a compelling supervisory or regulatory purpose, and would require a covered savings association to disclose more information than a Federal savings association or national bank would be required to provide. The commenter recommended that this requirement be eliminated or that its scope be clarified. The second commenter stated that the requirement to provide information on existing branches and agencies is unnecessary and burdensome, noting that it may be difficult to provide information on branches that have been operational for a number of years. The commenter suggested that all branches that are open or operational or that have received regulatory approval or non-objection should be presumed to be compliant and documentation should not be required. Neither commenter believes that the OCC has clearly indicated why it needs this information. As noted earlier in this preamble, the final rule does not require Federal savings associations to identify branches or agencies in a notice of an election. The OCC believes that it can obtain sufficient information about the branches and agencies of a prospective covered savings association by reviewing information the association submits on its nonconforming subsidiaries, assets, or activities. This information will allow the OCC to monitor covered savings associations for compliance with the final rule without imposing any additional burden that could be associated with submitting information identifying branches and agencies. The OCC has changed the information collection so that it no longer includes a requirement to submit information identifying branches and agencies.

Under the information collection, a Federal savings association seeking to operate as a covered savings association would be required under § 101.3(a) to submit a notice making an election to the OCC that: (1) Is signed by a duly authorized officer of the Federal savings association; and (2) identifies and describes any nonconforming subsidiaries, assets, or activities that the Federal savings association operates, holds, or conducts at the time its submits its notice.

Under § 101.5(a), the OCC may require a covered savings association to submit a plan to divest, conform, or discontinue a nonconforming subsidiary, asset, or activity.

A covered savings association may submit a notice to terminate its election to operate as a covered savings association under § 101.6 using similar procedures to those for an election. In addition, after a period of five years, a Federal savings association that has terminated its election to operate as a covered savings association may submit a notice under § 101.7 to reelect using the same procedures used for its original election.

Title: Covered Savings Association Notice.

OMB Control No.: 1557-0341.

Frequency of Response: On occasion.

Affected Public: Businesses or other for-profit organizations.

Election, Termination, Reelection:

Plan to Divest:

Total Annual Burden: 345 hours

In addition, the OCC will file a nonmaterial change to amend its Licensing Manual Collection (OMB Control No. 1557-0014) to increase the respondent count to reflect additional filings from Federal savings associations.

Comments continue to be invited on:

(a) Whether the collections of information are necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;

(b) The accuracy of the OCC's estimates of the burden of the collections of information;

(c) Ways to enhance the quality, utility, and clarity of the information to be collected;

(d) Ways to minimize the burden of the collections on respondents, including through the use of automated collection techniques or other forms of information technology; and

(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

Section 302(a) of the Riegle Community Development and Regulatory Improvement Act of 1994, 12 U.S.C. 4802(a), (RCDRIA) requires that the OCC, in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of RCDRIA, 12 U.S.C. 4802(b), requires new regulations and amendments to regulations that impose additional reporting, disclosure, or other new requirements on insured depository institutions generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form. The OCC has considered the administrative burdens and benefits of the rule in determining the effective date and administrative compliance requirements for this rule. The final rule will be effective no earlier than the first day of the calendar quarter following 30 days from the date on which the final rule is published in the Federal Register .

Pursuant to the Congressional Review Act, 5 U.S.C. 801 et seq., the Office of Information and Regulatory Affairs designated this rule as not a “major rule,” as defined by 5 U.S.C. 804(2).

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA AD No.: 2019-0086-E, dated April 19, 2019 (referred to after this as “the MCAI”), to correct an unsafe condition for Textron Aviation, Inc. Models 525, 525A, and 525B airplanes with Tamarack ATLAS winglets installed in accordance with STC SA03842NY. The MCAI states:

This [EASA] AD is an interim action and further AD action may follow.

The National Transportation Safety Board (NTSB) is investigating a fatal accident involving a Model 525 airplane with the ATLAS STC installed. The NTSB investigation focuses on the role the ATLAS may have played in the accident. In addition to the accident, five incidents of aircraft uncommanded roll events with the ATLAS activated have been reported to EASA and the FAA. In each incident, the pilot was able to recover from the event and land the aircraft safely. You may examine the MCAI on the internet at http://www.regulations.gov by searching for and locating Docket No. FAA-2019-0350.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are issuing this AD because we evaluated all information provided by the State of Design Authority and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

EASA has approved a master minimum equipment list (MMEL) for the ATLAS, which allows operation of the airplane with the system disabled for up to 10 flight hours with operating limitations. However, the FAA has not approved an MMEL for the ATLAS. The EASA AD allows operation for up to 100 flight hours with the system disabled and with the same operating limitations as in the MMEL. However, this AD does not allow operation with the ATLAS disabled.

Instead, this AD prohibits all flight until a modification has been incorporated in accordance with an FAA-approved method. Until a modification method is developed and approved, this AD requires revising the operating limitations in the AFM and fabricating and installing a placard to prohibit further flight.

The FAA finds the service information from the STC holder (Cranfield Aerospace Solutions) does not contain adequate instructions to safely disable the ATLAS. Those instructions include the use of “speed tape” around each Tamarack active camber surface (TACS) to keep them faired in the neutral position during flight. Any modifications mandated through AD action become changes to the type design in the U.S. system. The FAA would need to ensure that the use of speed tape complies with the applicable airworthiness regulations for use on a movable surface to hold that surface in a fixed position. The speed tape does not have sufficient testing and analysis to support the type design change. This program would involve testing for environmental effects, fatigue analysis, and analysis of hazards due to potential failures of the tape. Without more analysis, the security of the speed tape method to prevent movement of the TACS cannot be assured, and loss of control of the airplane may occur with the ATLAS disabled. An operator or Cranfield may provide substantiating data to the FAA and request an alternative method of compliance using the procedures in paragraph (g) of this AD.

This AD specifies that the owner/operator (pilot) may revise the AFM and may fabricate and install a placard prohibiting flight. Revising an AFM is not considered a maintenance action and may be done by a pilot holding at least a private pilot certificate. Allowing the pilot to fabricate and install a placard is an exception to our standard maintenance regulations. These actions must be recorded in the aircraft maintenance records to show compliance with this AD.

An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because the ATLAS, when operational, deflects the active control surfaces on the outboard wings. The malfunction of the ATLAS may reduce the pilot's ability to control the airplane. The service information provided by the STC holder does not contain adequate instructions to mitigate the unsafe condition. This unsafe condition could lead to loss of control of the airplane with consequent loss of life. The severity of the risk warrants compliance before further flight. Therefore, we find good cause that notice and opportunity for prior public comment are impracticable. In addition, for the reasons stated above, we find that good cause exists for making this amendment effective upon publication.

This AD is a final rule that involves requirements affecting flight safety, and we did not precede it by notice and opportunity for public comment. We invite you to send any written relevant data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2019-0350; Product Identifier 2019-CE-025-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this AD because of those comments.

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

We estimate that this AD affects 76 products of U.S. registry. We also estimate that it will take about 2 work-hours per product to revise the Operating Limitations section of the AFM and to fabricate and install a placard. The average labor rate is $85 per work-hour. We estimate the parts cost to fabricate the placard as $5.

Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $13,300, or $175 per product.

This AD prohibits flight until the incorporation of an FAA-approved modification. At this time, a modification does not exist; therefore, we have no data to use for estimating the cost of the modification.

As indicated earlier in this preamble, we specifically invite the submission of comments and other data regarding the costs of 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 small airplanes, gliders, balloons, airships, domestic business jet transport airplanes, and associated appliances to the Director of the Policy and Innovation Division.

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

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

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

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

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

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

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

This amendment to part 95 of the Federal Aviation Regulations (14 CFR part 95) amends, suspends, or revokes IFR altitudes governing the operation of all aircraft in flight over a specified route or any portion of that route, as well as the changeover points (COPs) for Federal airways, jet routes, or direct routes as prescribed in part 95.

The specified IFR altitudes, when used in conjunction with the prescribed changeover points for those routes, ensure navigation aid coverage that is adequate for safe flight operations and free of frequency interference. The reasons and circumstances that create the need for this amendment involve matters of flight safety and operational efficiency in the National Airspace System, are related to published aeronautical charts that are essential to the user, and provide for the safe and efficient use of the navigable airspace. In addition, those various reasons or circumstances require making this amendment effective before the next scheduled charting and publication date of the flight information to assure its timely availability to the user. The effective date of this amendment reflects those considerations. In view of the close and immediate relationship between these regulatory changes and safety in air commerce, I find that notice and public procedure before adopting this amendment are impracticable and contrary to the public interest and that good cause exists for making the amendment effective in less than 30 days.

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. 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. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, pursuant to the authority delegated to me by the Administrator, part 95 of the Federal Aviation Regulations (14 CFR part 95) is amended as follows effective at 0901 UTC, June 20, 2019.

Background

In this final rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to implement a decision to remove Venezuela from Country Group B, which affords favorable treatment for certain exports of National Security-controlled items, and moves Venezuela to Country Group D:1, which lists countries of national security concern (Supplement No. 1 to part 740). In addition, this final rule adds Venezuela to Country Groups D:2-4, which list countries of nuclear, chemical and biological weapons, and missile technology concern, respectively.

This final rule protects U.S. national security interests by making changes to the EAR to address current national security concerns related to Venezuela, e.g., the introduction of foreign military personnel and equipment into Venezuela, and better align the Country Group designation for Venezuela with other EAR national security related provisions that apply to Venezuela. For example, Venezuela is included in the military end-use and end-user control in § 744.21: Restrictions on certain `Military end uses' in the People's Republic of China or for a `Military end use' or `Military end user' in Russia or Venezuela. Venezuela is also already designated in Country Group D:5 as a U.S. Arms Embargoed Country, meaning that the general restrictions on the use of license exceptions in § 740.2(a)(12) for 9x515 and “600 series” items apply, along with the more restrictive license review policy for national security controlled items in § 742.4(b)(1)(ii) for 9x515 and “600 series” items.

The removal of Venezuela from Country Group B and its addition to Country Group D:1 will make exports and reexports to Venezuela and transfers within Venezuela ineligible for certain license exceptions set forth in Part 740. In addition, the national security licensing policy set forth in § 742.4(b) for Country Group D:1 countries will apply to those exports, reexports, and transfers (in-country). The U.S. Government has determined that the conduct of Venezuela raises sufficient concern that interagency review of proposed exports, reexports, or transfers (in-country) of national security controlled items subject to the EAR, previously eligible for certain license exceptions to Venezuela, and the possible imposition of license conditions or license denials on exports, reexports, and transfers (in-country), will enhance BIS's ability to protect U.S. national security interests.

In addition, the U.S. Government has determined that Venezuela's increasing dependence on countries in Country Groups D:3 and E merited its placement in Country Groups D:2-4.

Supplement No. 1 to Part 740 contains several tables of “Country Groups” that are used to identify, among other things, license exception eligibility and licensing policy. This rule removes Venezuela from Country Group B and adds Venezuela to Country Groups D:1-4.

License exceptions found in § 740.3, Shipments of limited value (LVS); § 740.4, Shipments to Country Group B countries (GBS); and § 740.6, Technology and software under restriction (TSR) are available only if the destination is in Country Group B. This change removes Venezuela from the list of eligible destinations for exports, reexports, and transfers (in-country) that are authorized by License Exceptions LVS, GBS and TSR.

License exceptions found in § 740.9, Temporary imports, exports, reexports, and transfers (in-country) (TMP); § 740.10, Servicing and replacement of parts and equipment (RPL); § 740.12, Gift parcels and humanitarian donations (GFT); § 740.14, Baggage (BAG); § 740.15, Aircraft and vessels (AVS); § 740.16, Additional permissive reexports (APR); and § 740.17, Encryption, commodities, software, and technology (ENC) all contain limitations or restrictions on their use for exports or reexports to destinations in Country Groups D:1, D:2, D:3, and/or D:4. Those limitations and restrictions will now apply to License Exceptions TMP, RPL, GFT, BAG, AVS, APR, and ENC to Venezuela.

Section 742.4(b)(2) of the EAR states the licensing policy for exports and reexports of national security controlled items to destinations in Country Group D:1. That licensing policy is to approve applications when BIS determines, on a case-by-case basis, that the items are for civilian use or otherwise would not make a significant contribution to the military potential of the country of destination that would prove detrimental to the national security of the United States. Applications to export or reexport national security controlled items to Venezuela will now be subject to this licensing policy.

In addition, Venezuela's placement in Country Group D:1 will result in the imposition of restrictions on the export, reexport, and transfer (in-country) of certain microprocessors to military end uses and end users in Venezuela, pursuant to § 744.17: Restrictions on certain exports, reexports and transfers (in-country) of microprocessors and associated “software” and “technology” for `military end uses' and to `military end users.' Furthermore, restrictions on certain exports and reexports to vessels and aircraft located in Venezuelan ports or registered in Venezuela will become effective pursuant to § 744.7, Restrictions on certain exports to and for the use of certain foreign vessels or aircraft. Finally, the addition of Venezuela to Country Group D:1 will expand the licensing requirements for reexports of the foreign-produced direct product of U.S.-origin technology and software to Venezuela pursuant to § 736.2(b)(3), General Prohibition Three.

Consistent with adding Venezuela to Country Group D:2, a license will be required for the export or reexport of items subject to the nuclear nonproliferation column 2 (NP 2) controls [Export Control Classification Numbers (ECCNs) 1A290, 1C298, 2A290, 2A291, 2D290, 2E001 (for that portion that applies for 2A290, 2A291 and 2D290) and 2E002 (for that portion that applies to 2A290 and 2A291) and 2E290]. This final rule adds an “X” in the NP 2 column of the nuclear nonproliferation column in Supplement No. 1 to Part 738 of the EAR for Venezuela. License applications for these items will be reviewed under the licensing policy in § 742.3 of the EAR. Consistent with adding Venezuela to Country Group D:2, the general prohibition in paragraph (a)(1)(i)(A) of § 744.6, Restrictions on certain activities of U.S. persons, will be applicable if the U.S. person exporter, reexporter, or transferor has “knowledge” of a prohibited end use in or by Venezuela.

Consistent with adding Venezuela to Country Group D:3, a license will be required for the export or reexport of items subject to the chemical and biological weapons column 3 (CB 3) controls (ECCN 1C991.d). This final rule adds an “X” in column 3 of the chemical and biological weapons column (CB 3) in Supplement No. 1 to Part 738 of the EAR. License applications for these items will be reviewed under the licensing policy in § 742.2 of the EAR.

Consistent with adding Venezuela to Country Group D:4, the general prohibitions in § 744.3—Restrictions on certain rocket systems (including ballistic missiles, space launch vehicles and sounding rockets) and unmanned aerial vehicles (including cruise missiles, target drones and reconnaissance drones) end-uses—under paragraphs (a)(1) and (a)(3) will be applicable if the exporter, reexporter, or transferor has “knowledge” the transaction involves one of those prohibited end uses in or by Venezuela. In addition, consistent with adding Venezuela to Country Group D:4, the general prohibitions in § 744.6 under paragraphs (a)(1)(i)(B) and (a)(2)(i) will be applicable if the U.S. person exporter, reexporter, or transferor (for purposes of paragraph (a)(1)(i)(B)) or other activities unrelated to exports (for purposes of paragraph (a)(2)(i)) has “knowledge” the transaction involved one of those prohibited transactions or other activities in or by Venezuela.

Prior to publication of this final rule, Venezuela was already included in Country Group D:5 and the license review policy under § 742.4(b)(1)(ii) continues to apply for items classified under 9x515 and “600 series” ECCNs for exports and reexports to Venezuela. Pursuant to § 742.4(b)(1)(ii), these license applications will continue to be “reviewed consistent with United States arms embargo policies in § 126.1” of the International Traffic in Arms Regulations.

On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA) (Title XVII, Subtitle B of Pub. L. 115-232) that provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule. As set forth in Section 1768 of ECRA, all delegations, rules, regulations, orders, determinations, licenses, or other forms of administrative action that have been made, issued, conducted, or allowed to become effective under the Export Administration Act of 1979 (50 U.S.C. 4601 et seq. ) (as in effect prior to August 13, 2018 and as continued in effect pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq. ) and Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 8, 2018, 83 FR 39871 (August 13, 2018)), or the Export Administration Regulations, and are in effect as of August 13, 2018, shall continue in effect according to their terms until modified, superseded, set aside, or revoked under the authority of ECRA.

1. Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distribute 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 final rule has been designated a “significant regulatory action,” although not economically significant, under section 3(f) of Executive Order 12866. This final rule will support the national security and foreign policy objectives of the United States by broadening the U.S. Government's visibility into transactions involving national security controlled items on the Commerce Control List and exports, reexports and transfers (in-country) to and in a country of concern.

2. Notwithstanding any other provision of law, no person may be required to respond to or be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This regulation involves a collection currently approved by OMB under control number 0694-0088, Simplified Network Application Processing System. This collection includes, among other things, license applications, and carries a burden estimate of 42.5 minutes for a manual or electronic submission for a total burden estimate of 31,878 hours. BIS expects the burden hours associated with this collection to increase slightly by 4 hours for an estimated cost increase of $120. This increase is not expected to exceed the existing estimates currently associated with OMB control number 0694-0088.

Any comments regarding the collection of information associated with this rule, including suggestions for reducing the burden, may be sent to Jasmeet K. Seehra, Office of Management and Budget (OMB), by email to Jasmeet_K._Seehra@omb.eop.gov, or by fax to (202) 395-7285.

3. This rule does not contain policies with Federalism implications as that term is defined under Executive Order 13132.

4. Pursuant to § 1762 of the Export Control Reform Act of 2018 (Title XVII, Subtitle B of Pub. L. 115-232), which was included in the John S. McCain National Defense Authorization Act for Fiscal Year 2019, this action is exempt from the Administrative Procedure Act (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date.

5. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. Accordingly, no regulatory flexibility analysis is required and none has been prepared.

6. This final rule is not subject to the requirements of E.O. 13771 (82 FR 9339, February 3, 2017) because it is issued with respect to a national security function of the United States. The cost-benefit analysis required pursuant to Executive Orders 13563 and 12866 indicates that this rule is intended to improve national security as its primary direct benefit. Specifically, the change in the Country Group designations for Venezuela and its impact on the availability of license exceptions and more restrictive license review policies described herein will enhance the national security of the United States by reducing the risk that exports, reexports, and transfers (in-country) of items subject to the EAR could be diverted and contribute to the military capability of countries of concern, contrary to U.S. national security interests. This final rule will allow the U.S. Government to review transactions involving military end uses or end users in Venezuela prior to their completion to mitigate this risk. Accordingly, this rule meets the requirements set forth in the April 5, 2017, OMB guidance implementing E.O. 13771 (82 FR 9339, February 3, 2017), regarding what constitutes a regulation issued “with respect to a national security function of the United States” and it is, therefore, exempt from the requirements of E.O. 13771.

Shipments of items removed from license exception eligibility or eligibility for export, reexport or transfer (in-country) without a license as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on May 24, 2019, pursuant to actual orders for exports, reexports and transfers (in-country) to a foreign destination, may proceed to that destination under the previous license exception eligibility or without a license so long as they have been exported, reexported or transferred (in-country) before June 24, 2019. Any such items not actually exported, reexported or transferred (in-country) before midnight, on June 24, 2019 require a license in accordance with this final rule.

Accordingly, parts 738 and 740 of the Export Administration Regulations (15 CFR parts 730-774) are amended as follows:

The VGBA, 15 U.S.C. 8001 et seq., took effect on December 19, 2008. The VGBA's purpose is to prevent drain entrapment and child drowning in swimming pools and spas. In part, the Act requires that drain covers must comply with entrapment protection requirements specified by the joint ASME/ANSI A112.19.8 performance standard, or any successor standard. The VGBA also states that public pools  1 must be equipped with drain covers that meet the requirements of the ASME/ANSI or any successor standard. The VGBA provides that if a successor standard to ASME/ANSI/A112.19.8 is proposed and the Commission determines the successor standard is in the public interest, the Commission must incorporate the revision into the mandatory drain cover standard.

On August 5, 2011, the Commission recognized the Association of Pool and Spa Professionals (APSP)  2 standard APSP-16 2011, Suction Fittings for Use in Swimming Pools, Wading Pools, Spas, and Hot Tubs, as the successor standard to ASME/ANSI A112.19.8. The Commission incorporated by reference APSP-16 2011 into 16 CFR part 1450. 76 FR 47436 (Aug. 5, 2011). ASME/ANSI A112.19.8 and its successor standard, APSP-16 2011, contain requirements that address hair entrapment, 3 body entrapment, 4 and, in a limited way, limb entrapment. 5

On March 27, 2018, APSP notified the Commission of the publication of a successor pool drain cover standard to APSP-16 2011, in conjunction with ANSI and the International Code Council (ICC), ANSI/APSP/ICC-16 2017 (APSP-16 2017).

APSP-16 2017 establishes materials, testing, use, installation, and marketing requirements for new or replacement bather-accessible suction outlet fitting assemblies, other than maintenance drains, that are designed to be fully submerged for use in any pool. APSP-16 2017 contains a new effective date for the standard, changes to physical testing requirements, new definitions, and new labeling requirements for the drain cover. These changes are discussed in section III of this preamble. APSP-16 2017 also contains new requirements that apply to the installation of the drain cover, to pools, to the operation of pools, and to pool owners. These changes are discussed in section IV of this preamble. As explained in section IV.A, the Commission does not have the authority to impose these requirements under section 1404(b) of the VGBA.

The VGBA does not specify an effective date for implementing successor standards. The Commission expects drain covers that meet APSP-16 2011 to be able to meet APSP-16 2017 with minimal changes to the drain covers. The changes necessary for the product to comply with the revised standard are limited to minor changes in on-product markings and new requirements for what must be included in the documentation accompanying the product. Product instructions and on-product markings are already required; thus, costs are limited to altering the content of these items. The APSP-16 2017 standard states that it will take effect 18 months after its adoption by CPSC.

The Administrative Procedure Act (APA) generally requires that the effective date of a rule be at least 30 days after publication of the final rule (5 U.S.C. 553(d)). Because of the low rate of injuries under APSP-16 2011, 6 and because the APA does not prohibit an 18-month effective date, accelerated adoption of the new standard is not warranted. Therefore, unless the Commission receives timely significant adverse comments, CPSC's revised standard will take effect 18 months after publication of this Federal Register notice incorporating APSP-16 2017 as the successor standard.

The APSP-16 technical committee considered many possible changes to physical testing requirements when it was developing the 2017 version of the APSP-16 standard. Ultimately, CPSC staff found only two changes to physical testing requirements that maintain or increase the level of safety afforded by APSP-16 2011. These are the changes to the hair test approach time (section 5.9.5.5 of APSP-16 2017), and changes to hair testing at specific ports in suction outlet fitting assemblies (section 1.3.7.1 of APSP-16 2017).

For three of the most significant tests specified in the 2011 version of APSP-16, the test results are given as a flow rating of gallons per minute of water through the drain cover. These three tests are the pony tail hair test, the full head of hair test, and the body-blocking test. The highest flow rate at which the drain cover meets the performance criteria of all three tests is the maximum allowable flow rate of water for which the drain cover may be certified. Drain cover manufacturers seek the highest possible flow rating. A higher flow rating increases the number of applications for which the drain cover is suitable.

The hair and body-blocking tests are conducted in a simulated pool installation. The test technician selects an initial water flow rate for testing through the drain cover, and then increases the test flow rate until the test requirements are no longer met for the hair or body tests. The test technician records the maximum flow rate for each of the tests where the drain cover meets the standard. The lower of the flow rates from the pony tail or full head of hair tests is considered to be the hair test result. The flow rating of the cover is the highest flow rating at which the drain cover meets the requirements for the hair and body-blocking tests.

The pony tail and full head of hair tests begin with the free ends of hair two inches away from the drain cover. APSP-16 2011 specified that the head and ponytail fixtures are moved in a side-to-side motion as they are lowered over a period of 60 seconds toward the drain cover during their respective tests. The hair ends move in response to, or generally opposite to, these motions, until the flow of water draws the hair into the drain cover. Due to the iterative nature of the tests, coupled with the dual requirement for the drain cover to meet two types of hair test requirements, it can take numerous tests to determine a hair flow rating.

To reduce the time required to perform the hair tests, and therefore, to lower the cost of testing, APSP-16 2017 decreases the hair test approach time from 60 seconds to 30 seconds. CPSC staff studied the change in hair approach time extensively. Staff explained the results of its testing in a detailed letter to APSP. 7 Staff's test experiences indicate that most of the time spent moving hair the full 60 seconds is unnecessary, because the hair is effectively drawn to the target area within a few seconds. Moreover, too much movement can lead to the hair being self-entangled above the drain and not within the drain, thus producing inaccurate results. The Commission concludes that the change to 30 seconds in section 5.9.5.5 of APSP-16 2017 is in the public interest because it is at least as protective as the 60 seconds specified in APSP-16 2011; it may minimize the risk of the hair being self-entangled above the drain; and it reduces the cost of performing the testing that is required to meet the standard because it reduces the time necessary to perform the tests.

To ease product installation, many SOFA manufacturers include more than one suction outlet on their products. Suction outlets may be located on one or more sides of the SOFA, on the bottom, or on a combination of these locations. For SOFAs with multiple suction outlets, APSP-16 2011, and before it, ASME/ANSI A112.19.8, only required that the hair and body-blocking element tests be performed on the drain cover while water was flowing through one of the suction outlets. The standards did not require testing the drain cover using the additional suction outlets, when present.

The introduction of channel drains, whose length is much longer than their width, provided a new scenario for entrapment. Figure 1 shows an example of a channel drain.

Like traditional SOFAs, channel drains are often equipped with multiple suction outlets, not all of which must necessarily be connected during installation. However, because channel drains have very narrow widths compared to their lengths, their design potentially concentrates the low-pressure area underneath the portion of the drain cover that is closest to the suction outlet. Because there was no previous requirement to test SOFAs using every suction outlet as the water source for the pump, it was possible that a channel drain could be tested using only the suction outlet that yielded the highest flow rating, i.e., the suction outlet least likely to produce entrapment for a given flow rate. However, channel SOFAs could be installed using a different suction outlet than the one that was used during testing; thus, this could potentially expose bathers to conditions that exceed what is allowed by the standard. To ensure that channel-type SOFAs did not receive an improper flow rating, the committee initially proposed that channel drains must meet the hair and body-block tests when each suction outlet was tested. Due to the wide variety of styles and suction outlet configurations available on traditional, non-channel-type SOFAs, and because all types of SOFAs could be subject to differing flow through the drain cover that are dependent on the suction outlet location, the committee decided that the new requirement to test at all suction outlets on channel drains should also apply to all types of SOFAs.

The additional requirement to perform hair tests at all suction outlets for all types of SOFAs will increase the testing burden because it increases the number of tests that are required to be performed. However, the possible increase in testing burden will be offset by other changes to the testing requirements. Under the revised standard, if the hair cannot reach the suction outlet, there is no need to test that outlet. Thus, APSP-17 2017 provides that the requirement to test at each suction outlet, which is included in section 5.7.2, only applies to suction outlets that have a “flow path length” ( i.e., the distance between the drain cover the suction outlet) of less than 16 inches, which is the maximum length of hair used in the hair tests. Furthermore, as discussed above, the 2017 standard reduced the hair approach time from 60 seconds to 30 seconds. The additional testing required to evaluate all of the suction outlets on a SOFA is offset by the reduction in hair test approach time discussed in Section II.A.2.a.

The requirement in APSP-16 2017 to test at every suction outlet reachable by the hair test specimen will increase the safety of bathers because it precludes the chance of a SOFA being installed in a manner that is different from the way it was tested, serves to clarify prior practice, and is supported by laboratory testing. Accordingly, the Commission determines that testing of SOFAS at every suction outlet is in the public interest.

The 2011 version of the APSP standard did not define “unblockable drain” or “unblockable SOFA.” The definitions section of APSP-16 2017 includes the following definition of “Unblockable SOFA”:

Section 8.4 of APSP-16 2017 contains requirements for the labelling of a SOFA, requiring identifying information, such as the manufacturer name and cover/grate part number, and date of the installation of the cover/grate. Section 8.5.1 of APSP-16 2017 contains labeling requirements for Registered Design Professional (RDP) SOFAs. Section 9.3 of APSP-16 2017 adds provisions regarding a General Certificate of Conformity (GCC) that are consistent with the Consumer Product Safety Act and VGBA. These requirements identify the product, the manufacturer, and the test lab that performed the analysis, as well as state the standard to which the product was tested, and when and where it was tested. Because the presence of this information makes it easy to identify relevant safety information about the product, the Commission finds these requirements are in the public interest.

Section 1404(b) of the VGBA specifies a standard for drain covers. It states “each swimming pool or spa drain cover manufactured, distributed, or entered into commerce in the United States shall conform to the entrapment protection standards of [the drain cover performance standard].” Section 1404(a) of the VGBA states that the requirements of section 1404(b) shall be treated as a consumer product safety rule under the CPSA. Thus, the drain cover must be in compliance with the drain cover standard at the time of manufacture of the cover, distribution of the cover, or when the cover is entered into commerce. This indicates that the drain cover standard is a standard for the drain cover, as a discrete product.

Section 1404(b) requires the Commission to assess any successor drain cover standard to determine whether the changes in the standard are in the public interest, before incorporating the successor standard. CPSC's Office of Compliance enforces section 1404(b) by determining whether the drain cover, as a discrete product, at the time of manufacture, distribution, or entrance into commerce, complies with the drain cover standard.

Separately, section 1404(c) of the VGBA requires that public pools and spas in the United States:

• Have drain covers that comply with the standard specified in section 1404(b) or a successor standard; and

• if the public pool or spa does not have an unblockable drain, it must be equipped with one or more of the secondary systems specified in section 1404(c)(1)(A)(ii).

APSP-16 2017 contains many changes that extend beyond the requirements for the drain cover or SOFA itself, and thus, exceed CPSC's authority under section 1404(b) of the VGBA. The voluntary standard can have such provisions. However, the Commission does not have authority to enforce them as mandatory standard provisions. The changes include requirements that can be separated into the following categories:

• Installation of the SOFA;

• Requirements applicable to pools;

• Activities of pool owners;

• Changes to statutory definitions in the VGBA.

The changes specific to each category are detailed in Tables 1 through 4.

The provisions mentioned in Table 1 set forth requirements for how to install the SOFA. The 2011 version of the APSP standard addressed installation by requiring that certain information about installation be provided in labels and instructions. In contrast, the provisions referenced in Table 1 require that the installer or pool owner/operator take certain actions. These are not provisions for the drain cover. A drain cover manufacturer has the ability to provide labels and instructions with the product. A drain cover manufacturer does not control how the product is installed.

The provisions mentioned in Table 2 set forth requirements for pools, not for drain covers. Several of the provisions set requirements for the pool's flow rating. The 2011 version of the APSP standard required markings and instructions regarding operation at an appropriate flow rating. However, the revised standard states requirements for the pool; these are requirements the drain cover manufacturer lacks the ability to fulfill.

The provisions mentioned in Table 3 require pool owners to take certain actions. The 2011 version of the APSP standard required that components of drain covers be marked to state the component's life span. In contrast, the revised standard requires that drain cover components be replaced at the end of their service life. This change makes the requirement apply to the pool owner, not the drain cover manufacturer. Similarly, a requirement prohibiting modifications to installed SOFAs applies to the pool owner, not the drain cover.

The provisions listed in Table 4 set forth what seem to be requirements for instructions. As is stated above, CPSC standards can include requirements for instructions. However, the instructions specified in section 9.4 actually establish requirements for pools and for secondary devices and systems designed to prevent suction entrapment. All of section 9.4 exceeds the Commission's authority under Section 1404(a) of the VGBA because the instructions require secondary systems on all pools. The VGBA only requires secondary systems for public pools. In addition, this section provides definitions of the secondary systems that differ from the statutory definitions in the VGBA.

Section 3.2.4 requires SOFAs to be designated in their installation manual as “blockable” or “unblockable.” This requirement does fall within the enforcement authority of CPSC. However, the definition in APSP-16 2017 contains an error. As discussed, APSP-16 2017 provides a definition of “unblockable.” That definition has two parts: Unblockable SOFAs must meet a minimum size requirement, and they must meet the body-blocking element maximum pull-off force requirement. Due to a printing error, section 3.2.4 omitted the pull-off force requirement. Thus, the Commission will not adopt section 3.2.4 of APSP-16 2017.

The Office of the Federal Register (OFR) has regulations concerning incorporation by reference. 1 CFR part 51. Under these regulations, agencies must discuss, in the preamble to the final rule, ways that the materials the agency incorporates by reference are reasonably available to interested person and how interested parties can obtain the materials. In addition, the preamble to the final rule must summarize the material. 1 CFR 51.5(b).

In accordance with the OFR's requirements, section II of this preamble summarizes the major provisions of the APSP-16 2017 standard that the Commission incorporates by reference into 16 CFR 1450.3. The standard is reasonably available to interested parties, and interested parties may purchase a copy of the standard from The Association of Pool & Spa Professionals. A copy of the standard can also be inspected at CPSC's Office of the Secretary.

The APA generally requires that agencies use notice and comment rulemaking when issuing a rule. 5 U.S.C. 553. The Commission is adopting as a mandatory standard a voluntary standard that was developed through the consensus process. The voluntary standard is noncontroversial and receives widespread support. In Recommendation 95-4, the Administrative Conference of the United States (ACUS) endorsed direct final rulemaking as an appropriate procedure to expedite promulgation of rules that are noncontroversial and that are not expected to generate significant adverse comment. See 60 FR 43108 (August 18, 1995). The Commission believes it is very unlikely that there will be adverse comments to this rule. Consistent with the ACUS recommendation, the Commission is satisfying the notice and comment procedure by publishing this rule as a direct final rule and providing that, unless adverse comment is received within 30 days, the rule will become effective as a final rule.

The Regulatory Flexibility Act (RFA) requires that when agencies are required to issue a notice of proposed rulemaking they must review the rulemaking's potential economic impact on small entities, including small businesses. Section 603 of the RFA requires the Commission to prepare and make available for public comment an Initial Regulatory Flexibility Analysis (IRFA) describing the impact of the proposed rule on small entities and identifying impact-reducing alternatives. However, under Section 605 of the RFA, if an agency certifies that the proposed rule, if promulgated, will not have a significant economic impact on a substantial number of small entities, an IRFA is not required, provided that the agency publishes the certification in the Federal Register , along with a statement providing the factual basis for the certification.

As discussed in section III.B of this preamble, the revised standard includes two changes to the testing procedures in ANSI/APSP/ICC-16: Hair test approach time and hair testing at specific ports in channel SOFAs. In addition to these two changes in hair tests from the current standard, ANSI/APSP/ICC-16 2017 specifies additional editorial changes, which are intended to clarify existing wording. Clarifying language pertaining to installation and maintenance instructions to be provided with the covers/grates for SOFAs was also added to the standard. Also, manufacturers are required to make minor changes to the information that is provided in permanent markings of compliant covers and grates.

Overall, the changes in testing requirements in the standard revision should have minimal impacts on small businesses, either in costs of testing, or in product modifications necessitated to comply with the revised testing provisions. The revisions that this rule would require in the information that must be provided in installation and maintenance instructions, and the changes in the permanent markings required for covers, and grates should also not impose significant costs on small cover and grate manufacturers. Because small firms should only experience minimal increases in compliance costs or other burdens associated with this rule, the Commission certifies that referencing the revised standard, ANSI/APSP/ICC-16-2017, as the successor standard under the VGBA will not be likely to have significant economic impact on a substantial number of small businesses or other entities.

This rule does not impose any information collection requirements. Accordingly, this rule is not subject to the Paperwork Reduction Act, 44 U.S.C. 3501-3520.

The Commission's regulations provide a categorical exclusion for the Commission's rules from any requirement to prepare an environmental assessment or an environmental impact statement because they “have little or no potential for affecting the human environment.” 16 CFR 1021.5(c)(2). This rule falls within the categorical exclusion, so no environmental assessment or environmental impact statement is required.

Section 26(a) of the CPSA, 15 U.S.C. 2075(a), provides that where a “consumer product safety standard under [the Consumer Product Safety Act (CPSA)]” is in effect and applies to a product, no state or political subdivision of a state may either establish or continue in effect a requirement dealing with the same risk of injury, unless the state requirement is identical to the federal standard. Section 26(c) of the CPSA also provides that states or political subdivisions of states may apply to the Commission for an exemption from this preemption in certain circumstances.

Section 1404(a) of the VGBA specifies that a rule issued under section 1404(b) of the VGBA shall be treated as a consumer product safety standard under the CPSA, thus, implying that the preemptive effect of section 26(a) of the CPSA would apply. Therefore, this rule will invoke the preemptive effect of section 26(a) of the CPSA when it becomes effective.

For the reasons stated above, the Commission amends part 1450 of title 16 of the Code of the Federal Regulations as follows:

I. Background

In the Federal Register of February 19, 2019 (84 FR 4696), we issued a final rule establishing the list of bulk drug substances that can be used in compounding under section 503A of the FD&C Act (the final rule) (21 U.S.C. 353a). The final rule, entitled “List of Bulk Drug Substances That Can Be Used To Compound Drug Products in Accordance With Section 503A of the Federal Food, Drug, and Cosmetic Act,” is codified at 21 CFR 216.23 and became effective March 21, 2019.

We examined the economic implications of the final rule as required by the Regulatory Flexibility Act (5 U.S.C. 601-612) and, because we do not have enough information about the effect of the final rule on small entities, determined that the final rule will have a significant economic impact on a substantial number of small entities. In compliance with section 212 of the Small Business Regulatory Enforcement Fairness Act (Pub. L. 104-121, as amended by Pub. L. 110-28), we are making available the SECG to explain the actions that a small entity must take to comply with the rule.

We are issuing the SECG consistent with our good guidance practices regulation (21 CFR 10.115). The SECG represents the current thinking of FDA on the final rule. It does not establish any rights for any person and is not binding on FDA or the public. You can use an alternative approach if it satisfies the requirements of the applicable statutes and regulations. This guidance is not subject to Executive Order 12866.

Persons with access to the internet may obtain the SECG at either https://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/default.htm or https://www.regulations.gov. Use the FDA website listed in the previous sentence to find the most current version of the guidance.

The Coast Guard will enforce special local regulations established in 33 CFR 100.1302 for the following eight events during the hours specified on the dates and at the locations listed in the following Table:

The special requirements listed in 33 CFR 100.1302 apply to the activation and enforcement of these special local regulations. All vessel operators who desire to enter the designated zone must obtain permission from the Captain of the Port or their Designated Representative. The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation.

In addition to this notice of enforcement in the Federal Register , the Coast Guard will provide notification of this enforcement period via the Local Notice to Mariners and marine information broadcasts.

The Coast Guard will enforce the Safety Zones; Annual Events in the Captain of the Port Buffalo Zone listed in 33 CFR 165.939 for the following events:

(1) Cleveland Triathlon, Cleveland, OH; The safety zone listed in Table 165.939 as (b)(1) will be enforced from 6:15 a.m. through 10:45 a.m. on July 21, 2019.

(2) Downtown Cleveland Alliance July 4th Fireworks, Cleveland, OH; The safety zone listed in Table 165.939 as (b)(4) will be enforced from 9:15 p.m. through 10:15 p.m. on July 4, 2019.

(3) Parade of Lights, Cleveland, OH; The safety zone listed in Table 165.939 as (b)(6) will be enforced from 8:45 p.m. through 11:45 p.m. on July 27, 2019.

(4) Open Water Swim; The safety zone listed in Table 165.939 as (b)(12) will be enforced from 6:45 a.m. through 10:45 a.m. on July 13, 2019.

(5) Cleveland National Air Show, Cleveland, OH; The safety zone listed in Table 165.939 as (d)(2) will be enforced daily from 9 a.m. through 6 p.m. August 30, 2019 through September 2, 2019.

Pursuant to 33 CFR 165.23, entry into, transiting, or anchoring within the safety zone during an enforcement period is prohibited unless authorized by the Captain of the Port Buffalo or his designated representative. Those seeking permission to enter the safety zone may request permission from the Captain of Port Buffalo via channel 16, VHF-FM. Vessels and persons granted permission to enter the safety zone shall obey the directions of the Captain of the Port Buffalo or his designated representative. While within a safety zone, all vessels shall operate at the minimum speed necessary to maintain a safe course.

This notice of enforcement is issued under authority of 33 CFR 165.939 and 5 U.S.C. 552(a). In addition to this notice of enforcement in the Federal Register , the Coast Guard will provide the maritime community with advance notification of this enforcement period via Broadcast Notice to Mariners or Local Notice to Mariners. If the Captain of the Port Buffalo determines that the safety zone need not be enforced for the full duration stated in this notice he or she may use a Broadcast Notice to Mariners to grant general permission to enter the respective safety zone.

The Coast Guard is issuing this temporary rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule. Because the Coast Guard received notice of this event on May 20, 2019, notice and comment procedures would be impracticable in this instance.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . For similar reasons as stated above, notice and comment procedures would be impractical in this instance due to the short notice provided for this event.

The Coast Guard is establishing a safety zone under authority 46 U.S.C. 70034 (previously 33 U.S.C. 1231). The Captain of the Port San Francisco has determined that potential hazards associated with the Pier 15 Prom Fireworks Display on May 25, 2019, will be a safety concern for anyone within a 100-foot radius of the fireworks barge and anyone within a 280-foot radius of the fireworks firing site. For this reason, a safety zone is needed to protect personnel, vessels, and the marine environment in the navigable waters around the fireworks barge during the fireworks display.

This rule establishes a safety zone from 12:00 p.m. until 10:50 p.m. on May 25, 2019 during the loading, staging, and transit of the fireworks barge, and the fireworks display, until approximately 30 minutes after completion of the fireworks display. During the loading and staging of the pyrotechnics onto the fireworks barge, scheduled to take place from noon to 4:00 p.m. on May 25, 2019, at Pier 50 in San Francisco, CA, the safety zone will encompass the navigable waters around and under the fireworks barge, from surface to bottom, within a radius of 100 feet. This 100-foot zone will remain in place while the barge is at the pier and while it is being towed to the display location.

The fireworks barge will remain at Pier 50 until the start of its transit to the display location. Towing of the barge from Pier 50 to the display location is scheduled to take place from 9:15 p.m. to 9:40 p.m. on May 25, 2019, where it will remain until the conclusion of the fireworks display.

At 9:45 p.m. on May 25, 2019, 30 minutes prior to the commencement of the 5-minute Pier 15 Prom Fireworks Display, the safety zone will increase in size and encompass the navigable waters around and under the fireworks barge, from surface to bottom, within a radius of 280 feet from the circle center at approximate position 37°48′08″ N, 122°23′46″ W (NAD 83). The safety zone shall terminate at 10:50 p.m. on May 25, 2019.

The effect of the safety zone is to restrict navigation in the vicinity of the fireworks loading, staging, transit, and firing site. Except for persons or vessels authorized by the COTP or the COTP's designated representative, no person or vessel may enter or remain in the restricted areas. These regulations are needed to keep spectators and vessels away from the immediate vicinity of the fireworks firing site to ensure the safety of participants, spectators, and transiting vessels.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. Executive Order 13771 directs agencies to control regulatory costs through a budgeting process. This rule has not been designated a “significant regulatory action,” under Executive Order 12866. Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB), and pursuant to OMB guidance it is exempt from the requirements of Executive Order 13771.

This regulatory action determination is based on the limited duration and narrowly tailored geographic area of the safety zone. Although this rule restricts access to the waters encompassed by the safety zone, the effect of this rule will not be significant because the local waterway users will be notified via public Notice to Mariners to ensure the safety zone will result in minimum impact. Vessels will be able to transit the area near the safety zone and the entities most likely to be affected are waterfront facilities, commercial vessels, and pleasure craft engaged in recreational activities.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule may affect the following entities, some of which may be small entities: Owners and operators of waterfront facilities, commercial vessels, and pleasure craft engaged in recreational activities and sightseeing, if these facilities or vessels are in the vicinity of the safety zone at times when this zone is being enforced. This rule will not have a significant economic impact on a substantial number of small entities for the following reasons: (i) This rule will encompass only a small portion of the waterway, (ii) this rule will only be in place for a short period of time, and (iii) the maritime public will be advised in advance of this safety zone via Notice to Mariners.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has 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. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it 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. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Directive 023-01 and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone of limited size and duration. It is categorically excluded from further review under Categorical Exclusion L60(a) in Table 3-1 of U.S. Coast Guard Environmental Planning Implementing Procedures 5090.1. A Record of Environmental Consideration supporting this determination is available in the docket where indicated under ADDRESSES .

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

In a document published in the Federal Register on October 20, 2015 (80 FR 63480), VA proposed to amend its regulations that govern enrollment in the VA health care system by removing the regulatory provision that restates VA's discretionary authority to consider the veteran's net worth when determining eligibility for lower-cost health care. VA provided a 60-day comment period, which ended on December 21, 2015. We received thirteen (13) comments on the proposed rule. Pursuant to 38 U.S.C. 1705, VA established a health care enrollment system with implementing regulations at 38 CFR 17.36. When veterans apply for VA health care benefits, VA assigns a priority category that reflects the basis for that veteran's eligibility, such as whether the veteran was rated as having a service-connected disability or would be unable to defray the costs of necessary expenses because of low income. Veterans are placed in the highest priority category they are eligible for based on the criteria described in § 17.36(b). Veterans who do not meet the requirements of priority categories 1 through 4, and are determined to be unable to defray the expenses of necessary care under 38 U.S.C. 1722(a) are placed in priority category 5. See 38 CFR 17.36(b)(5). This rulemaking affects a regulatory provision related to priority category 5. Veterans are considered unable to defray the costs of necessary care if they have a low annual income, qualify for VA pension benefits, or otherwise meet the criteria set forth in 38 U.S.C. 1722(a) and 38 CFR 17.47(d). VA has the authority to use a veteran's net worth to determine whether the veteran is unable to defray the cost of health care at 38 U.S.C. 1722(d)(1), but this authority is discretionary.

In 2013, VA informed the public of its intent to discontinue annual income and asset information reporting by veterans. See 78 FR 64065 (Oct. 25, 2013) and 78 FR 79564 (Dec. 30, 2013). VA did not receive any adverse response to those notices. With this in mind, VA has determined that it is appropriate to cease consideration of the veteran's net worth in determining whether they are able to defray the expenses of necessary health care and qualify for inclusion in priority category 5 effective January 1, 2015.

By eliminating consideration of the veteran's net worth for purposes of health care enrollment, more veterans have qualified for VA health care in a higher priority category, which has improved access and affordability of VA health care for many lower-income veterans. This change reduced administrative burdens for veterans and VA. By eliminating the requirement to have veterans report net worth information VA will be able to use established practices with the Internal Revenue Service and Social Security Administration to verify veterans' reported annual income far more efficiently. Since this process can be done without requiring a collection of information with the Veteran, this policy has eliminated the significant burden on veterans to report their net worth, and it also eliminated the need for VA to use resources to verify that information.

For these reasons, we are removing § 17.47(d)(5) in its entirety and renumbering current § 17.47(d)(6) as § 17.47(d)(5). Current paragraph (d)(5) restates VA's discretionary statutory authority to use the veteran's net worth to determine whether he is able to defray the costs of health care. By removing the regulatory restatement of VA's discretionary statutory authority to consider a veteran's net worth, VA removed language in the regulation that will be perceived as inconsistent with the policy change. The amendments in this rulemaking are consistent with current VA policy and help ensure our regulations are not interpreted more narrowly than VA intends.

Nine (9) commenters agreed with the change in rulemaking. One commenter stated that “all vets deserve the care they rightly earned. Net worth has nothing to do with it.” Two (2) of these commenters “agree[d] with the decision to remove the net worth requirement for veterans seeking health care through the VA” and “believe[d] removing the wording that gives VA discretionary authority and replacing it with wording that leaves out financial status discrimination against Veterans is a good idea.” Additionally, two (2) other of these commenters remarked “the role of this rule is to more properly and efficiently administer the health care of veterans” and that the rule “is fair, cost-effective, and supports VA's main mission of caring about Veterans.” We thank the commenters for supporting the rule and make no edits based on these comments.

Four (4) others disagreed or appeared to misunderstand the proposal. The comments ranged from requesting that VA “not take away the insurance promised to our veterans” to “they served their time/retired & went on to a higher paying career, does not mean they don't deserve equal benefits.” Two (2) commenters expressed concerns regarding the costs VA would incur implementing this rulemaking. Shifting veterans previously classified in categories 7 and 8 to category 5 does not increase the cost of care. Veterans shifting from categories 7 and 8 to category 5 merely collapses the categories administratively for more effective management and tracking. This shift merely reclassifies the veterans. We recognize that it is reasonable to expect an uptick in expenditures when collapsing categories in this manner, especially when more veterans will occupy the same category. However, VA expects that it will see a decrease in collections of $55,873,000 from 2015-2019 for categories 7 and 8. The authority to consider net worth in making these determinations is discretionary. In weighing all factors, including the economic impact of this change, VA has decided this amendment is best for VA and veterans. Therefore, VA makes no changes based on this comment. Some questioned why VA requested the income and net worth of veterans. These responses may have come from a misunderstanding of the intent of the rule. The intent of the rule is to eliminate the net worth reporting burden for veterans who seek VA health care. VA makes no edits based on these comments. Based on the rationale set forth in the Supplementary Information to the proposed rule and in this final rule, VA is adopting the proposed rule with no changes.

Title 38 of the Code of Federal Regulations, as revised by this final rulemaking, represents VA's implementation of its legal authority on this subject. Other than future amendments to this regulation or governing statutes, no contrary guidance or procedures are authorized. All existing or subsequent VA guidance must be read to conform with this rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking.

Although, this final rule contains provisions constituting a collection of information, at 38 CFR 17.47, under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ), no new or revised collections of information are associated with this final rule. The information collection requirements for 38 CFR 17.47(d)(5) are currently approved by the Office of Management and Budget (OMB) and have been assigned OMB control number 2900-0091. On November 24, 2014 and prior to publication of the proposed rule associated with this final regulation, VA revised the Information Collection Request (ICR) to remove the net worth information collection from VA form 10-10EZ, in accordance with the Paperwork Reduction Act of 1995.

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This final rule will directly affect only individuals and would not directly affect small entities. Therefore, pursuant to 5 U.S.C. 605(b), this rulemaking is exempt from the initial and final regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by the Office of Management and Budget (OMB), as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

VA has examined the economic, interagency, budgetary, legal, and policy implications of this regulatory action and determined that the action is a significant regulatory action because it is likely to result in a rule that may raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order. VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's website at http://www.va.gov/orpm by following the link for VA Regulations Published from FY 2004 through FYTD. This rule is not subject to the requirements of E.O. 13771 because this rule results in no more than de minimis costs.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. This final rule will have no such effect on State, local, and tribal governments, or on the private sector.

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are 64.007, Blind Rehabilitation Centers; 64.008, Veterans Domiciliary Care; 64.009, Veterans Medical Care Benefits; 64.010, Veterans Nursing Home Care; 64.011, Veterans Dental Care; 64.012, Veterans Prescription Service; 64.013, Veterans Prosthetic Appliances; 64.014, Veterans State Domiciliary Care; 64.015, Veterans State Nursing Home Care; 64.018, Sharing Specialized Medical Resources; 64.019, Veterans Rehabilitation Alcohol and Drug Dependence; 64.022, Veterans Home Based Primary Care; and 64.024, VA Homeless Providers Grant and Per Diem Program.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Robert L. Wilkie, Secretary, Department of Veterans Affairs, approved this document on May 20, 2019, for publication.

For the reasons stated in the preamble, the Department of Veterans Affairs amends 38 CFR part 17 as follows:

This supplementary information section is arranged as follows:

On June 1, 2018, amended on August 9, 2018, the Ohio Environmental Protection Agency (Ohio) requested SIP approval of a variety of amendments to its regulations in Ohio Administrative Code (OAC) Chapter 3745-17, entitled “Particulate Matter Standards.” The most significant revisions in Ohio's rules address requirements for power plants to conduct continuous opacity monitoring, and provide two alternatives in cases where continuous opacity monitors are determined not to provide a reliable assessment of particulate matter control. One of these alternatives is to conduct continuous monitoring of the mass of emitted particulate matter, in which case the measured mass must meet limits specified in the rule. The other alternative is to conduct monitoring of parameters shown to indicate satisfaction of applicable particulate matter control requirements, in which case the source must specify the range of values of these parameters and must achieve this range of values. The amended rules also include more administrative revisions, for example removing sources that no longer operate from the rules.

Ohio's submittal of June 1, 2018 requested action only on the second of the above alternatives, to authorize parameter monitoring in lieu of continuous opacity monitoring in appropriate cases, and not on the first alternative, involving continuous mass monitoring. However, Ohio amended its request on August 9, 2018, to request approval of both alternatives to continuous opacity monitoring.

EPA proposed to approve the requested revisions on December 11, 2018, at 83 FR 63607. The notice of proposed rulemaking (NPRM) provides a more complete discussion of the revisions that Ohio requested be approved and EPA's evaluation of these revisions.

Ohio excluded selected portions of OAC Rule 3745-17-03, pertaining to opacity requirements, from its request for EPA approval. These provisions were submitted on June 4, 2003, as part of a rule package intended to offer alternative opacity limits for power plants operating continuous opacity monitors. EPA proposed to disapprove these provisions on June 27, 2005, and Ohio withdrew its request for approval of these provisions on September 5, 2014. Accordingly, EPA is not taking action on these provisions.

In response to the NPRM, EPA received one comment, which was not relevant to the proposed rulemaking. EPA continues to find that the requested revisions warrant approval, for the reasons given in the notice of proposed rulemaking. Therefore, EPA is approving the requested revisions and is approving the entirety of all of these rules except for OAC 3745-17-03, for which Ohio excluded specified sections from its request for action. Specifically, EPA is approving amended OAC rules 3745-17-01, 3745-17-03 [except for paragraph (B)(1)(b) and the phrase “Except as provided in paragraph (8)(1)(b) of this rule,” in paragraph (B)(1)(a)], 3745-17-04, 37 45-17-07, 3745-17-08, 3745-17-09, 3745-17-10, 3745-17-11, 3745-17-12, 3745-17-13, and 3745-17-14. In addition, EPA is removing from the SIP the rule at OAC 3745-17-02, which Ohio has rescinded and the substance of which has been recodified (and approved into the SIP) within OAC 3745-25-02.

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 Ohio particulate matter rules described in the amendments to 40 CFR part 52 set forth below. EPA has made, and will continue to make, these documents generally available through www.regulations.gov and at the EPA Region 5 Office (please contact the person identified in the For Further Information Contact section of this preamble for more information).

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Clean Air Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a significant regulatory action subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

40 CFR part 52 is amended as follows:

Throughout this document “we,” “us,” and “our” means the EPA.

The Missoula NAA encompasses the City of Missoula and was designated nonattainment for the 1987 24-hour PM 10 NAAQS and classified as moderate under section 107(d)(4)(B), following enactment of the Clean Air Act (CAA) Amendments of 1990. See 56 FR 56694 (November 6, 1991). On August 30, 1995, the EPA fully approved the Missoula NAA PM 10 plan including reasonably available control measures (RACM), an attainment demonstration, emissions inventory, quantitative milestones, and control and contingency requirements.

The factual and legal background for this action is discussed in detail in our March 5, 2019 (84 FR 7846) proposed approval of certain rule revisions to the Missoula City-County Air Pollution Control Program, the Missoula Limited Maintenance Plan, the Missoula LMP as meeting the appropriate transportation conformity requirements, and concurrent redesignation of the Missoula NAA to attainment of the NAAQS for PM 10 .

The public comment period on the EPA's proposed rule opened on March 5, 2019, the date of its publicaction in the Federal Register , (84 FR 7846), and closed on April 4, 2019. During this time, the EPA received no comments.

The EPA is making the determination that the Missoula NAA has attained the 1987 24-hour PM 10 NAAQS of 150 µg/m 3 . This determination is based upon monitored air quality data for the PM 10 NAAQS during the years 2015-2017. Additionally, the EPA is approving the Missoula NAA LMP submitted on August 3, 2016, as meeting the applicable CAA requirements, and we have determined the LMP to be sufficient to provide for maintenance of the PM 10 NAAQS over the course of the 10-year maintenance period out to 2029. The EPA is also approving the Missoula LMP as meeting the appropriate transportation conformity requirements found in 40 CFR 93, subpart A. The EPA is approving most of the revisions submitted on August 3, 2016 and August 22, 2018 (Chapter 4 revisions). Specifically, the EPA is approving revisions to the eight chapters on Definitions, Failure to Attain Standards, Emergency Episode Avoidance Plan, Industrial Sources, Fugitive Particulate, Solid Fuel Burning Devices, Administrative Procedures, and Penalties. As identified in Section IV of the March 5, 2019 proposed approval, the EPA is not acting on Chapter 9, rule 9.204 in the August 3, 2016 submittal or the IBR revisions in the August 22, 2018 submittal. Lastly, this rule redesignates the Missoula NAA from nonattainment to attainment of the PM 10 NAAQS. A list of the revisions to the Missoula City-County Air Pollution Control Program that the EPA is approving is outlined in Table 1 below.

In this document, the EPA is finalizing regulatory text that includes incorporation by reference. In accordance with requirements of 1 CFR 51.5, the EPA is finalizing the incorporation by reference of the Regulations described in the amendments to 40 CFR part 52 set forth below. The EPA has made, and will continue to make, these materials generally available through www.regulations.gov and at the EPA Region 8 Office (please contact the person identified in the FOR FURTHER INFORMATION CONTACT section of this preamble for more information). Therefore, these materials have been approved by the EPA for inclusion in the State implementation plan (SIP), have been incorporated by reference by the 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 the EPA's approval, and will be incorporated by reference in the next update to the SIP compilation.

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, the EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011);

• Is not an Executive Order 13771 (82 FR 9339, February 2, 2017) regulatory action because SIP approvals are exempted under Executive Order 12866;

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and

• Does not provide the EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, the SIP is not approved to apply on any Indian reservation land or in any other area where the EPA or an Indian tribe has demonstrated that a tribe has jurisdiction. In those areas of Indian country, the rule does not have tribal implications and will not impose substantial direct costs on tribal governments or preempt tribal law as specified by Executive Order 13175 (65 FR 67249, November 9, 2000).

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. The EPA will submit a report containing this action 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 . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by July 23, 2019. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

40 CFR parts 52 and 81 are amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl.

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2017-0572 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before July 23, 2019. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2017-0572, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments. Do not submit electronically any information you consider to be CBI or other information whose disclosure is restricted by statute.

• Mail: OPP Docket, Environmental Protection Agency Docket Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW, Washington, DC 20460-0001.

• Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at http://www.epa.gov/dockets/contacts.html.

Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at http://www.epa.gov/dockets.

In the Federal Register of February 27, 2018 (83 FR 8408) (FRL-9972-17), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 7F8614) by Makhteshim Agan of North America d/b/a ADAMA, 3120 Highlands Blvd., Suite 100, Raleigh, NC 27604. The petition requested that 40 CFR part 180 be amended by establishing tolerances for residues of the nematicide, fluensulfone, including its metabolites and degradates, in or on the following commodities: Citrus dried pulp at 0.4 parts per million (ppm); Crop Group 10-10, citrus fruit at 0.15 ppm; peanut at 0.15 ppm; peanut, hay at 8.0 ppm; and peanut, meal at 0.30 ppm. That document referenced a summary of the petition prepared by Makhteshim Agan of North America, the registrant, which is available in docket ID number EPA-HQ-OPP-2017-0572 at http://www.regulations.gov. One comment was received on the notice of filing. EPA's response to this comment is discussed in Unit IV.C.

In the Federal Register of May 18, 2018 (83 FR 23247) (FRL-9976-87), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 7F8650) by Makhteshim Agan of North America, d/b/a ADAMA, 3120 Highlands Blvd., Suite 100, Raleigh, NC 27604. The petition requested to amend the tolerances in 40 CFR 180.680 for residues of the nematicide, fluensulfone and its metabolite BSA expressed as fluensulfone equivalents, in or on Berry, low growing, subgroup 13-07G at 0.5 parts per million (ppm); Brassica, head and stem, subgroup 5A at 1.5 ppm; Brassica, leafy greens, subgroup 5B at 20 ppm; Potato, chips at 2 ppm; Potato, granules/flakes at 2 ppm; Tomato, paste at 1.5 ppm; Vegetables, cucurbits, group 9 at 0.7 ppm; Vegetables, fruiting, group 8-10 at 0.7 ppm; Vegetables, leafy, except Brassica, group 4 at 4 ppm; Vegetables, leaves of root and tuber, group 2, except sugar beet at 50 ppm; Vegetables, root, except sugar beet, subgroup 1B at 4 ppm; and Vegetables, tuberous and corm, subgroup 1C at 0.8 ppm. That document referenced a summary of the petition prepared by Makhteshim Agan of North America, the registrant, which is available in docket ID number EPA-HQ-OPP-2018-0030 at http://www.regulations.gov. There were no comments received in response to the notice of filing.

In the Federal Register of March 18, 2019 (84 FR 9737) (FRL-9989-71), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 7F8650) by Makhteshim Agan of North America, d/b/a ADAMA, 3120 Highlands Blvd., Suite 100, Raleigh, NC 27604. The petition requested to: (1) Amend the tolerance expression in 40 CFR 180.680 paragraphs (a) and (d) to read “Tolerances are established for residues of the nematicide fluensulfone, including its metabolites and degradates, in or on the commodities in the table below. Compliance with the tolerance levels specified in the following table below is to be determined by measuring only the sum of fluensulfone, 5-chloro-2-[(3,4,4-trifluoro-3-buten-1-yl)sulfonyl]thiazole and its metabolite, 3,4,4-trifluoro-but-3-ene-1-sulfonic acid, calculated as the stoichiometric equivalent of fluensulfone, in or on the commodity”; and (2) amend the tolerances in 40 CFR 180.680 for residues of the nematicide, fluensulfone and its metabolite BSA expressed as fluensulfone equivalents, on the raw agricultural commodities as follows: Almond hulls at 5 parts per million (ppm); Fruit, pome, group 11 at 0.4 ppm; Fruit, small vine climbing subgroup 13-07D at 0.8 ppm; Fruit, stone, group 12 at 0.1 ppm; Grain cereal, forage, fodder and straw, group 16 at 3 ppm; and, rotated wheat (inadvertent residues with 90-day PBI): Grain, cereal, group 15 at 0.05 ppm; Molasses at 0.3 ppm; and, rotated cereal grains (inadvertent residues with 10-month PBI): Nut, tree, group 14 at 0.04 ppm; Sugarcane at 0.05 ppm and Wheat grain (includes triticale) (Barley grain; Buckwheat grain; Oat grain; and Teosinte grain) at 0.1 ppm; Wheat bran (Barley bran) at 0.14 ppm; Wheat forage (Oat forage) at 6 ppm; Wheat germ at 0.10 ppm; Wheat hay (Barley hay and Oat hay) at 15 ppm; Wheat middlings at 0.10 ppm; Wheat shorts at 0.11 ppm; and, Wheat straw (Barley straw and Oat straw) at 6 ppm. That document referenced a summary of the petition prepared by Makhteshim Agan of North America, the registrant, which is available in docket ID number EPA-HQ-OPP-2018-0793 at http://www.regulations.gov. One comment was received on the notice of filing. EPA's response to this comment is discussed in Unit IV.C.

Based upon review of the data supporting the petitions, EPA has modified the levels at which tolerances are being established as well as which commodities will have tolerances. The reasons for these changes are explained in Unit IV.D.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .”

Consistent with FFDCA section 408(b)(2)(D), and the factors specified in FFDCA section 408(b)(2)(D), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for fluensulfone including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with fluensulfone follows.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children.

A summary of the toxicological effects of fluensulfone are discussed in the final rule published in the Federal Register of April 13, 2018 (83 FR 15971) (FRL-9975-76).

Specific information on the studies received and the nature of the adverse effects caused by fluensulfone as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found at http://www.regulations.gov in the document titled “ Fluensulfone—Aggregate Human Health Risk Assessment in Support of Section 3 Registration of New Uses on Citrus and Peanut, and Change in the Tolerance Expression ” on pages 39-49 in docket ID number EPA-HQ-OPP-2017-0572.

Once a pesticide's toxicological profile is determined, EPA identifies toxicological points of departure (POD) and levels of concern to use in evaluating the risk posed by human exposure to the pesticide. For hazards that have a threshold below which there is no appreciable risk, the toxicological POD is used as the basis for derivation of reference values for risk assessment. PODs are developed based on a careful analysis of the doses in each toxicological study to determine the dose at which no adverse effects are observed (the NOAEL) and the lowest dose at which adverse effects of concern are identified (the LOAEL). Uncertainty/safety factors are used in conjunction with the POD to calculate a safe exposure level—generally referred to as a population-adjusted dose (PAD) or a reference dose (RfD)—and a safe margin of exposure (MOE). For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk. Thus, the Agency estimates risk in terms of the probability of an occurrence of the adverse effect expected in a lifetime. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/assessing-human-health-risk-pesticides.

A summary of the toxicological endpoints for fluensulfone used for human risk assessment is discussed in Unit III.B. of the final rule published in the Federal Register of June 1, 2016 (81 FR 34898) (FRL-9946-07).

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to fluensulfone, EPA considered exposure under the petitioned-for tolerances as well as all existing fluensulfone tolerances in 40 CFR 180.680. EPA assessed dietary exposures from fluensulfone in food as follows:

i. Acute exposure. Quantitative acute dietary exposure and risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a 1-day or single exposure.

Such effects were identified for fluensulfone. In estimating acute dietary exposure, EPA used 2003-2008 food consumption information from the United States Department of Agriculture (USDA) National Health and Nutrition Examination Survey, What We Eat in America, (NHANES/WWEIA). As to residue levels in food, the acute dietary risk assessment assumed tolerance-equivalent residues and 100 percent crop treated (PCT).

ii. Chronic exposure. In conducting the chronic dietary exposure assessment EPA used 2003-2008 food consumption information from the USDA's NHANES/WWEIA. As to residue levels in food, the chronic dietary risk assessment assumed tolerance-equivalent residues and 100 PCT.

iii. Cancer. Based on the data summarized in Unit III.A., EPA has concluded that a nonlinear RfD approach is appropriate for assessing cancer risk to fluensulfone. Cancer risk was assessed using the same exposure estimates as discussed in Unit III.C.1.ii., chronic exposure.

iv. Anticipated residue and PCT information. EPA did not use anticipated residue or PCT information in the dietary assessment for fluensulfone. Tolerance-equivalent residue levels and 100 PCT were assumed for all food commodities.

2. Dietary exposure from drinking water. The Agency used screening-level water exposure models in the dietary exposure analysis and risk assessment for fluensulfone in drinking water. These simulation models take into account data on the physical, chemical, and fate/transport characteristics of fluensulfone. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/about-water-exposure-models-used-pesticide.

Based on the Pesticide Root Zone Model/Exposure Analysis Modeling System (PRZM/EXAMS) and Pesticide Root Zone Model Ground Water (PRZM GW) models, the estimated drinking water concentrations (EDWCs) for acute exposures are estimated to be 11.8 parts per billion (ppb) for surface water and 77.6 ppb for ground water and for chronic exposures are estimated to be 0.173 ppb for surface water and 52.5 ppb for ground water. Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. For the acute dietary risk assessment, the water concentration value of 77.6 ppb was used to assess the contribution to drinking water. For the chronic dietary risk assessment, the water concentration of value 52.5 ppb was used to assess the contribution to drinking water.

3. From non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure ( e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets).

Fluensulfone is currently registered for the following uses that could result in residential exposures: Golf courses and residential lawns. EPA assessed residential exposure using the following assumptions: No residential handler exposure for fluensulfone is expected because the products are not intended for homeowner use. The product label requires that handlers wear specific clothing ( e.g., long sleeve shirt/long pants) and/or personal protective equipment (PPE). The Agency has made the assumption that the product is not for homeowner use and is intended for use by professional applicators. As a result, a residential handler assessment has not been conducted.

For adult residential post-application exposure, the Agency evaluated dermal post-application exposure only to outdoor turf/lawn applications (high contact activities). The Agency also evaluated residential post-application exposure for children via dermal and hand-to-mouth routes of exposure, resulting from treated outdoor turf/lawn applications (high contact activities). Further information regarding EPA standard assumptions and generic inputs for residential exposures may be found at http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/standard-operating-procedures-residential-pesticide.

4. Cumulative effects from substances with a common mechanism of toxicity. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

EPA has not found fluensulfone to share a common mechanism of toxicity with any other substances, and fluensulfone does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that fluensulfone does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's website at http://www2.epa.gov/pesticide-science-and-assessing-pesticide-risks/cumulative-assessment-risk-pesticides.

1. In general. Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold (10X) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the FQPA Safety Factor (SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor.

2. Prenatal and postnatal sensitivity. No evidence of increased quantitative or qualitative susceptibility was seen in developmental toxicity studies in rats and rabbits. Fetal effects in those studies occurred in the presence of maternal toxicity and were not considered more severe than the maternal effects. However, there was evidence of increased qualitative, but not quantitative, susceptibility of pups in the 2-generation reproduction study in rats. Maternal effects observed in that study were decreased body weight; at the same dose, effects in offspring were decreased pup weights, decreased spleen weight, and increased pup loss (post-natal day 1-4). Although there is evidence of increased qualitative susceptibility in the 2-generation reproduction study in rats, there are no residual uncertainties with regard to pre- and post-natal toxicity following in utero exposure to rats or rabbits and pre- and post-natal exposures to rats. Considering the overall toxicity profile, the clear NOAEL for the pup effects observed in the 2-generation reproduction study, and that the doses selected for risk assessment are protective of all effects in the toxicity database including the offspring effects, the degree of concern for the susceptibility is low.

3. Conclusion. EPA has determined that reliable data show the safety of infants and children would be adequately protected if the FQPA SF were reduced to 1x. That decision is based on the following findings:

i. The toxicity database for fluensulfone is complete.

ii. Evidence of potential neurotoxicity was only seen following acute exposure to fluensulfone and the current PODs chosen for risk assessment are protective of the effects observed. There is no need for a developmental neurotoxicity study or additional UFs to account for neurotoxicity.

iii. There is no indication of quantitative susceptibility in the developmental and reproductive toxicity studies, and there are no residual uncertainties concerning pre- or post-natal toxicity. In addition, the endpoints and doses chosen for risk assessment are protective of the qualitative susceptibility observed in the 2-generation reproduction study.

iv. There are no residual uncertainties identified in the exposure databases. The dietary food exposure assessments were performed based on 100 PCT and tolerance-equivalent residue levels. EPA made conservative (protective) assumptions in the ground and surface water modeling used to assess exposure to fluensulfone in drinking water. EPA used similarly conservative assumptions to assess post-application exposure of children as well as incidental oral exposure of toddlers. These assessments will not underestimate the exposure and risks posed by fluensulfone.

EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the acute PAD (aPAD) and chronic PAD (cPAD). For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate PODs to ensure that an adequate MOE exists.

1. Acute risk. Using the exposure assumptions discussed in this unit for acute exposure, the acute dietary exposure from food and water to fluensulfone will occupy 9.4% of the aPAD for all infants less than 1 year old, the population group receiving the greatest exposure.

2. Chronic risk. Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic exposure to fluensulfone from food and water will utilize 4.1% of the cPAD for all infants less than 1 year old, the population group receiving the greatest exposure. Based on the explanation in Unit III.C.3., regarding residential use patterns, chronic residential exposure to residues of fluensulfone is not expected.

3. Short-term risk. Short-term aggregate exposure takes into account short-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level).

Fluensulfone is currently registered for uses that could result in short-term residential exposure, and the Agency has determined that it is appropriate to aggregate chronic exposure through food and water with short-term residential exposures to fluensulfone.

Using the exposure assumptions described in this unit for short-term exposures, EPA has concluded the combined short-term food, water, and residential exposures result in aggregate MOEs of 5300 for adults and 2500 for children. Because EPA's level of concern for fluensulfone is a MOE of 100 or below, these MOEs are not of concern.

4. Intermediate-term risk. Intermediate-term aggregate exposure takes into account intermediate-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level).

An intermediate-term adverse effect was identified; however, fluensulfone is not registered for any use patterns that would result in intermediate-term residential exposure. Intermediate-term risk is assessed based on intermediate-term residential exposure plus chronic dietary exposure. Because there is no intermediate-term residential exposure and chronic dietary exposure has already been assessed under the appropriately protective cPAD (which is at least as protective as the POD used to assess intermediate-term risk), no further assessment of intermediate-term risk is necessary, and EPA relies on the chronic dietary risk assessment for evaluating intermediate-term risk for fluensulfone.

5. Aggregate cancer risk for U.S. population. EPA assessed cancer risk using a non-linear approach ( i.e., RfD) since it adequately accounts for all chronic toxicity, including carcinogenicity, that could result from exposure to fluensulfone. As the chronic dietary endpoint and dose are protective of potential cancer effects, fluensulfone is not expected to pose an aggregate cancer risk.

6. Determination of safety. Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to fluensulfone residues.

An enforcement analytical method for the BSA metabolite was previously submitted and found to be acceptable. The method extracts residues from matrices into an acetonitrile-based solvent, involves minimal cleanup, and uses high-performance liquid chromatography with tandem mass spectrometric detection (LC-MS/MS) in negative-ion mode to isolate, identify and quantify residues. For all matrices and analytes, the limit of quantitation (LOQ), defined as the lowest level of method validation (LLMV), was 0.01 ppm. With the change to the tolerance expression, an enforcement method is now needed for parent fluensulfone. A method for analysis of fluensulfone residues was previously submitted and has been found to be suitable for enforcement. The method is essentially identical to that used for BSA analysis but omits the cleanup step and uses LC-MS/MS in the positive-ion mode for isolation, identification, and quantification of residues.

The FDA multi-residue protocols are not suitable for the analysis of fluensulfone or its metabolites BSA and TSA. The Agency notes that QuEChERS multi-residue method may be suitable for the analysis of these compounds, based on extraction solvents and clean-up strategies being similar to the analytical method described above.

The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; email address: residuemethods@epa.gov.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nations Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level.

The Codex has not established a MRL for fluensulfone for citrus.

The Codex has established MRLs for fluensulfone in or on some of the commodities or parts of some of the crop groups that are being revised in this document. The U.S. tolerances are harmonized with the Codex MRLs to the extent possible. In several cases (below), there is disharmony between U.S. crop group tolerances and Codex MRLs for individual commodities covered by the crop group. Because EPA has data supporting the establishment of the crop groups and no data that indicate a need to establish separate individual commodities, the effect is that tolerances for some individual commodities are not harmonized with Codex MRLs.

One comment generally opposing the use of fluensulfone was received in response to the notice of filing for citrus and peanut uses (EPA-HQ-OPP-2017-0572). Although the Agency recognizes that some individuals believe that pesticides should be banned on agricultural crops, the existing legal framework provided by section 408 of the Federal Food, Drug and Cosmetic Act (FFDCA) authorizes EPA to establish tolerances when it determines that the tolerance is safe. Upon consideration of the validity, completeness, and reliability of the available data as well as other factors the FFDCA requires EPA to consider, EPA has determined that these fluensulfone tolerances are safe. The commenter has provided no information supporting a contrary conclusion.

One comment was received in response to the notice of filing to amend the tolerance expression for fluensulfone to harmonize with the Codex residue definition (EPA-HQ-OPP-2018-0793). The commenter supported the federal government regulating the chemicals in pesticides and specifically wanted EPA to set higher safety standards for pesticides. As explained in the previous paragraph, EPA evaluated fluensulfone using the existing safety standard in the FFDCA and has determined that these fluensulfone tolerances are safe.

For stone fruit (Crop Group 12-12) and sugarcane, the tolerances being established by the Agency are derived using the Organization for Economic Cooperation and Development (OECD) MRL calculation procedures and based on available residue data.

The tolerance for tree nuts is based on the requested revision to the tolerance expression. As such, it is the combination of 0.01 ppm BSA and 0.01 ppm fluensulfone, resulting in the level of 0.02 ppm as opposed to the proposed 0.04 ppm.

Inadvertent tolerances in barley bran and wheat bran are being revised to 0.15 ppm (based on the OECD calculation procedure rounding classes), rather than the proposed tolerances at 0.14 ppm.

The petitioner had requested a higher tolerance for inadvertent residues on teosinte grain than the tolerance level set for crop group 15, based on the residue data used to establish the higher tolerance for wheat grain. These higher tolerances are based on residue data that indicate higher tolerances are necessary for crops for which the pesticide label permits a shorter plant-back interval ( i.e., wheat, barley, buckwheat, oats). For other crops, including teosinte, the pesticide label establishes a longer plant-back interval, and associated residue data indicate that such intervals result in lower residues on those crops. It is this latter set of residue data and the pesticide label instructions for plant-back intervals that support the crop group 15 tolerance as well as the Agency's conclusion that residues in teosinte will be covered by the crop group 15 tolerance. A tolerance in wheat milled byproducts is being established at 0.15 ppm (based on the OECD calculation procedure rounding classes); because a tolerance on wheat milled byproducts covers residues in both wheat shorts and wheat middlings, tolerances on those individual commodities are unnecessary.

Although the petitioner did not request a revision of the existing grape, raisin tolerance, EPA is modifying that tolerance to 1.5 ppm. As noted in 40 CFR 180.40(f)(1), EPA will not establish crop group tolerances unless necessary tolerances for processed foods are also established. In this action, the petitioner has requested an increase in the tolerance for subgroup 13-07D, which includes grape. Based on available data, EPA has determined that an amended tolerance for grape, raisin would be necessary. This tolerance is derived from the revised highest average field trial (HAFT) of 0.49 ppm from the grape field trials, using the revised residue definition (fluensulfone + BSA, in terms of fluensulfone), multiplied by the median processing factor for raisins from the processing study (2.7X), resulting in 1.32 ppm; therefore, a tolerance of 1.5 ppm in raisin is appropriate.

For citrus, EPA used processing factors of 233X for fluensulfone and <0.5X for BSA in citrus oil. Application of these processing factors and OECD MRL rounding classes indicates that residues will concentrate in dried pulp at higher levels than requested as well as in citrus oil. In accordance with 40 CFR 180.40(f)(1), EPA is establishing a tolerance for fruit, citrus, group 10-10, oil at 15 ppm. Based on the Agency's calculations, EPA is also establishing the proposed tolerance for citrus, dried pulp as a tolerance for fruit, citrus, group 10-10, dried pulp at 0.9 ppm, rather than 0.4 ppm.

Although the petitioner requested tolerances on peanut commodities, after EPA determined that the submitted field trial data were not adequate to support a tolerance the petitioner withdrew its request for those tolerances; therefore, EPA is not establishing tolerances for residues on peanut; peanut, hay; or peanut, meal.

Therefore, tolerances are established for residues of fluensulfone, and its metabolite BSA expressed as fluensulfone equivalents, in or on fruit, citrus, group 10-10 at 0.3 ppm; fruit, citrus, group 10-10, dried pulp at 0.9 ppm; and fruit, citrus, group 10-10, oil at 15 ppm.

Additionally, existing tolerances under paragraphs (a) and (d) are revised as follows for residues of fluensulfone, and its metabolite BSA expressed as fluensulfone equivalents, as follows: Paragraph (a): Almond, hulls at 5 ppm; berry, low growing, subgroup 13-07G at 0.5 ppm; Brassica, head and stem, subgroup 5A at 1.5 ppm; Brassica, leafy greens, subgroup 5B at 20 ppm; fruit, pome, group 11-10 at 0.4 ppm; fruit, small, vine climbing, subgroup 13-07D at 0.8 ppm; fruit, stone, group 12-12 at 0.15 ppm; grape, raisin at 1.5 ppm; nut, tree, group 14-12 at 0.02 ppm; potato, chips at 2 ppm; potato, granules/flakes at 2 ppm; sugarcane, cane at 0.06 ppm; sugarcane, molasses at 0.3 ppm; tomato, paste at 1.5 ppm; vegetables, cucurbits, group 9 at 0.7 ppm; vegetables, fruiting, group 8-10 at 0.7 ppm; vegetables, leafy, except Brassica, group 4 at 4 ppm; vegetables, leaves of root and tuber, group 2, except sugar beet at 50 ppm; vegetables, root, except sugar beet, subgroup 1B at 4 ppm; and vegetables, tuberous and corm, subgroup 1C at 0.8 ppm; Paragraph (d): barley, bran at 0.15 ppm; barley, grain at 0.1 ppm; barley, hay at 15 ppm; barley, straw at 6 ppm; buckwheat, grain at 0.1 ppm; grain, cereal, forage, fodder and straw, group 16 at 3 ppm; grain, cereal, group 15 at 0.05 ppm; oat, forage at 6 ppm; oat, grain at 0.1 ppm; oat, hay at 15 ppm; oat, straw at 6 ppm; wheat, bran at 0.15 ppm; wheat, forage at 6 ppm; wheat, germ at 0.1 ppm; wheat, grain at 0.1 ppm; wheat, hay at 15 ppm; wheat, milled byproducts at 0.15 ppm; and wheat, straw at 6 ppm.

Lastly, the tolerance expressions for fluensulfone currently established under 40 CFR 180.680 (a) and (d) are revised to read as follows “Tolerances are established for residues of the nematicide fluensulfone, including its metabolites and degradates, in or on the commodities in the table below. Compliance with the tolerance levels specified in the following table below is to be determined by measuring only the sum of fluensulfone, 5-chloro-2-[(3,4,4-trifluoro-3-buten-1-yl)sulfonyl]thiazole and its metabolite, 3,4,4‐trifluoro‐but‐3‐ene‐1‐sulfonic acid, calculated as the stoichiometric equivalent of fluensulfone, in or on the commodity.”

This action establishes and modifies tolerances under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this action has been exempted from review under Executive Order 12866, this action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), nor is it considered a regulatory action under Executive Order 13771, entitled “Reducing Regulations and Controlling Regulatory Costs” (82 FR 9339, February 3, 2017). This action does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et seq. ), nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerances in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), do not apply.

This action directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (UMRA) (2 U.S.C. 1501 et seq. ).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note).

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), 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 action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR chapter I is amended as follows: