On July 14, 2017 (82 FR 32447), OSC published an indefinite delay of its June 9, 2017, final rule revising its regulations regarding the filing of complaints and disclosures with OSC and updating OSC's prohibited personnel practice provisions. This document confirms the effective date of August 26, 2019, for that final rule.

Under the regulations in “Subpart L—Fruits and Vegetables” (7 CFR 319.56-1 through 319.56-12, referred to below as the regulations), the Animal and Plant Health Inspection Service (APHIS) prohibits or restricts the importation of fruits and vegetables into the United States from certain parts of the world to prevent plant pests from being introduced into or disseminated within the United States.

Section 319.56-4 of the regulations contains a performance-based process for approving the importation of commodities that, based on the findings of a pest risk analysis (PRA), can be safely imported subject to one or more of the designated phytosanitary measures listed in paragraph (b) of that section. Under that process, APHIS publishes a notice in the Federal Register announcing the availability of the PRA that evaluates the risks associated with the importation of a particular fruit or vegetable. Following the close of the 60-day comment period, APHIS may begin issuing permits for importation of the fruit or vegetable subject to the identified designated measures if: (1) No comments were received on the PRA; (2) the comments on the PRA revealed that no changes to the PRA were necessary; or (3) changes to the PRA were made in response to public comments, but the changes did not affect the overall conclusions of the analysis and the Administrator's determination of risk.

On August 26, 2016, we published in the Federal Register (81 FR 58867-58869, Docket No. APHIS-2015-0053) a proposal 1 to amend the regulations to allow the importation of fresh raspberry fruit from Morocco into the continental United States.

We solicited comments on the proposed rule for 60 days ending on October 25, 2016. We received six comments by that date, from members of the public and from a State agriculture agency. Two commenters supported the proposed rule. A third commenter generally opposed importing fresh raspberry fruit and all other commodities, but did not offer any comments on the specific provisions of the proposed rule. The remaining comments are discussed below.

One commenter requested that shipments of fresh raspberry fruit from Morocco not be allowed into the State of Florida due to the “high” risk rating assigned to the fungus Monilinia fructigena in the PRA. The commenter acknowledged that while raspberry fruit is not considered a major host of this fungus, apples, peaches, plums, and apricots are, and if M. fructigena were to follow the pathway of importation into the United States, it could have devastating effects on Florida's agricultural industry, especially on commercial peach production and on the native plums that serve as a major food source for wildlife in that State.

As stated in the risk management document (RMD) that accompanied the proposed rule, M. fructigena is a common cause of fruit rot in fruit orchards. Required field inspections, packinghouse inspections, and port of entry inspections provide sufficient mitigation and have been used successfully to mitigate M. fructigena associated with fresh pears from China. In addition, culling at the packinghouses, while not required in the systems approach, is a standard industry practice that removes obviously blemished, diseased, and insect-infested fruits from the pathway. Infected or infested fruit found by an inspector will not be allowed to enter into the United States. Furthermore, if a pest or disease is found at the port of entry, a traceback will be conducted by APHIS and the national plant protection organization (NPPO) of Morocco to identify the source of the problem. Corrective action, including removal of the packinghouse or place of production from the export program can then be taken.

One commenter requested that we consider requiring the use of irradiation on fresh raspberry fruit from Morocco to mitigate the risks associated with M. fructigena.

Irradiation is an approved treatment to mitigate the risks presented by arthropod plant pests, but is not approved as a treatment against fungi, like M. fructigena.

One commenter asked about the costs associated with inspections and whether these inspections would increase the burden on port of entry inspectors and cause delays.

The cost of inspection at the port of entry is covered by the agricultural quarantine and inspection user fee and, for inspections conducted outside regular business hours at the request of the importer/owner of the consignment, a reimbursable overtime charge. As discussed in the economic analysis that accompanied the proposed rule, Morocco expects to export between 200 and 500 metric tons of fresh raspberry fruit to the continental United States annually. This is a relatively small amount (about 0.4 to 0.9 percent of U.S. fresh raspberry fruit production) and we do not therefore anticipate an increase in burden to inspectors, nor do we believe that this action will cause delays at the ports.

One commenter asked how inspectors will be trained to identify M. fructigena on fresh raspberry fruit from Morocco.

Inspectors in Morocco and the United States are already well trained in identifying signs and symptoms of pests and diseases, including M. fructigena. The fresh raspberry fruit will be inspected for symptoms of fungal infections such as brown lesions and tufts sprouting from the skin of infected fruit.

One commenter asked if fruits or vegetables have been inspected and certified free of pests or diseases in their country of origin only to be found infested or infected upon arrival in the United States.

Commodities are inspected in their country of origin and again upon arrival at the port of entry in the United States. If a consignment is found to contain plant pests at the port of entry, the consignment may be treated, destroyed, or re-exported.

One commenter expressed concern about the monitoring and enforcement of the systems approach. Specifically, the commenter asked how APHIS intends to monitor the NPPO of Morocco to ensure the conditions of the systems approach are being met.

APHIS reserves the right to conduct site visits to Morocco to inspect places of production in Morocco and audit the program if pest problems occur.

Finally, we note that the proposed rule was issued prior to the October 15, 2018, effective date of a final rule  2 that revised the regulations in §  319.56-4 by broadening an existing performance standard to provide for approval of all new fruits and vegetables for importation into the United States using a notice-based process. That final rule also specified that region- or commodity-specific phytosanitary requirements for fruits and vegetables would no longer be found in the regulations, but instead in APHIS' Fruits and Vegetables Import Requirements database (FAVIR). With those changes to the regulations, we cannot issue the final regulations as contemplated in our August 2016 proposed rule and are therefore discontinuing that rulemaking without a final rule. Instead, it is necessary for us to finalize this action through the issuance of a notification.

Therefore, in accordance with the regulations in §  319.56-4(c)(3)(iii), we are announcing our decision to authorize the importation into the continental United States of fresh raspberry fruit from Morocco subject to the following phytosanitary measures, which will be listed in FAVIR, available at https://epermits.aphis.usda.gov/manual:

• The NPPO of Morocco must develop an operational workplan, subject to APHIS approval, that details the activities that the NPPO of Morocco would carry out to comply with the phytosanitary requirements.

• The fresh raspberry fruit may be imported in commercial consignments only.

• The fresh raspberry fruit must be grown at a place of production that is registered with the NPPO of Morocco.

• During the growing season, raspberries must be inspected in the field by the NPPO of Morocco for signs of M. fructigena infection no more than 30 days prior to harvest. If the fungal disease is detected, the NPPO of Morocco must notify APHIS. APHIS will prohibit the importation of fresh raspberry fruit from Morocco into the continental United States from the place of production for the remainder of the growing season. The exportation of fresh raspberry fruit from the rejected place of production may resume in the next growing season if an investigation is conducted and APHIS and the NPPO of Morocco agree that appropriate remedial actions have been taken.

• The fresh raspberry fruit must be packed in packinghouses that are registered with the NPPO of Morocco.

• Detection of M. fructigena infection at a packinghouse may result in the suspension of the packinghouse until an investigation is conducted and APHIS and the NPPO of Morocco agree to appropriate remedial measures.

• Each consignment of fresh raspberry fruit must be accompanied by a phytosanitary certificate issued by the NPPO of Morocco with an additional declaration stating that consignment was produced in accordance with the requirements authorized under 7 CFR 319.56-4, and that the consignment has been inspected prior to export from Morocco and found free of M. fructigena.

In addition to these specific measures, fresh raspberry fruit from Morocco will be subject to the general requirements listed in §  319.56-3 that are applicable to the importation of all fruits and vegetables.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), the reporting and recordkeeping requirements included in this notification are covered under the Office of Management and Budget (OMB) control number 0579-0049. The estimated annual burden on respondents is 119 hours, which will be added to 0579-0049 in the next quarterly update.

The Animal and Plant Health Inspection Service is committed to compliance with the EGovernment Act to promote the use of the internet and other information technologies, to provide increased opportunities for citizen access to Government information and services, and for other purposes. For information pertinent to E-Government Act compliance related to this notification, please contact Ms. Kimberly Hardy, APHIS' Information Collection Coordinator, at (301) 851-2483.

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 Federal Credit Union Act (FCU Act) requires that certain credit union employees and appointed and elected officials be subject to fidelity bond coverage. 1 The FCU Act directs the Board to promulgate regulations concerning both the amount and character of fidelity bond coverage and to approve bond forms. 2 The pertinent portion of the FCU Act provides that the Board is directed to require that every person appointed or elected by any Federal credit union to any position requiring the receipt, payment, or custody of money or other personal property owned by a Federal credit union or in its custody or control as collateral or otherwise, give bond in a corporate surety company holding a certificate of authority from the Secretary of Treasury as an acceptable surety on Federal bonds. Any such bond or bonds shall be in a form approved by the Board with a view to providing surety coverage to the Federal credit union with reference to loss by reason of acts of fraud or dishonesty including forgery, theft, embezzlement, wrongful abstraction, or misapplication on the part of the person, directly or through connivance with others, and such other surety coverages as the Board may determine to be reasonably appropriate. Any such bond or bonds shall be in such an amount in relation to the assets of the Federal credit union as the Board may from time to time prescribe by regulation. 3

Parts 704 and 713 of the NCUA's regulations implement the requirements of the FCU Act regarding fidelity bonds. 4 Part 713 applies to natural person credit unions and Part 704 applies to corporate credit unions. The parts establish the requirements for a fidelity bond, the acceptable bond forms, and the minimum permissible coverage. Both parts require a FICU's board of directors to review annually its fidelity bond coverage to ensure it is adequate in relation to the potential risks facing the FICU and the minimum requirements set by the Board.

Part 704 was recently revised to amend the provision that determines the maximum amount a corporate credit union may pay for a deductible or a covered loss before the fidelity bond insurer makes a payment. The NCUA restricts the deductible a corporate credit union may pay to limit the potential losses to it if there is a covered claim. The maximum deductible allowed is a percentage of a corporate credit union's capital based on its leverage ratio. For example, if a corporate credit union has a greater than 2.25 percent leverage ratio then it may have a maximum deductible that is 15 percent of its tier 1 capital. The recent final rule updated this provision to reference tier 1 capital instead of core capital. 5 Part 713, however, has not been substantively revised since 2005, when the NCUA issued a final rule modernizing it. 6

In August 2017, the Board published and sought comment on the NCUA's regulatory reform agenda (Agenda). 7 The Agenda identifies those regulations the Board intends to amend or repeal because they are outdated, ineffective, or excessively burdensome. This is consistent with the spirit of Executive Order 13777. 8 Although the NCUA, as an independent agency, is not required to comply with Executive Order 13777, the Board has chosen to comply with it in spirit and has reviewed all of the NCUA's regulations to that end. One of the items in the Agenda is related to the NCUA's regulations on fidelity bonds. The Agenda supports exploring ways to implement the requirements of the FCU Act related to fidelity bonds in the least costly way possible. The Agenda further notes that while the FCU Act mandates fidelity bond coverage, the NCUA's objective should be to allow a credit union to make a business decision based on its own circumstances and needs. This would effectively reduce the NCUA's involvement in a credit union's operational decisions while remaining consistent with the FCU Act.

As discussed above, part 713 establishes the minimum requirements for a fidelity bond for a natural person credit union. One such requirement under part 713 is that fidelity bonds be purchased in an “individual policy.”  9 The “individual policy” provision was intended to prevent multiple FICUs from being insured under one fidelity bond policy. The Board prohibited such joint coverage because the loss suffered by one or two of the joint policyholders could reduce the amount of available coverage for the other policyholders to below the required minimum amount. 10 Before 2017, the NCUA's Office of General Counsel (OGC) had issued legal opinions stating that a FICU may not include one or more CUSOs or other parties as additional insureds under its fidelity bond because of the “individual policy” limitation. 11 It came to OGC's attention, however, that some bond issuers may have been interpreting their policies to permit the issuance of bonds that covered FICUs and their CUSOs, despite OGC's opinions. This prompted OGC to review the regulation and approved bond forms. As a result of that review, OGC issued another legal opinion in September 2017 that rescinded and replaced all previous legal opinions that addressed the “individual policy” requirement. 12 The 2017 opinion concluded that the “individual policy” requirement of § 713.3(a) of the NCUA's regulations generally prohibits joint coverage under fidelity bonds, but does not prohibit a FICU from purchasing a fidelity bond that covers both it and certain of its CUSOs, as discussed more fully below.

OGC's fidelity bond review extended beyond the issue of joint coverage and revealed several inconsistencies between part 713 and approved bond forms. The review also revealed several outdated provisions. In November 2018, the NCUA published a notice of proposed rulemaking (the proposed rule) to update its fidelity bond regulation to correct these problems, ensure the safe and sound operation of FICUs, and protect the National Credit Union Share Insurance Fund (NCUSIF). 13 The comment period closed on January 22, 2019.

The NCUA received 26 comment letters on its November 2018 proposed rule. These comments were received from credit unions, including corporate credit unions, credit union leagues and trade associations, an association of state credit union supervisors, an insurance company, and two insurance associations. In general, many of the commenters supported the stated goal, to implement fidelity bond requirements in a cost-effective manner. All of the commenters, however, expressed concerns about specific aspects of the proposal. Most commenters believed that the proposed rule resulted in unnecessary burden and increased costs without substantially improving the adequacy of FICU fidelity bond coverage. Some commenters also expressed concerns that the rule reduced the number of insurance companies providing fidelity bonds, which would reduce FICUs' ability to negotiate among providers. In response to the comments received, the Board has made several changes to the final rule. The specific details of the final rule, including changes as a result of the comments received, are discussed below.

In general, part 713 applies to all federally insured natural person credit unions and provides the fidelity bond requirements for them. Changes to the specific subsections of part 713 are discussed below.

The proposed rule retained most of the current § 713.1 without change, with the following exceptions. The proposed rule added the words “federally insured” before the words “credit union” to more precisely describe which credit unions are subject to the section. The current rule uses the term “credit union” and “federal credit union” interchangeably to mean “federal credit union.” As discussed in the background section, the requirements in part 713 are applicable to both federal credit unions and federally insured, state-chartered credit unions (FISCUs). 14 For clarity, the proposed rule cross-referenced the requirement in part 741 that FISCUs must comply with Part 713 and referred to FICUs throughout the rule instead of federal credit unions.

One commenter questioned whether the proposed rule should be applicable to all FISCUs. FISCUs' fidelity bond requirements are applied through part 741, which states that “[a]ny credit union which makes application for insurance . . . must possess the minimum fidelity bond coverage stated in part 713 . . . .” The commenter stated that the positioning of the language referring to minimum coverage means that only the amount of bond coverage, and not the other requirements in part 713, apply to FISCUs. The commenter stated that the NCUA should invite specific comment on whether all of Part 713 should apply to FISCUs. The commenter also does not believe it is necessary for the NCUA to impose detailed provisions on FISCUs' fidelity bonds.

The Board has considered the comment and disagrees that part 741 applies to only the amount of bond coverage. Part 741 does not use the term “amount” and instead uses the term “minimum coverage.” The Board believes that the reasonable and plain understanding of the term “coverage” includes factors such as the amount of insurance, the claims covered by the insurance, and other operational considerations that ensure the coverage is adequate. The Board's position is further supported by the fact it has been the Board's public and longstanding position that the entirety of part 713 applies to FISCUs. The commenter even noted that prior NCUA discussions of part 713 were directed to all FISCUs. Therefore, the Board is finalizing this provision as proposed.

The final rule also includes a cross-reference for corporate credit unions and states that corporate credit unions must comply with § 704.18 instead of part 713.

The proposed rule amended current § 713.2 by dividing the section into two subparagraphs. Current § 713.2 became paragraph (a). The proposed rule retained most of the current § 713.2 without change, with the following exception. For consistency with the rest of part 713, the term “Federal credit union” was revised to “federally insured credit union.” The Board did not receive any comment on this provision and is finalizing it as proposed.

The proposed rule added a new paragraph (b) to § 713.2. Proposed paragraph (b) increased a board of directors' oversight responsibility of its FICU's fidelity bond coverage. Specifically, the proposed rule required a FICU's board, and, if applicable, a FICU's supervisory committee, to review all applications for purchase or renewal of bond coverage and to pass a board resolution approving the purchase or renewal. The proposed rule also required a FICU's board to delegate one board member, who is not an employee of the FICU, to sign the attestation for bond purchase or renewal. This proposal prohibited the same board member from signing the attestation for renewal in consecutive years.

The Board notes the current rule already requires a FICU's board to annually review its fidelity bond and other insurance coverage to ensure it is adequate. The proposed rule took that review a step further and required a FICU's board, and, if applicable, its supervisory committee, to review all applications for purchase or renewal of fidelity bond coverage. The Board believed this change helped ensure the board is addressing the adequacy of the coverage at all stages, rather than at an annual point in time that may be retrospective, and require additional steps by the FICU to remedy a deficiency.

Almost every commenter objected to the requirement for additional board review and stated that the current requirement for an annual review of the adequacy of coverage is sufficient. Most commenters stated that bond renewal is a highly involved, time-intensive, and technical process and that it is more appropriate for a board of directors to focus on broad strategic goals. One commenter stated that a bond renewal usually takes about one year to complete. A few commenters stated that the risk of loss from dishonest employees is better addressed through NCUA's examination of a credit union's internal controls. In contrast, one insurance company supported the proposed requirement as adding an important layer of review.

The Board continues to believe that an ongoing review by a FICU's board of directors is necessary to ensure the adequacy of fidelity bond coverage. The Board agrees with commenters that adequate internal controls are a fundamental part of ensuring a FICU's safety and soundness. The Board, however, also believes that adequate fidelity bond coverage complements sound internal controls. Therefore, the Board is finalizing a board's requirement to review all applications for purchase or renewal of fidelity bond coverage as proposed.

The proposed rule required a FICU's supervisory committee to conduct a review of all applications for purchase or renewal of fidelity bond coverage, in addition to the FICU's board. Several commenters objected to the proposed requirement that both the board of directors and the supervisory committee were responsible for reviewing renewal documents. Commenters generally believed that the dual review is unnecessary. A few commenters noted that many supervisory committees do not meet as frequently as boards of directors and it would be very difficult to synchronize their review given the back-and-forth negotiating with the insurance company that usually occurs during the renewal process. After reviewing the comments, the Board has removed the requirement for the supervisory committee to review fidelity bond purchases or renewals. The Board believes that removing the requirement for supervisory committee review balances the Board's concern for adequate fidelity bond oversight with concerns about regulatory burden.

As noted, the proposed rule also required a FICU's board to, after conducting its review, pass a resolution approving the purchase or renewal of fidelity coverage and designating a member of the board, who is not an employee of the FICU, to sign applications for purchase, bond renewals, and any accompanying attestations. Also as mentioned, the proposed rule required that the member of the board acting as signatory rotate each time the FICU purchases or renews fidelity coverage. Commenters were almost universally against this proposed requirement.

A few commenters stated that some insurance companies require an employee of the credit union to sign the renewal documents. The Board is aware that under the current rule it is industry practice for employees to generally sign renewal documents. The final rule, however, requires that a non-employee sign the renewal documents. This policy may necessitate changes to certain fidelity bond forms.

One commenter thought a more effective solution would be to mandate the inclusion of a clause in the fidelity bond contract that states the signatory's fraud is not imputed to the company and, therefore, the signatory's fraud cannot serve as a basis for the insurer to rescind coverage. The Board has not adopted this suggestion. The Board is concerned that this level of specificity in a fidelity bond contract, along with the fact this would be a significant departure from current industry practice, would reduce the number of fidelity bond insurance providers. A robust market for fidelity bond insurance ensures each FICU has options when determining appropriate insurance coverage. The Board believes, however, that if an insurer offers such a bond form it would likely address the Board's concerns regarding rescinded fidelity bond coverage and may alleviate the need for the board of directors to review each renewal and for a director to sign the renewal.

Most other comments focused on the potential burden of this provision. Some commenters expressed concern that this requirement could negatively affect a FICU's ability to recruit volunteer board members by increasing the perceived personal liability of the board member who is designated to sign the renewal. Other commenters thought insurance companies would either increase costs or modify contracts in response to the proposed rule. One commenter stated that the proposal is problematic due to the amount of time, bandwidth, and knowledge that is necessary to be a signatory, and believed it would require the board member to have a background in insurance. In contrast, one insurance company expressed support for this requirement, however, the company stated that the NCUA should impose additional requirements to ensure the signatory has done adequate due diligence before signing the bond renewal.

The Board is finalizing this provision as proposed. The Board has not made any changes to this proposed provision because the Board believes it is necessary to prevent losses to the NCUSIF due to rescinded coverage. The underlying purpose of these requirements is to address the issue of rescission of fidelity bond coverage when the signatory to the application to purchase or renew coverage is knowledgeable of fraudulent activity. If the signatory to the application for purchase or renewal is knowledgeable of fraudulent activity, the bond issuer might void the policy and not make a payout when losses are discovered. The NCUA believes that a non-employee board member, who would not be involved in the day-to-day operations of a FICU, is less likely to be responsible for a fraudulent activity than an employee. The NCUA also believes that rotating signatories reduces the potential for the signatory to be knowledgeable of the fraudulent activity.

In recent years, the NCUSIF has sustained increased losses due to voided fidelity bond coverage. Before 2010, bond rescission was not a material concern for the NCUA. Since 2010, however, the NCUA has had at least three claims denied due to rescinded fidelity bond coverage and the NCUA is concerned that the frequency of rescinded coverage will continue to increase. Between 2010 and May 2019, the NCUSIF has already lost in excess of $10 million from fidelity bonds that were voided due to the signatory being aware of fraudulent activities. Litigation related to denied claims is ongoing and may result in additional losses to the NCUA. The Board also notes that this requirement is also advantageous to individual FICUs, as this will help prevent them from losing coverage in cases not involving involuntary liquidation.

Finally, the Board believes the final rule presents only a minimal increase in regulatory burden as the FICU's board is already required to annually review its fidelity bond coverage, but meaningfully mitigates the risk to the NCUSIF associated with fidelity bond coverage rescission.

The proposed rule amended current § 713.3 by renumbering and revising the section. Current § 713.3 became paragraph (a), current paragraphs (a) and (b) were renumbered as paragraphs (a)(1) and (2), and two new subparagraphs were added as (a)(3) and (4). Finally, a new paragraph (b) also was added.

Current paragraph (b) of § 713.3 states that, at a minimum, a FICU's fidelity bond coverage must include fidelity bonds that cover fraud and dishonesty. The proposed rule removed the redundant phrase “[i]nclude fidelity bonds that” in current paragraph (b). The Board did not receive any comment on this section and is finalizing this provision as proposed. The final rule reads “At a minimum, your bond coverage must: . . . Cover fraud and dishonesty by all employees, directors, officers, supervisory committee members, and credit committee members;”.

The proposed rule added a new paragraph (a)(3) to § 713.3. Proposed paragraph (a)(3) required a FICU to have fidelity bond coverage that includes an option for the liquidating agent to purchase coverage that extends the discovery period, the period to discover and file a claim, for at least two years after liquidation. 15 Most commenters objected to the proposed two-year discovery period following an involuntary liquidation. Most commenters cited the potential for increased premiums as the reason for their objection. In the proposed rule, the NCUA stated its belief that any additional cost of this provision would likely be covered by the liquidating agent as the liquidating agent would pay the fee for an extended discovery period.

Commenters, however, did not believe that the liquidating agent would bear all of the additional cost of the two-year discovery window because state insurance regulations cap the amount that an insurer can charge for an extended discovery period. Several commenters expressed concern that the NCUSIF savings would not justify the added cost to all FICUs due to the limited number of FICUs that are involuntarily liquidated. Several commenters requested that the NCUA undergo a cost-benefit analysis. One commenter stated that the NCUA did not present any evidence that the current policy of providing notice does not work, just that it lacks legal certainty. In contrast, two credit union commenters supported the extended discovery period. In addition, two commenters associated with the insurance industry suggested a 12-month discovery window. One stated that a 12-month window is in line with industry standards and encourages timely action by the liquidating agent. In response to the commenters, the Board has amended the proposed two-year discovery window.

In an effort to better balance the costs and benefits of the Board's intent, the Board has amended the final rule to require that fidelity bond contracts provide for a 12-month discovery window following an involuntary liquidation. The Board initially proposed a two-year discovery window as members have 18 months to file a claim on insured accounts after the appointment of a liquidating agent. 16 Upon consideration of the comments, the Board believes a 12-month discovery period provides adequate time to discovery and file a claim. Additionally, after conducting research, the Board believes that this proposed requirement will not result in any material additional cost or burden on FICUs.

The Board also proposed to add a new paragraph (a)(4) to § 713.3 to include a requirement that, for voluntary liquidations, a FICU's fidelity bond coverage remain in effect, or provide that the discovery period is extended, for at least four months after the final distribution of assets. There were only two comments on the proposed four-month discovery period following a voluntary liquidation. One commenter did not object to it. The other commenter did not support imposing the requirement on FISCUs and stated that state law governs voluntary liquidations for FISCUs. The Board believes that this requirement is important because it benefits a FISCU's members as any recovery following a voluntary termination flows through to members. Additionally, the provision imposes only a minor burden for FISCUs. Therefore, the Board is finalizing this provision as proposed.

Section 713.3 requires that a bond, at a minimum, must be purchased in “an individual policy.”  17 The NCUA added this section to part 713 in a 1999 final rule in response to a commenter who pointed out that there had been instances of FICUs jointly purchasing fidelity bonds with each other. 18 The commenter was concerned that a loss caused by one or two of the joint policyholders could reduce the amount of available coverage for the other policyholders to below the required minimum amount. In addressing this comment, the Board provided in § 713.3 that a FICU must purchase its own individual policy. 19 The regulation did not, however, define “individual policy.”

Since inclusion of this provision in the NCUA's regulations, OGC has issued two public legal opinions interpreting the meaning of “individual policy” and opining on the type of coverage that is prohibited under § 713.3(a). 20 A 2014 OGC legal opinion states that a FICU may not include one or more of its CUSOs or other parties as additional insureds under its fidelity bond. 21 In a 2004 legal opinion, OGC opined that a CUSO that provides management services for multiple credit unions could not purchase a single fidelity bond with each credit union named as an insured. 22 In both letters, OGC explained the purpose of the individual policy requirement is to avoid diluting the individual credit union's coverage.

As noted above, OGC issued a third legal opinion on the “individual policy” requirement in 2017 (2017 legal opinion). The 2017 legal opinion rescinded and replaced the previous two opinions and expanded the permissibility for certain joint coverage provisions under the “individual policy” requirement. OGC and the NCUA's Office of Examination and Insurance determined this broader interpretation was both within the NCUA's legal authority under the FCU Act and a safe and sound practice for FICUs. For clarity and ease of reference, the Board sought to incorporate the 2017 legal opinion into proposed part 713.

No commenters opposed this policy and several commenters supported it. The Board is finalizing this provision as proposed. Under the final rule, a FICU may have a fidelity bond that also covers its CUSO(s) if the FICU owns greater than 50 percent of a CUSO it wishes to cover, or a covered CUSO is organized by the FICU for the purpose of handling certain of its business transactions and composed exclusively of its employees. The 50 percent threshold reflects the standard for accounting consolidation under generally accepted accounting principles, or GAAP. A FICU directly benefits from any fidelity bond insurance proceeds collected by a consolidated CUSO. 23 This final rule, however, does not eliminate the prohibition against joint coverage of entities not majority owned by the FICU, such as other credit unions or non-majority-owned CUSOs. The Board believes this amendment will provide greater flexibility to FICUs without affecting safety and soundness. 24

The current rule provides that the NCUA will maintain a current list of bond forms approved by the Board for use by FICUs. The rule also states that a FICU must obtain the approval of the Board before it can use any other basic bond form or any rider or endorsement that limits coverage of an approved bond form. The Board proposed to amend § 713.4 to make several changes to reflect the practices of the NCUA, clarify the list of documents that must have Board approval, and address the expiration and continuing review of approved bond forms. The Board received several comments that addressed the expiration and continuing review of approved bond forms. Those comments are discussed below. Other than the expiration of bond form approval, the Board did not receive any comments that generally discussed its approval of bond forms. Therefore, this section has generally been finalized as proposed. Any questions regarding the NCUA's approval of fidelity bond forms can be directed to the NCUA's OGC, (703) 518-6540.

Current § 713.4(a) states that a current listing of basic bond forms that may be used without prior Board approval is on the NCUA's website. The proposed rule clarified this requirement by dividing paragraph (a) into two new paragraphs. The Board did not receive any comment on this section and is finalizing this provision as proposed. New paragraph (a) explicitly states that “the NCUA Board must approve all bond forms before federally insured credit unions may use them.”

Proposed paragraph (b) stated that approved bond forms are listed on the NCUA's website and may be used by a FICU without further NCUA approval. If a FICU is unable to access the NCUA's website, it can get a current listing of approved bond forms by contacting the NCUA at (703) 518-6330. The proposed rule rewrote this provision for clarity, but did not make any substantive changes. The Board did not receive any comment on this section and is finalizing it as proposed.

Proposed paragraph (c) set forth which fidelity bonds and fidelity bond documents require Board approval. The Board is finalizing this paragraph as proposed.

The final rule clarifies that any bond form that has been amended or changed since the Board approved it requires new approval from the Board. The Board notes that this policy is the current practice whereby bond issuers submit amended bond forms to the Board for approval under current § 713.4(b)(1).

The final rule states explicitly that renewal forms (and any other document) that limit the coverage of approved bond forms must also receive Board approval. The Board is clarifying the list of documents subject to approval because the Board is aware of instances where the renewal or continuation of coverage forms included language affecting the bond coverage, including language that limited the bond coverage. As such, it is the Board's belief that the renewal form is an extension of the bond form and thus this is not an additional burden but further clarification of what constitutes the bond form.

The proposed rule also added a new paragraph (d) to sunset its approval on all bond forms ten years after the form is approved. The impetus for this provision is the discovery that Board approved-bond forms were being interpreted in a way that was contrary to the NCUA's understanding of how the bond forms would be used. In addition, a review of previously approved bond forms, as part of issuing the 2017 legal opinion, revealed several instances of outdated provisions, additions that had not been approved by the Board, and some forms that contained provisions that were contrary to the FCU Act and part 713 of the NCUA's regulations. To avoid instances of this in the future, the Board proposed to sunset its approval of a bond form after a period of ten years. Commenters had mixed opinions on this provision. While several commenters supported the ten-year sunset, many other commenters expressed concerns about the ten-year sunset date. Specifically, two commenters associated with the insurance industry expressed concerns because form approval is already a complicated process as it involves state insurance regulators. The Board understands the complexity involved in the approval process, but is maintaining the ten-year sunset. The Board believes the sunset is necessary to ensure bond forms are up-to-date and continue to provide adequate fidelity bond coverage for FICUs.

With respect to bond forms that the Board has approved before 2019, the Board proposed to allow its approval on these forms to continue until January 1, 2029. Several commenters expressed concerns about the NCUA's ability to reapprove bond forms, and particularly, reapprove all existing bond forms in 2029. Commenters believed that re-approval would be a resource-intensive process and suggested that the NCUA include qualifying language in case there is a delay and the NCUA has not reapproved all bond forms by their expiration date. The Board agrees that qualifying language is beneficial. Therefore, the final rule provides that approval for all existing bond forms sunsets after ten years unless otherwise determined by the NCUA Board. 25 The Board believes the addition of qualifying language provides reasonable flexibility while preserving its intent to sunset bond form approval after ten years.

Under the proposed rule, the ten-year approval period began on the date the Board approved a bond form. The proposed rule stated, however, that the ten-year period would not toll or start over if a bond carrier submits a revision to an approved bond form. One commenter believed that this is unnecessary and approval should always sunset ten years after a bond form is reviewed and approved. The Board has reconsidered and agrees with the commenter. Under the final rule, the Board's approval always sunsets ten years after a bond is reviewed and approved. The Board proposed to maintain the original sunset date because of concerns that a subsequent review may be targeted and not review the bond form in its entirety. To address this concern, under the final rule, a bond form will always be reviewed in its entirety.

The proposed rule also noted that should the Board determine, upon re-review, that a bond form does not comply with the NCUA's regulations, the Board would not require FICUs with coverage under that bond to seek new coverage. One commenter objected to this provision and believed that if the coverage is not adequate, new coverage should be required immediately. The Board is supportive of adequate fidelity bond coverage, but is concerned about the burden to a FICU if the contract is determined to be inadequate during the contract term. Therefore, under the final rule a FICU must only seek new coverage under an approved bond form after its current coverage expires per the terms of the contract between the FICU and the bond issuer.

The proposed rule also clarified that the Board may review a bond form at any time. The Board received no comment on this provision and is finalizing it as proposed.

The proposed rule used the term federally insured credit union instead of federal credit union in each of §§ 713.5, 713.6, and 713.7 for consistency and clarity. The Board did not receive any comment on these sections and is finalizing them as proposed.

In general, part 704 applies to all federally insured corporate credit unions. Section 704.18 provides the fidelity bond requirements for such credit unions. Changes to the specific subparagraphs of § 704.18 are discussed below.

The proposed rule amended current § 704.18(b) by dividing paragraph (b) into two subparts. Current paragraph (b) remained unchanged and was designated paragraph (b)(1). The proposed rule added a new paragraph as (b)(2). Proposed paragraph (b)(2) required that a corporate credit union's board of directors and supervisory committee review all applications for purchase or renewal of its fidelity bond coverage. After review, the corporate credit union's board was required to pass a resolution approving the purchase or renewal of fidelity bond coverage and delegate one member of the board, who is not an employee of the corporate credit union, to sign the purchase or renewal agreement and all attachments. No board member was permitted to be a signatory on consecutive purchase or renewal agreements for the same fidelity bond coverage policy. This proposed amendment was identical to proposed changes to Part 713 for natural person credit unions. The Board received significant comment on this proposed requirement. As compared to the proposed rule, the final rule does not require that the corporate credit union's supervisory committee review all applications for purchase or renewal. The Board is finalizing the remaining requirements of this paragraph as proposed. For additional background and a detailed discussion of comments received, see the previous discussion for changes to § 713.2(b).

The proposed rule made significant revisions to current § 704.18(c). Section 704.18(c) was split into five new subparagraphs, each of which is described in more detail below.

The proposed rule stated that a corporate credit union's fidelity bond coverage must be purchased from a company holding a certificate of authority from the Secretary of the Treasury. This was not a substantive change from the current requirements and the proposed language was intended to reflect the comparable language in part 713. The Board did not receive any comment on this provision and is finalizing it as proposed.

Proposed § 704.18(c)(2) stated that fidelity bonds must provide coverage for the fraud and dishonesty of all employees, directors, officers, and supervisory and credit committee members. This was not a substantive change from the current requirements and the Board is finalizing this provision as proposed.

The proposed rule substantively amended the requirements for a corporate credit union's approved bond forms. The proposed requirements reflected the changes proposed for natural person credit unions in part 713. The proposed rule required the Board to approve all bond forms before a corporate credit union may use them. In addition, a corporate credit union could not use any bond form that had been amended since receiving Board approval, or any rider, endorsement, renewal, or other document that limited coverage of approved bond forms, without first receiving approval from the Board. As required under proposed part 713, approval of all bond forms expired 10 years after the date the Board approved or reapproved use of the bond form. Any currently approved bond forms would expire on January 1, 2029. The Board is finalizing this provision as proposed with one exception. As compared to the proposed rule, the final rule adds qualifying language to provide the Board flexibility to extend its approval of bond forms. For additional background, and a detailed discussion of comments, see the previous discussion for changes to § 713.4.

The proposed rule added a new § 704.18(c)(4) to ensure that there is an adequate discovery period, the period to discover and file a claim, following a corporate credit union's liquidation. The proposed requirements reflected the changes proposed for natural person credit unions in part 713. The proposed rule required fidelity bonds to include an option for the liquidating agent to purchase coverage in the event of an involuntary liquidation that extended the discovery period for a covered loss for at least two years after liquidation. The Board is finalizing this provision as proposed with one substantive modification. The final rule requires only a one-year discovery period following an involuntary liquidation. In the case of a voluntary liquidation, under the proposed rule, fidelity bonds were required to remain in effect, or provide that the discovery period is extended, for at least four months after the final distribution of assets. The Board is finalizing this provision as proposed. For additional background and a detailed discussion of comments, see the previous discussion for changes to § 713.3(a)(3) and (4).

The current rule requires that corporate credit union bond forms include a provision requiring written notification by surety to the NCUA when a credit union's bond is terminated or when the coverage of an employee, director, officer, supervisory or credit committee member has been terminated. The NCUA also must be notified in writing by surety if a deductible is increased above permissible limits. The proposed rule did not include any amendments to these requirements. One commenter, however, objected to the existing requirements and stated that the corporate credit union, and not the insurer, should be responsible for providing the required notice. This comment is outside the scope of the proposed rule, but the Board notes that it continues to believe that the insurance company should notify the NCUA if any of the listed events occur.

The Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq. ) requires that the Office of Management and Budget (OMB) approve all collections of information by a Federal agency from the public before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current, valid OMB control number.

The burden outline in the preamble of the notice of proposed rulemaking did not include those associated with corporate credit unions. As with part 713, part 704 is being amended to require NCUA approval on all bond forms expired after a period of 10 years from the date of the NCUA approval or reapproved of its use. This information collection requirement is estimated to impact two corporate credit unions, for a total of two additional burden hours. This program change is reflected in the 19 total burden hours requested.

In accordance with the PRA, the information collection requirements included in this final rule have been submitted to OMB for approval under control number 3133-0170.

The Regulatory Flexibility Act (RFA) generally requires that, in connection with a final rulemaking, an agency prepare and make available for public comment a final regulatory flexibility analysis that describes the impact of a final rule on small entities. A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include credit unions with assets less than $100 million) and publishes its certification and a short, explanatory statement in the Federal Register together with the rule.

The Board does not believe that the final rule has a significant economic impact on a substantial number of small entities. Any increased costs for the bond insurer to resubmit their forms every ten years is spread out among all FICUs and the cost to each FICU is negligible. In addition, after conducting research the Board believes that the requirement for bond forms to include a 12-month discovery period following liquidation will not result in any material additional cost or burden on FICUs. Finally, the requirement that boards must approve purchases and renewals would impose no direct cost on FICUs. Accordingly, the NCUA certifies that the final rule does not have a significant economic impact on a substantial number of small FICUs.

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. The NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order to adhere to fundamental federalism principles. This final rule does not have a 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. The NCUA has therefore determined that this final rule does not constitute a policy that has federalism implications for purposes of the executive order.

The NCUA has determined that this final rule does not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998).

The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (SBREFA) generally provides for congressional review of agency rules. 26 A reporting requirement is triggered in instances where the NCUA issues a final rule as defined by section 551 of the APA. 27 An agency rule, in addition to being subject to congressional oversight, may also be subject to a delayed effective date if the rule is a “major rule.”  28 The NCUA does not believe this rule is a “major rule” within the meaning of the relevant sections of SBREFA. As required by SBREFA, the NCUA submitted this final rule to the Office of Management and Budget (OMB) for it to determine if the final rule is a “major rule” for purposes of SBREFA. OMB determined the final rule was not a major rule. The NCUA also will file appropriate reports with Congress and the Government Accountability Office so this rule may be reviewed.

For the reasons discussed above, the NCUA is amending 12 CFR parts 704 and 713 as follows:

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI)  1 directs each federal financial institutions regulatory agency  2 to publish appraisal regulations for federally related transactions within its jurisdiction. In 1994, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (other banking agencies) established thresholds for all real estate-related financial transactions with a transaction value  3 of $250,000 or less, as well as certain real estate-secured business loans (qualifying business loans or QBLs) with a transaction value of $1 million or less. 4 Transactions below these established threshold levels were not required to have Title XI appraisals. QBLs are business loans  5 that are real estate-related financial transactions and that are not dependent on the sale of, or rental income derived from, real estate as the primary source of repayment. 6

Thereafter, first in 1995 and again in 2001, the NCUA promulgated rules similar to those of the other banking agencies then in effect, eventually establishing a similar Title XI appraisal threshold level for most real estate-related transactions. 7 In particular, the rulemakings established that all real estate-related financial transactions with a transaction value  8 of $250,000 or less do not require appraisals. 9 The NCUA did not, however, adopt the separate exemption provided in the other banking agencies' appraisal regulations for QBLs with transaction values of $1 million or less. In addition, both residential and commercial real estate related financial transactions, not otherwise exempt from the appraisal rule, are subject to the $1 million threshold, which requires certified appraisals for all transactions with transaction values of $1 million or more.

In July 2017, the other banking agencies invited comment on a notice of proposed rulemaking (OBAs commercial appraisal NPR)  10 that amended the other banking agencies' appraisal regulations promulgated pursuant to Title XI. Specifically, the OBAs commercial appraisal NPR increased the monetary threshold at or below which financial institutions that are regulated by the other banking agencies (regulated institutions) would not be required to obtain appraisals in connection with commercial real estate transactions (commercial real estate appraisal threshold) from $250,000 to $400,000. The other banking agencies consulted with the NCUA throughout the rule development process, and NCUA staff participated in interagency meetings and calls related to the rulemaking.

The OBAs commercial appraisal NPR followed the completion in early 2017 of the regulatory review process required by the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA). 11 During the EGRPRA process, the other banking agencies received numerous comments related to the Title XI appraisal regulations, including recommendations to increase the thresholds at or below which transactions are exempt from the Title XI appraisal requirements. Among other proposals developed through the EGRPRA process, the other banking agencies recommended increasing the commercial real estate appraisal threshold to $400,000. 12

The comment period for the OBAs commercial appraisal NPR closed on September 29, 2017. 13 The other banking agencies collectively received over 200 comments from appraisers, appraiser trade organizations, financial institutions, financial institutions trade organizations, and individuals. The other banking agencies issued a final rule in early 2018 (OBAs commercial appraisal final rule). 14 As compared to the OBAs commercial appraisal NPR, their final rule increased the commercial real estate appraisal threshold (non-QBLs) to $500,000 rather than the $400,000 proposed.

On May 24, 2018, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (the EGRRCP Act) into law. 15 Section 103 of the EGRRCP Act amends Title XI to exempt from appraisal requirements certain federally related, rural real-estate transactions valued below $400,000 if no state-certified or state-licensed appraiser is available. 16 The exemption provided in the EGRRCP Act is self-implementing so credit unions may avail themselves of the statute's exemption immediately, provided the transaction meets all of the requirements under section 103.

On October 3, 2018, the NCUA published a notice of proposed rulemaking (the proposed rule) to amend its appraisal regulation to, among other things, increase the threshold below which appraisals are not required for commercial real estate transactions from $250,000 to $1,000,000. 17 The proposed rule also would codify independence requirements for individuals providing written estimates of market value, incorporate the rural exemption under the EGRRCP Act, and make other clarifying amendments. The comment period closed on December 3, 2018.

In the other banking agencies' EGRPRA Report and commercial appraisal NPR, they addressed whether it would be appropriate to increase the current $250,000 threshold for transactions secured by residential real estate. The other banking agencies determined that it would not be appropriate to increase the residential threshold at that time based on three considerations. First, the other banking agencies observed that any increase in the threshold for residential transactions would have a limited impact on burden, as appraisals would still be required for the vast majority of these transactions pursuant to rules of other federal government agencies and the standards set by the government-sponsored enterprises (GSEs). 18

Second, the other banking agencies determined that appraisals can provide protection to consumers by helping to assure the residential purchaser that the value of the property supports the purchase price and the mortgage amount. 19 The consumer protection role of appraisals is reflected in amendments made to Title XI and the Truth in Lending Act (TILA)  20 through the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), 21 governing the scope of transactions requiring the services of a state-certified or state-licensed appraiser. These include the addition of the Consumer Financial Protection Bureau (CFPB) to the group of agencies assigned a role in the appraisal threshold-setting process for Title XI, 22 and a new TILA provision requiring appraisals for loans involving “higher-risk mortgages.”  23

During the EGRPRA process, the staff of the other banking agencies conferred with the CFPB regarding comments the agencies received supporting an increase in the threshold for 1-to-4 family residential transactions. CFPB staff shared the view that appraisals can provide consumer protection benefits and their concern about potential risks to consumers resulting from an expansion of the number of residential mortgage transactions that would be exempt from the Title XI appraisal requirement.

Third, the other banking agencies considered safety and soundness concerns that could result from a threshold increase for residential transactions. As the EGRPRA Report noted, the 2008 financial crisis showed that, like other asset classes, imprudent residential mortgage lending can pose significant risks to financial institutions. For these reasons, the other banking agencies concluded in the EGRPRA Report and in their commercial appraisal NPR that a change to the current $250,000 threshold for residential mortgage loans would not have been appropriate at that time.

Likewise, the Board did not propose increasing the appraisal threshold for residential real estate transactions in the proposed rule. The Board, however, specifically sought comment on whether the $250,000 threshold for residential transactions can and should be raised, consistent with consumer protection, safety and soundness, and the reduction of unnecessary regulatory burden. Generally, those commenters that supported the proposed threshold also supported a higher residential threshold and those commenters opposed to the threshold were also opposed to increasing the residential threshold. Most of the commenters who supported increasing the residential threshold made reference to the other banking agencies' recent proposal to increase their residential threshold to $400,000, as discussed more fully below. 24 A few credit unions recommended that the Board consider regional thresholds based on local housing markets. Those commenters against increasing the residential threshold generally reiterated the same three reasons discussed above for not raising the residential threshold.

As alluded to above, on December 7, 2018, the other banking agencies issued a notice of proposed rulemaking inviting comment on a proposed rule to amend their appraisal regulations to increase the threshold level at or below which appraisals would not be required for residential real estate-related transactions from $250,000 to $400,000 (OBAs residential appraisal NPR). 25 The OBAs residential appraisal NPR, consistent with the requirement for other transactions that fall below applicable thresholds and do not require an appraisal, would still require regulated institutions to obtain an evaluation of the real property collateral, in lieu of an appraisal, that is consistent with safe and sound banking practices. The OBAs residential appraisal NPR would also, pursuant to the Dodd-Frank Act, amend their appraisal regulations to require regulated institutions to subject appraisals for federally related transactions to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice (USPAP). 26 Comments for the OBAs residential appraisal NPR were due by February 5, 2019.

At this time, the Board is considering the comments received and is continuing to evaluate whether it is appropriate to increase the threshold level below which appraisals would not be required for credit unions' residential real estate-related transactions from $250,000 to $400,000.

Title XI directs each federal financial institutions regulatory agency to publish appraisal regulations for federally related transactions within its jurisdiction. The purpose of Title XI is to protect federal financial and public policy interests  27 in real estate-related transactions by requiring that real estate appraisals used in connection with federally related transactions (Title XI appraisals) be performed in accordance with uniform standards, by individuals whose competency has been demonstrated, and whose professional conduct will be subject to effective supervision. 28

Title XI directs the NCUA to prescribe appropriate standards for Title XI appraisals under the NCUA's jurisdiction, including, at a minimum that Title XI appraisals be: (1) Performed in accordance with the USPAP; (2) written appraisals, as defined by the statute; and (3) subject to appropriate review for compliance with USPAP. 29 All federally related transactions must have Title XI appraisals.

Title XI defines a “federally related transaction” as a real estate-related financial transaction that is regulated or engaged in by a federal financial institutions regulatory agency and requires the services of an appraiser. 30 A real estate-related financial transaction is defined as any transaction that involves: (i) The sale, lease, purchase, investment in or exchange of real property, including interests in property, or financing thereof; (ii) the refinancing of real property or interests in real property; and (iii) the use of real property or interests in real property as security for a loan or investment, including mortgage-backed securities. 31

The NCUA has authority to determine those real estate-related financial transactions that do not require the services of a state-certified or state-licensed appraiser and are therefore exempt from the appraisal requirements of Title XI. These real estate-related financial transactions are not federally related transactions under the statutory or regulatory definitions because they are not required to have Title XI appraisals. 32

The NCUA has exercised this authority by exempting several categories of real estate-related financial transactions from the Title XI appraisal requirements. 33 The NCUA has determined that these categories of transactions do not require appraisals by state-certified or state-licensed appraisers in order to protect federal financial and public policy interests or to satisfy principles of safety and soundness.

In 1992, Congress amended Title XI, expressly authorizing the NCUA to establish a threshold level below which an appraisal by a state-certified or state-licensed appraiser is not required in connection with federally related transactions. The NCUA may establish a threshold level that the NCUA determines, in writing, does not represent a threat to the safety and soundness of credit unions. 34

In the Dodd-Frank Act, Congress amended the threshold provision to require concurrence “from the [CFPB] that such threshold level provides reasonable protection for consumers who purchase 1-4 unit single-family residences.”  35 As noted above, transactions below the threshold level are exempt from the Title XI appraisal requirements and thus are not federally related transactions.

The NCUA received 87 comment letters in response to its October 3, 2018 proposed rule. These comment letters were received from credit unions, credit union trade associations, state credit union leagues, appraisal companies, appraisal trade organizations, individuals, and other industry organizations.

In general, all of the comments received from appraisers, appraisal companies, appraisal trade organizations, and bank trade organizations objected to the proposed $1 million threshold for commercial real estate transactions. These commenters expressed concern that the proposal would reduce the safety and soundness of credit unions and would create an imbalance in the commercial real estate market between credit unions and banks, which are subject to a $500,000 threshold for general commercial (non-QBL) real estate transactions. In contrast, comments received from credit unions, credit union trade associations, and state credit union leagues generally supported the proposal. Almost all such commenters supported the proposed $1 million threshold for commercial real estate transactions and stated the proposed threshold would reduce regulatory burden, reduce member costs, and increase access to credit.

This final rule adopts the October 3, 2018 proposed rule with one material change; the final rule does not adopt the proposed modification to the exemption for existing extensions of credit. Accordingly, the final rule amends part 722-Appraisals of the NCUA's regulations to: (1) More clearly indicate when a written estimate of market value, an appraisal conducted by a state-licensed appraiser, or an appraisal conducted by a state-certified appraiser is required; (2) incorporate the relevant changes enacted by the EGRRCP Act; and (3) provide relief from appraisal requirements for commercial real estate-related financial transactions. In particular, the final rule establishes a new threshold of $1,000,000 or more for commercial real estate-related financial transactions. The new threshold for commercial real estate-related financial transactions represents a significant increase from the current level of $250,000.

Additionally, the NCUA is adding and removing various definitions in support of the changes and for improved clarity. Further, the final rule substantially reorganizes § 722.3 for ease of use.

These changes, along with related comments, are discussed in more detail below in the order in which they appear in the rule. In the Dodd-Frank Act, Congress amended the threshold provision to require “concurrence from the Bureau of Consumer Financial Protection that such threshold level provides reasonable protection for consumers who purchase 1-4 unit single-family residences.”  36 The Board has received concurrence from the CFPB that the commercial real estate appraisal threshold being adopted provides reasonable protection for consumers who purchase 1-to-4 unit single family residential properties.

The Board is amending the terms and definitions applicable to part 722. The final rule also makes technical, non-substantive amendments to section 722.2, including removing the individual numbering of the definitions within the section to make revisions to part 722 easier in the future. The following definitions are added, removed, or amended under this final rule:

The proposal included an amendment to current § 722.2(d) to remove the definition for complex 1-to-4 family residential property appraisal and replace it with the shorter term complex. The proposed definition for complex was similar to the current definition, but allowed the term to be used more broadly in conjunction with other amendments being made in § 722.3. One commenter recommended additional guidance or commentary on what attributes would constitute complex. The definition of complex remains substantively the same as the long-standing definition of complex 1-to-4 family residential property appraisal. Therefore, the Board does not believe further clarification is necessary.

Accordingly, § 722.2 provides that complex, when used in regard to a real estate-related financial transaction, means a transaction in which the property to be appraised, the form of ownership, or market conditions are atypical. The definition also states that a credit union may presume that appraisals of 1-to-4 family residential properties are not complex unless the institution has readily available information that a given appraisal will be complex. This presumption is in the current rule and its addition to the definition of complex is not a substantive change in policy. The presumption is moved from § 722.3(b)(3) as part of the overall restructuring of § 722.3.

The proposed rule included a definition of federal financial institutions regulatory agency in response to changes to Title XI under the EGRRCP Act. 37 The Board did not receive any comments on the proposed definition and is finalizing the definition as proposed. Accordingly, consistent with the definition provided under Title XI, the final rule defines federal financial institutions regulatory agency as the Board of Governors of the Federal Reserve System; the Federal Deposit Insurance Corporation (FDIC); the Office of the Comptroller of the Currency, Treasury (OCC); the NCUA, and, formerly, the Office of Thrift Supervision. 38

The proposal included an amendment to current § 722.2(g) to add parentheses around the words “or real property” to help clarify for the reader that the terms real estate and real property can be used interchangeably and have the same meaning for purposes of part 722. No substantive change was intended by this technical amendment. The Board did not receive any comments on the proposed change and is finalizing it as proposed. Additionally, for consistency, the final rule uses the term real estate throughout the rule in place of the term real property.

The proposed rule included minor, non-substantive technical amendments to current § 722.2(h) and the definition of real estate-related financial transaction. In particular, the proposal replaced the words “real property” with the words “real estate” each place they occur within the definition for consistency. The Board did not receive any comments on the proposed change and is finalizing it as proposed.

The proposal added a definition of the term residential real estate transaction to identify for the reader which federally related transactions are still subject to the $250,000 appraisal threshold. One commenter stated that the definition should be modified such that properties being constructed for resale or non-owner occupancy should not be classified as residential even if it is secured by a 1-to-4 family residential property. Under the other banking agencies' 2018 final rule, a loan that is secured by a single 1-to-4 family residential property, including a loan for construction, remains subject to the $250,000 threshold. 39 The NCUA is taking the same approach in its appraisal regulation by including any loan for construction of one, two, three, or four unit dwellings, including manufactured homes permanently affixed to the underlying land as a single 1-to-4 family residential property. Another commenter asked the Board to clarify that multifamily properties, those with five or more units, are not residential. The Board is therefore clarifying that multifamily properties are not residential. Accordingly, the final rule provides that a residential real estate transaction means a real estate-related financial transaction that is secured by a single 1-to-4 family residential property. 40

For clarity, the proposal added a definition of staff appraiser, which is a term currently used, but undefined, in § 722.5 of the regulation. The Board did not receive any comments on the proposed definition and is now finalizing it as proposed. Accordingly, section 722.2 of the final rule provides that staff appraiser means a state-certified or state-licensed appraiser that is an employee of the credit union.

The proposed rule made minor, non-substantive technical amendments to current § 722.2(l) and the definition of transaction value. In particular, the proposal replaced the words “real property” with the words “real estate” each place they occur within the definition for consistency. The Board did not receive any comments on the proposed change and is finalizing it as proposed.

The final rule amends current § 722.3 to increase the threshold level below which appraisals are not required for certain commercial real estate transactions, incorporates relevant changes under the EGRRCP Act, and reorganizes the section to make it easier to determine when an appraisal or written estimate of market value is required. Current § 722.3 provides the general requirement that all real estate-related financial transactions must have a state-certified or state-licensed appraisal unless the transaction qualifies for a listed exception. Under the current structure of this section, the NCUA believes that it is difficult for a reader to quickly determine whether a written estimate of market value or an appraisal performed by a state-licensed or state-certified appraiser is required. Commenters were generally in favor of the proposed formatting revisions. Accordingly, this final rule reorders current § 722.3 to help the reader more readily determine: (a) Whether the real estate-related financial transaction does or does not require an appraisal under part 722; (b) when an appraisal required under part 722 must be prepared by a state-certified appraiser; (c) when an appraisal required under part 722 may be prepared by either a state-certified or state-licensed appraiser; and (d) when only a written estimate of market value is required.

The final rule incorporates and updates the list of exempt transactions in current § 722.3(a)(1)-(9). As discussed in more detail below, § 722.3(a)(1)-(6) of the final rule retains many of the transactions currently exempted:

(a)(1). The proposed rule exempted a transaction that is not considered a “new loan” under generally accepted accounting principles (GAAP). 41 This exemption replaced current § 722.3(a)(5), which exempts certain existing extensions of credit. The Board believed these provisions were substantively similar, but proposed the modified exemption because the Board believed it would be more consistently implemented. The Board specifically sought comment on whether the current language of the regulation should be maintained. Credit union commenters had mixed opinions on whether the current or proposed language was preferable. Commenters in favor of the revision generally stated that the proposed language has less subjectivity and makes this exemption easier to implement. In contrast, commenters were opposed to the language for a variety of reasons. A few commenters believed that the GAAP definition is too complex and that the current standard is not too subjective. One commenter specifically stated that while the GAAP standard may be precise, it could require a complicated calculation that could lead to more errors than the current standard. A few commenters thought that the proposal reduced flexibility. These commenters stated that the current rule exempts a transaction involving an existing extension of credit under two separate prongs, but the proposal permitted the exemption under only a single scenario.

In response to the comments received, the final rule will not adopt the proposed language, and the Board will maintain the language in current § 722.3(a)(5). The Board proposed the new language to reduce burden and increase consistency among credit unions. As many credit unions did not view the proposed language as less burdensome, and some believed it would result in less consistency than the current language, the Board has declined to adopt it. Therefore, the Board will maintain the current exemption for existing extensions of credit. Under the final rule, an appraisal is not required if the transaction involves an existing extension of credit provided that: (1) There is no advancement of new monies, other than funds necessary to cover reasonable closing costs; or (2) there has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union's real estate collateral protection after the transaction, even with the advancement of new monies.

The Board notes that a written estimate of market value is required for any real-estate related financial transaction that is exempt from appraisal requirements under paragraph (a)(1). This policy is consistent with the current rule. The Interagency Appraisal and Evaluations Guidelines ( Guidelines ) provides additional guidance on the requirement to provide a written estimate of market value. 42

(a)(2). The proposed rule did not include any changes to paragraph (a)(2) other than the term real estate is used instead of real property. The Board is finalizing this provision as proposed.

(a)(3). The proposed rule did not include any changes to paragraph (a)(3).

(a)(4). The proposed rule did not include any changes to paragraph (a)(4).

(a)(5). The proposal moved current § 722.3(a)(6) to proposed § 722.3(a)(5), however, it did not make any substantive changes, and the Board is finalizing this provision as proposed.

(a)(6). The proposal moved current § 722.3(a)(8) to proposed § 722.3(a)(6), however, it did not make any substantive changes to this provision. The Board is finalizing this provision as proposed.

(a)(7) The final rule removes current § 722.3(a)(7). The final rule changes the appraisal and written estimate of market value requirements for real estate-related financial transactions that are fully or partially guaranteed by a U.S. government agency  43 or government-sponsored agency. 44 Under the current rule, any real estate-related financial transaction that is insured or guaranteed by a U.S. government agency or government-sponsored agency (regardless of whether the insurance or guarantee is for the full transaction value or only a part of the transaction value) are exempt from appraisal and written estimate of market value requirements. In contrast, under the proposed rule, there was no categorical exemption for such transactions. Instead, a real estate-related financial transaction that is insured or guaranteed by a U.S. government agency or government-sponsored agency is only exempt from appraisal and written estimate of market value requirements if the transaction value is less than $1 million and the transaction is fully insured or guaranteed. The Board specifically sought comment on this proposed change, and whether the current approach in the regulation should be maintained. A few commenters responded that the proposed change would not generally affect their use of such insurance or guarantee programs. One credit union trade organization stated that the proposal would contribute to regulatory burden without enhancing safety and soundness and stated that the NCUA did not present any evidence of safety and soundness concerns under the current rule.

A few other commenters expressed concerns about the exemption more generally. In particular, several commenters stated that GSE appraisal requirements are in flux and it is premature to make the proposed change at this time. Other commenters noted that not all government agencies require appraisals. Another commenter was concerned that one of the underlying reasons for the exemption, that other agencies require appraisals in such circumstances, are being eroded. This commenter noted that both the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation have moved to waive appraisal requirements entirely for both purchase money mortgage transactions and refinance transactions.

The Board is finalizing this provision as proposed. Accordingly, transactions that are partially or fully guaranteed by a U.S. government agency or a sponsored agency are no longer categorical exemptions from the appraisal and written evaluation requirements of part 722. Instead, such transactions are subject to the $1 million threshold. The Board continues to believe that the new approach better aligns the appraisal and written estimate of market value requirements to the potential risk to the credit union, and preserves the borrower protection benefits appraisals provide. While this change varies somewhat from the respective provisions in the other banking agencies' rules, in practice, the Board does not expect this change to result in a material difference in appraisal requirements or burden, given that most U.S. government guaranty and insurance programs currently require appraisals.

Finally, one commenter asked that the Board clarify whether insured or guaranteed transactions are exempt from appraisal requirements if a loan is repurchased by a credit union. The Board is clarifying that generally a repurchase falls within paragraph (a)(5) under the final rule and is exempt from appraisal requirements.

(a)(9) The proposed rule removed current § 722.3(a)(9), which gave the Regional Director an option to grant a waiver from the appraisal requirement for a category of loans meeting the definition of a member business loan. One credit union commented that it has received previous waivers, but does not object to the proposed change and noted that the proposed threshold provided most of the permissions granted under the previous waiver. Two credit union trade organizations questioned the removal of the waiver provision. The provision is removed due to the increase for the commercial appraisal threshold to the requirement of $1 million or more. The Board no longer believes a waiver is necessary given the increase of this threshold. The Board is finalizing this provision as proposed.

Section 722.3(b) of the final rule identifies the real estate-related financial transactions for which an appraisal performed by a state-certified appraiser is required.

The proposed rule increased the threshold at which commercial real estate-related financial transactions are exempt from appraisal requirements from $250,000 to $1 million. Of the 87 comments received from the proposed rule, 66 were opposed to the proposed $1 million threshold and 21 supported the threshold. The majority of the comments opposed to the threshold were from appraisers, appraisal companies, appraisal trade organizations, and bank trade organizations. The majority of commenters in favor of the threshold were from credit unions, credit union trade associations, state credit union leagues, and other trade associations.

The majority of commenters opposed to the $1 million threshold expressed concern that the proposal increased risk for commercial real estate transactions. These commenters generally discussed that appraisals offer an important safety and soundness tool because appraisals provide an unbiased opinion on the value of collateral, and without this valuation, credit unions are exposed to increased risk. One commenter discussed that appraisals were an important safety and soundness standard during the last financial crisis. In contrast, a few commenters that supported the threshold believed that the proposal does not increase risk as credit unions would continue to use their judgement in deciding when, and if, appraisals are necessary. Another commenter stated that cash flow is the primary factor for the success of a commercial loan.

In addition to safety and soundness concerns, commenters also expressed strong opinions on the relationship of the proposed rule to the other banking agencies' 2018 final rule. Several commenters opposed to the proposed threshold expressed concern about an imbalance in the commercial real estate market that may be created between credit unions and banks. These commenters recommended that the Board adopt the same $500,000 threshold as the other banking agencies. Specifically, a state credit union league stated that a $500,000 threshold is appropriate as it would promote safe and sound lending practices, place credit unions on par with banks, and not expose the National Credit Union Share Insurance Fund to excessive risk. A credit union service organization (CUSO) also encouraged the Board to adopt the $500,000 threshold for general commercial exposures, but to incorporate the $1 million threshold for QBLs included in the other banking agencies' rules. In contrast, five commenters who supported the threshold stated that it increases parity with banks as banks benefit from the $1 million threshold for certain QBLs.

A few other commenters opposed to the proposed threshold stated that most commercial loans under $1 million are to small business owners. Those commenters generally stated that most small business owners are not experienced in commercial lending and benefit from the protection offered by appraisals. In contrast, other commenters stated that consumers benefit from increased access to credit and reduced costs under the proposed rule.

The NCUA has carefully considered the other banking agencies' commercial appraisal NPR  45 and final rule  46 regarding real estate appraisals. The Board also carefully considered whether changes to the threshold for requiring an appraisal by a state-certified appraiser are appropriate to reduce regulatory burden, while consistent with public policy interests and safety and soundness. Based on its supervisory experience and available data, the other risk mitigations incorporated into the final rule, and other regulatory requirements and supervisory expectations, the NCUA Board does not believe that the increased threshold poses a material threat to the safety and soundness of credit unions or creates undue risk to the National Credit Union Share Insurance Fund.

The Board also believes that the final rule benefits both members and credit unions as it reduces regulatory burden and may increase access to credit. The NCUA last modified the threshold for exempt transactions in 2001 and used the same threshold for both residential and commercial real estate. 47 Since 2001, the values of commercial property have increased and the current threshold requires credit unions to obtain Title XI appraisals on a larger proportion of commercial real estate transactions than in 2001. This increase in the number of appraisals required likely has contributed to the increased burden in time and cost described by some of the commenters. The Board believes that the final rule will reduce regulatory burden by providing credit unions greater flexibility in commercial lending. Additionally, the NCUA does not believe that given credit unions' limited origination of commercial mortgages that the final rule creates an imbalance in the commercial mortgage market. 48

Therefore, the NCUA is finalizing the $1 million threshold as proposed. A more detailed analysis supporting this conclusion is provided below in the Analysis of Higher Commercial Appraisal Threshold section.

Under the final rule, an appraisal performed by a state-certified appraiser is required for transactions that are not exempt under paragraph (3)(a) and the transaction value is $1 million or more. This increases the threshold at which commercial real estate-related financial transactions are exempt from appraisal requirements from $250,000 to $1 million.

The Board notes this is the only provision in the final rule that requires an appraisal for commercial real estate transactions not otherwise exempt, 49 as current § 722.3(b)(2) is removed as part of the overall reorganization of § 722.3. For commercial real estate transactions with transaction values below $1 million, credit unions are able to use their judgment, consistent with safe and sound lending practices, to determine whether to use an appraisal or a written estimate of market value. This approach aligns with the other banking agencies' appraisal requirements for QBLs with a transaction value of $1 million or less. 50 This approach provides more flexibility, however, than the commercial real estate appraisal threshold for non-QBLs, which the other banking agencies established at $500,000 in their 2018 final rule.

The final rule also requires an appraisal performed by a state-certified appraiser if the transaction is complex, involves residential real estate, and $250,000 or more of the transaction value is not insured or guaranteed by a U.S. government agency or government-sponsored agency. 51 An appraisal is not required if the transaction is otherwise exempt under paragraph (3)(a) or qualifies for the rural area exemption in paragraph (3)(f). This requirement is similar to the requirement in current § 722.3(b)(3) that complex residential transactions of $250,000 or more have appraisals performed by a state-certified appraiser. The substantive difference between current § 722.3(b)(3) and the final rule relates to transactions that are partially insured or guaranteed by a U.S. government agency or government-sponsored agency. Specifically, a complex residential real estate transaction that is partially insured or guaranteed by a U.S. government agency or government-sponsored agency, but has $250,000 or more of the transaction value not insured or guaranteed, is required to have a state-certified appraisal in the final rule. Such a transaction is exempt from appraisal requirements under the current rule. The Board is finalizing this section as proposed.

Finally, the Board is removing the clarifying statement in the proposed rule text that a credit union is not required to obtain an appraisal if the United States government agency or United States government-sponsored agency obtains an appraisal by a state-certified appraiser. The Board does not intend any substantive change and is only removing the statement upon further consideration that it is unnecessary. If a credit union gets a certified appraisal as part of a loan that is insured or guaranteed by a U.S. government agency or sponsored agency, then it has also met its obligations under the final rule.

The final rule requires an appraisal performed by a state-certified or state-licensed appraiser if the transaction is not complex, involves residential real estate, and $250,000 or more of the transaction value is not insured or guaranteed by a U.S. government agency or government-sponsored agency. 52 An appraisal is not required if the transaction is otherwise exempt under paragraph (3)(a) or qualifies for the rural area exemption in paragraph (3)(f). This requirement is consistent with the current rule that non-complex residential transactions of $250,000 or more require an appraisal from either a state-certified or state-licensed appraisal. The one substantive difference, which is discussed above, is the addition of certain transactions that are partially insured or guaranteed by a U.S. government agency or government-sponsored agency. For clarity, this requirement is explicit under the final rule, as opposed to implicitly through § 722.3(c), as in the current rule. The Board believes the final rule more clearly indicates when an appraisal conducted by a state-licensed appraiser or a state-certified appraiser is acceptable. The Board also notes that if a transaction requires a certified appraisal under paragraph (b)(1), but also could qualify for a licensed appraisal under paragraph (c), the credit union must obtain a certified appraisal. The Board is finalizing this section as proposed.

The final rule states that if, during the course of an appraisal of a residential real estate transaction performed by a state-licensed appraiser, factors are identified that result in the transaction meeting the definition of complex, then the credit union may either ask the state-licensed appraiser to complete the appraisal and have a state-certified appraiser approve and cosign the appraisal, or engage a state-certified appraiser to complete the appraisal. The Board notes that while a credit union is responsible for properly applying the complex transaction definition, the NCUA maintains interpretive authority with respect to the regulatory definition and may determine that a transaction is complex and requires an appraisal. The Board is finalizing this provision as proposed.

As in paragraph 3(b), the clarifying paragraph stating that a credit union is not required to obtain an appraisal if the United States government agency or United States government-sponsored agency obtains an appraisal has been removed.

The final rule requires a written estimate of market value for any real estate-related financial transaction unless: (1) An appraisal performed by a state-certified or state-licensed appraiser was obtained; (2) the transaction is exempt from appraisal requirements under paragraphs (a)(2) through (6) of this section; or (3) the transaction is fully insured or guaranteed by a United States government agency or United States government-sponsored agency.

Proposed paragraph (d) has been finalized as proposed with one material exception; under the final rule, a written estimate of market value is required for existing extensions of credit that are exempt from appraisal requirements. As discussed above, this is consistent with the current rule. The change from the proposed rule reflects that the final rule did not adopt the proposed amendment to modify the exemption for existing extensions of credit to reference the GAAP definition of a new loan. Comments and the Board's consideration of the comments are more fully discussed below.

Most credit union-affiliated commenters did not comment on the written estimate of market value requirements, but a few did ask for clarifying information. A few credit unions asked for additional guidance on what is a safe and sound written estimate of market value. The Board notes that a safe and sound written estimate of market value contains sufficient information detailing the credit union's analysis, assumptions, and conclusions to support the credit decision. A written estimate of market value requires documentation of a property's market value. The term “market value” is defined under the appraisal rule and generally means the most probable price which a property should bring in a competitive and open market. To document a property's market value, a credit union must obtain and analyze appropriate available information, from multiple sources if practicable, to arrive at a valuation that is supported by property-specific and relevant market information. Additionally, a safe and sound written estimate of market value must be supported by a physical inspection of the property or any alternative method to confirm the property's condition, depending on transaction risks. Credit unions should refer to the Guidelines to develop policies and procedures for conducting written estimates of market value that are consistent with safety and soundness expectations.

The Board does not intend for valuation programs to be one size fits all, but rather risk-focused and commensurate with the complexity and nature of each credit union's real estate lending activities, risk profile, and business model. For example, a credit union that engages primarily in owner-occupied real estate lending in its local market area should tailor its valuation program to reflect the size and nature of the loans and collateral. In contrast, a credit union that engages in significant commercial real estate lending or large acquisition, development, and construction projects should tailor its valuation program for these types of higher risk transactions.

Additionally, credit unions should establish policies and procedures for determining when to obtain an appraisal for transactions that may otherwise permit a written estimate of market value, such as for a higher risk transaction. One commenter stated that this suggestion to get an appraisal for certain transactions, even when a written estimate of market value is permitted, should be written in more definitive language. The Board has not made any changes to the rule and believes that the current rule provides flexibility to credit unions to obtain appraisals even if they are not required, based on the specific risk factors for a transaction.

Several appraisers, appraisal companies, and appraisal trade associations commented on written estimates of market value. These commenters generally discussed that evaluators are not subject to state oversight requirements or enforcement actions, credit union employee evaluators may be biased, and written estimates are not subject to the Uniform Standards of Professional Appraisal Practice. Under the final rule, a person must be qualified and experienced to perform written estimates of market value for the type and amount of credit being considered. A credit union must ensure that the individual possesses the requisite education, expertise, and experience to competently complete the written estimate of market value. For example, to meet this standard a person could have experience selling real estate, lending, or have attended professional training in which they acquired knowledge and expertise necessary to value real estate. Credit unions should establish criteria to select, evaluate, and monitor evaluation providers to ensure their valuations sufficiently meet NCUA standards.

Under the final rule, the person conducting the written estimate of market value must be capable of rendering an unbiased opinion and be independent. Specifically, the person performing the written estimate cannot have a direct, indirect, or prospective interest, financial or otherwise, in the property or the transaction. The final rule has also strengthened the independence requirements for persons performing written estimates of market value as compared to the current rule. The Board believes that an enhanced independence requirement for written estimates of market value is an important prudential safeguard, as the final rule permits commercial real estate transactions that are less than $1 million to have a written estimate of market value instead of a state-certified appraisal. Accordingly, under the final rule, the individual performing a written estimate of market value must be independent of the loan production and collection process. If independence cannot be achieved, the credit union must be able to demonstrate clearly that it has prudent safeguards to isolate its collateral valuation program from influence or interference from the loan production process and collection process.

One CUSO asked whether a loan officer, other than the one handling the loan, could perform written estimates of market value under the independence standards. The Board is clarifying that a loan officer other than the one handling the loan could provide the written estimate of market value, provided that this person is qualified and experienced, independent of and has no interests in that loan transaction, and there is a review of the valuation by a person independent of the loan production process. For example, if the only expertise in the credit union to conduct a valuation is with individuals in the loan production process, a loan officer that is not originating the loan could perform the valuation. However, in such a case, the loan officer's valuation would be reviewed by an individual that is independent of the loan production process. For example, someone in the credit union's supervisory committee could review the valuation. If adequate independence cannot be achieved internally, a credit union must engage a third party, such as an appraiser or real-estate broker, to provide for the written estimate of market value.

One commenter asked for additional information on what constitutes prudent safeguards for independence and asked if it is sufficient to eliminate the performance of written estimates from the reviewing officer's compensation. Under the final rule, persons who perform written estimates of market value cannot have direct or indirect or prospective interest, financial or otherwise, in the property or transaction. Additionally, the Board does not believe that one factor ensures independence across all credit unions. In contrast, the Board believes each credit union should take a comprehensive approach and consider its unique situation to ensure its collateral valuation is independent of influence from the loan production process.

In evaluating this final rule, the NCUA considered the impact to credit unions and borrowers. A couple of credit union commenters provided time and cost estimates of appraisals as evidence of borrowers' potential savings. Those commenters stated that commercial real estate appraisals generally cost between $2,000 and $5,000 and take between three to five weeks to receive. In contrast, a few commenters opposed to the proposal stated appraisals generally cost a few hundred dollars. Based on information from banking agency data, the cost of third-party evaluations of commercial real estate generally ranges from $500 to over $1,500, whereas the cost of appraisals of such properties generally ranges from $1,000 to over $3,000. Commercial real estate transactions with values above $250,000, but below $1 million (applicable transaction value range), are likely to involve smaller and less complex properties, and appraisals and written estimates of market value on such properties would likely be at the lower end of the cost range. This third-party pricing information suggests a savings of several hundred dollars per transaction. The NCUA also notes there is a greater pool of individuals qualified to conduct written estimates of market value than state-certified appraisers, particularly in rural areas, thereby reducing the associated time and costs.

In the proposed rule, the Board sought comment on whether the NCUA should establish a de minimis threshold for which written estimates of market value are not required. Seven credit unions and credit union trade organizations supported a de minimis threshold. Suggestions ranged between $25,000 and $100,000. One credit union thought the threshold should apply on a transaction-by-transaction basis, rather than be applicable to all transactions under the threshold. One appraisal trade organization did not support a de minimis threshold. The Board has determined not to adopt a de minimis threshold at this time as the Board believes further consideration is warranted. The Board is considering a requirement for credit unions to document a valuation for secured property even if a written estimate of market value is not required. The Board is also considering whether residential transactions should be treated the same as commercial transactions. Under the member business loan rule, transactions below $50,000 are generally exempt from the definition of commercial loan, and therefore exempt from the member business loan limit. 53 Accordingly, the Board believes there may be reason to exempt similarly sized loans under the appraisal rule. The Board also appreciates, however, that members who purchase residential properties with values below $50,000 may benefit from valuations of their real-estate related transaction. The Board is also in the process of determining whether credit unions originate a substantial volume of commercial transactions under $50,000 and whether a targeted de minimus exception would provide meaningful burden relief.

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it supports the air traffic service route structure in the southeastern United States to maintain the efficient flow of air traffic.

The FAA published a notice of proposed rulemaking for Docket No. FAA-2019-0060 in the Federal Register (84 FR 7308; March 4, 2019) removing RNAV route Q-106. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal. No comments were received.

Area navigation routes are published in paragraph 2006, of FAA Order 7400.11C dated August 13, 2018, and effective September 15, 2018, which is incorporated by reference in 14 CFR 71.1. The area navigation route listed in this document will be subsequently removed from the Order.

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

The FAA is amending Title 14 Code of Federal Regulations (14 CFR) part 71 by removing RNAV route Q-106 that extends between the SMELZ, FL, WP and the GADAY, AL, WP. With the implementation of additional Q routes in the Florida Metroplex Q-route Project (Docket No. FAA-2018-0437, 83 FR 54864; November 1, 2018), the FAA has determined that Q-106 is redundant and no longer required.

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 Department of Transportation (DOT) Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA has determined that this airspace action of removing RNAV route Q-106 between the SMELZ, FL, WP and the GADAY, AL, WP has no potential to cause any significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment. Therefore, this airspace action has been categorically excluded from further environmental impact review in accordance with the National Environmental Policy Act (NEPA) and its implementing regulations at 40 CFR parts 1500-1508, and in accordance with FAA Order 1050.1F, Environmental Impacts: Policies and Procedures, paragraph 5-6.5a, which categorically excludes from further environmental impact review rulemaking actions that designate or modify classes of airspace areas, airways, routes, and reporting points (see 14 CFR part 71, Designation of Class A, B, C, D, and E Airspace Areas; Air Traffic Service Routes; and Reporting Points). In accordance with FAA Order 1050.1F, paragraph 5-2 regarding Extraordinary Circumstances, this action has been reviewed for factors and circumstances in which a normally categorically excluded action may have a significant environmental impact requiring further analysis, and it is determined that no extraordinary circumstances exist that warrant preparation of an environmental assessment.

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

Background

On February 4, 2016, a notice of proposed rulemaking by cross-reference to temporary regulations (REG-100861-15) under section 704 of the Code and temporary regulations (T.D. 9748) (2016 temporary regulations) were published in the Federal Register at 81 FR 5966 and 81 FR 5908, respectively.

Section 1.704-1(b)(4)(viii) provides a safe harbor under which allocations of creditable foreign tax expenditures (“CFTEs”) are deemed to be in accordance with the partners' interests in the partnership. The 2016 temporary regulations revised the rules under this section to clarify the effect of section 743(b) adjustments on the determination of net income in a CFTE category. The 2016 temporary regulations also include special rules regarding how deductible allocations and nondeductible guaranteed payments (that is, allocations that give rise to a deduction under foreign law, and guaranteed payments that do not give rise to a deduction under foreign law) are taken into account for purposes of determining net income in a CFTE category. Finally, the 2016 temporary regulations include a clarification of the rules regarding the treatment of disregarded payments between branches of a partnership for purposes of determining income attributable to an activity included in a CFTE category.

A public hearing was not requested and none was held. However, the Department of the Treasury (“Treasury Department”) and the Internal Revenue Service (“IRS”) received a written comment in response to the notice of proposed rulemaking. After consideration of the comment, the proposed regulations under section 704 are adopted as amended by this Treasury decision. The revisions are discussed in this preamble.

The comment requested revising the regulations to provide that disregarded payments between CFTE categories are taken into account in computing the net income in a CFTE category. The comment argued that the placement of a disregarded payment rule in a paragraph that discusses attribution of income to an activity is potentially confusing and requested that the language be moved to the portion of the regulation that addresses the basic definition of activities and that in its place a statement be added providing that disregarded payments between CFTE categories will reduce net income in one CFTE category and increase net income in the other category.

The Treasury Department and the IRS have determined the rule is clear as originally drafted in the 2016 temporary regulations. Income in a CFTE category is determined first by assigning items of income to activities. Activities are then grouped together in a CFTE category to the extent the income attributable to activities is allocated using the same allocation percentages. Section 1.704-1(b)(4)(viii)( c )( 3 ). Disregarded payments are not taken into account in determining income assigned to an activity. However, if a partnership makes allocations to give economic regard to the disregarded payment, it can result in more than one allocation percentage being applied to income within the same activity. Section 1.704-1(b)(4)(viii)( c )( 3 )( iv ). This will result in the activity being subdivided and the subdivided portions being assigned to different CFTE categories. See Example 24 in § 1.704-1(b)(5)(xxiv). In other words, while the 2016 temporary regulations do not literally provide that a disregarded payment “reduces” the net income in a CFTE category in that case, the 2016 temporary regulations provide for a result similar to the result suggested by the comment by instead subdividing an activity and then assigning one sub-activity to a different CFTE category. This approach is more consistent with the fact that income items are determined based on regarded items and not disregarded items, including disregarded payments. These final regulations add a cross reference to the disregarded payment rule for assigning income to an activity in § 1.704-1(b)(4)(viii)( c )( 3 )( iv ) in the paragraph that provides the basic definition of an activity to further highlight the interaction of those two paragraphs. See § 1.704-1(b)(4)(viii)( c )( 2 )( iii ).

The 2016 temporary regulations unintentionally deleted § 1.704-1(b)(4)(viii)( d )( 1 )( i ) and ( ii ). Those paragraphs are restored without change by these regulations. In order to comply with new Federal Register formatting requirements, Examples 25, 36 and 37 in § 1.704-1T(b)(5) in the 2016 temporary regulations appear without further changes in § 1.704-1(b)(6)(i) through (iii) of these final regulations, Examples 1, 2, and 3, respectively.

This regulation is not subject to review under section 6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations. Therefore, a regulatory impact assessment is not required. Because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f), the proposed rule preceding these final regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business and no comments were received.

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

Accordingly, 26 CFR part 1 is amended as follows:

Coast Guard District Commanders and Captains of the Port (COTP) must be immediately responsive to the safety and security needs within their jurisdiction; therefore, District Commanders and COTPs have been delegated the authority to issue certain local regulations. Safety zones may be established for safety or environmental purposes. A safety zone may be stationary and described by fixed limits or it may be described as a zone around a vessel in motion. Security zones limit access to prevent injury or damage to vessels, ports, or waterfront facilities. Special local regulations are issued to enhance the safety of participants and spectators at regattas and other marine events. Drawbridge operation regulations authorize changes to drawbridge schedules to accommodate bridge repairs, seasonal vessel traffic, and local public events. Regulated Navigation Areas are water areas within a defined boundary for which regulations for vessels navigating within the area have been established by the regional Coast Guard District Commander.

Timely publication of these rules in the Federal Register may be precluded when a rule responds to an emergency, or when an event occurs without sufficient advance notice. The affected public is, however, often informed of these rules through Local Notices to Mariners, press releases, and other means. Moreover, actual notification is provided by Coast Guard patrol vessels enforcing the restrictions imposed by the rule. Because Federal Register publication was not possible before the end of the effective period, mariners were personally notified of the contents of these safety zones, security zones, special local regulations, regulated navigation areas or drawbridge operation regulations by Coast Guard officials on-scene prior to any enforcement action. However, the Coast Guard, by law, must publish in the Federal Register notice of substantive rules adopted. To meet this obligation without imposing undue expense on the public, the Coast Guard periodically publishes a list of these temporary safety zones, security zones, special local regulations, regulated navigation areas and drawbridge operation regulations. Permanent rules are not included in this list because they are published in their entirety in the Federal Register . Temporary rules are also published in their entirety if sufficient time is available to do so before they are placed in effect or terminated.

The following unpublished rules were placed in effect temporarily during the period between April 2019 and June 2019 unless otherwise indicated. To view copies of these rules, visit www.regulations.gov and search by the docket number indicated in the following table.

The Coast Guard will enforce the safety zone located in 33 CFR 165.845 for the New Orleans Tourism and Marketing Corporation (NOTMC) firework display event. The regulations will be enforced from 5:45 p.m. through 6:45 p.m. on November 22, 2019. This action is being taken to provide for the safety of life on navigable waterways during this event, which will be located between mile marker (MM) 95.5 and MM 94.5, above Head of Passes, Lower Mississippi River, LA. During the enforcement period, if you are the operator of a vessel in the regulated area, you must comply with directions from Captain of the Port Sector New Orleans or a designated representative.

In addition to this notice of enforcement in the Federal Register , the Coast Guard plans to provide notification of this enforcement period via a Marine Safety Information Bulletin and Broadcast Notice to Mariners.

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 Publishing 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-2018-0179 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 September 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-2018-0179, 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 April 23, 2014 (79 FR 22602) (FRL-9907-39), 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 4F8237) by Dow AgroSciences, LLC, 9330 Zionsville Rd., Indianapolis, IN 46268. The petition requested to establish tolerances in 40 CFR part 180 for residues of the insecticide, sulfoxaflor ( N -[methyloxido[1-[6-(trifluoromethyl)-3-pyridinyl]ethyl]-λ 4 -sulfanylidene]cyanamide), in or on alfalfa, forage at 7 parts per million (ppm); alfalfa, hay at 20 ppm; alfalfa, seed at 30 ppm; alfalfa, silage at 9 ppm; animal feed, non-grass, group 18, forage at 15 ppm; animal feed, non-grass, group 18, hay at 20 ppm; animal feed, non-grass, group 18, silage at 9 ppm; buckwheat, forage at 1 ppm; buckwheat, grain at 0.08 ppm; buckwheat, hay at 1.5 ppm; buckwheat, straw at 2 ppm; cacao bean, dried bean at 0.15 ppm; clover forage at 15 ppm; clover hay at 20 ppm; clover silage at 8 ppm; corn, field, forage at 0.5 ppm; corn, field, grain at 0.015 ppm; corn, field, stover at 0.8 ppm; corn, pop at 0.015 ppm; corn, pop, stover at 0.8 ppm; corn, sweet, at 0.01 ppm; corn, sweet, forage at 0.6 ppm; corn, sweet, stover at 0.7 ppm; millet, forage at 0.4 ppm; millet, grain at 0.3 ppm; oat, grain at 0.4 ppm; oat, hay at 1 ppm; oat, straw at 2 ppm; pineapple at 0.09 ppm; rye, forage at 1 ppm; rye, grain at 0.08 ppm; rye, hay at 1.5 ppm; rye, straw at 2 ppm; sorghum, forage at 0.4 ppm; sorghum, grain at 0.3 ppm; sorghum, stover at 0.9 ppm; teff, forage at 1 ppm; teff, grain at 0.08 ppm; teff, hay at 1.5 ppm; teff, straw at 2 ppm; teosinte, grain at 0.015 ppm; triticale, forage at 1 ppm; triticale, grain at 0.08 ppm; triticale, hay at 1.5 ppm; and triticale, straw at 2 ppm. That document referenced a summary of the petition prepared by Dow AgroSciences, the registrant, which is available in docket number EPA-HQ-OPP-2014-0156, http://www.regulations.gov. The petition also requested revisions to the certain existing animal commodity tolerances, as follows: Milk at 1 ppm; fat of cattle, goat, horse and sheep at 0.6 ppm; meat of cattle, goat, horse and sheep at 1 ppm; meat byproducts of cattle, goat, horse and sheep at 2.5 ppm; hog, fat at 0.04 ppm; hog, meat at 0.07 ppm; hog, meat byproducts at 0.2 ppm; egg at 0.08 ppm; poultry, meat at 0.09 ppm; poultry, fat at 0.03 ppm; poultry, meat byproducts at 0.2 ppm. These requested revisions were inadvertently omitted from the April 23, 2014 Federal Register notice (79 FR 22602) (FRL-9907-39) but were included in the summary of the petition that was available in the docket. Comments were received on the notice of filing. EPA's response to these comments is discussed in Unit IV.C.

In the Federal Register of July 24, 2018 (83 FR 34968) (FRL-9980-31), 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 8E8666) by IR-4, IR-4 Project Headquarters, Rutgers, The State University of New Jersey, 500 College Road East, Suite 201W, Princeton, NJ 08540. The petition requested that 40 CFR part 180 be amended by establishing tolerances for residues of sulfoxaflor ( N -[methyloxido[1-[6-(trifluoromethyl)-3-pyridinyl]ethyl]-λ 4 -sulfanylidene]cyanamide) in or on the following raw agricultural commodities: Artichoke, globe at 0.70 ppm; asparagus at 0.015 ppm; brassica, leafy greens, subgroup 4-16B, except watercress at 2.0 ppm; bushberry subgroup 13-07B at 2.0 ppm; caneberry subgroup 13-07A at 1.5 ppm; celtuce at 2.0 ppm; florence fennel at 2.0 ppm; fruit, stone, group 12-12 at 3.0 ppm; kohlrabi at 2.0 ppm; leafy greens subgroup 4-16A at 6.0 ppm; leaf petiole vegetable subgroup 22B at 2.0 ppm; nut, tree, group 14-12 at 0.015 ppm; sunflower subgroup 20B at 0.30 ppm; and vegetable, brassica, head and stem, group 5-16, except cauliflower at 2.0 ppm. Additionally, the petition requested to amend 40 CFR 180.668 by removing the established tolerances for residues of sulfoxaflor in or on the following raw agricultural commodities: Fruit, stone, group 12 at 3.0 ppm; leafy greens, subgroup 4A at 6.0 ppm; leafy petiole, subgroup 4B at 2.0 ppm; nuts, tree, group 14 at 0.015 ppm; pistachio at 0.015 ppm; and vegetable, brassica, leafy, group 5, except cauliflower at 2.0 ppm. That document referenced a summary of the petition prepared by Dow AgroSciences, the registrant, which is available in docket number EPA-HQ-OPP-2018-0179, http://www.regulations.gov. There were no comments received in response to the notice of filing.

Based upon review of the data supporting the petition, EPA is establishing tolerances that vary from what the petitioner requested (PP 8E8666), as authorized under FFDCA section 408(d)(4)(A)(i). Also, the petitioner withdrew the tolerances proposed for buckwheat and clover (PP 4F8237). Since clover is a representative commodity for non-grass animal feeds (group 18), a crop group tolerance cannot be established for that crop group. Additionally, existing tolerances for livestock commodities ( e.g., cattle, goats, sheep, and horse) are being revised based upon a recalculation of the livestock dietary burden. 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 sulfoxaflor including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with sulfoxaflor 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.

Specific information on the studies received and the nature of the adverse effects caused by sulfoxaflor as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies are discussed in the final rule published in the Federal Register of May 17, 2013 (78 FR 29041) (FRL-9371-4). Further discussion of the toxicological profile for sulfoxaflor can be found at http://www.regulations.gov in section 4.0 titled “ Hazard Characterization and Dose-Response Assessment ” (pages 14-28) of the document titled “ Sulfoxaflor. Human Health Risk Assessment for New Food Uses on Avocado and Rice ” and pages 13-26 of the document titled “ Sulfoxaflor. Human Health Risk Assessment for New Food Uses on Artichoke, Asparagus, Bushberry, Caneberry and Sunflower, and Multiple Crop Group Conversions ” in docket ID number EPA-HQ-OPP-2018-0179.

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-pesticide.

A summary of the toxicological endpoints for sulfoxaflor used for human risk assessment is shown in the table of this unit.

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to sulfoxaflor, EPA considered exposure under the petitioned-for tolerances as well as all existing sulfoxaflor tolerances in 40 CFR 180.668. EPA assessed dietary exposures from sulfoxaflor 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 sulfoxaflor. In estimating acute dietary exposure, EPA used 2003-2008 food consumption information from the U.S. Department of Agriculture's (USDA's) National Health and Nutrition Examination Survey, What We Eat in America, (NHANES/WWEIA). As to residue levels in food, the acute assessment was based on the maximum observed residue levels from crop field trials and 100 percent crop treated (PCT).

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

iii. Cancer. Based on the data summarized in Unit III.A., EPA has concluded that quantification of risk using a non-linear approach ( i.e., RfD/cPAD) will adequately account for all chronic toxicity, including carcinogenicity. 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. Section 408(b)(2)(E) of FFDCA authorizes EPA to use available data and information on the anticipated residue levels of pesticide residues in food and the actual levels of pesticide residues that have been measured in food. If EPA relies on such information, EPA must require pursuant to FFDCA section 408(f)(1) that data be provided 5 years after the tolerance is established, modified, or left in effect, demonstrating that the levels in food are not above the levels anticipated. For the present action, EPA will issue such data call-ins as are required by FFDCA section 408(b)(2)(E) and authorized under FFDCA section 408(f)(1). Data will be required to be submitted no later than 5 years from the date of issuance of these tolerances.

2. Dietary exposure from drinking water. The Agency used screening level water exposure models in the dietary exposure analysis and risk assessment for sulfoxaflor in drinking water. These simulation models take into account data on the physical, chemical, and fate/transport characteristics of sulfoxaflor. 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.

Environmental fate data indicate that the use of sulfoxaflor is likely to result in different residue profiles in surface water and ground water. The residues in surface water are likely to include parent sulfoxaflor and X11719474/X11519540 degradates while X11719474/X11519540 will predominate in ground water. When the residue profiles are coupled with the toxicological database, it becomes apparent that the EDWCs for assessing acute dietary exposure for the general population, acute dietary exposure for women of child-bearing age, and chronic dietary exposure for all populations need to be addressed differently. An explanation of the three scenarios and the rationale for the approaches taken by EPA is provided below.

Acute Exposure: Separate acute endpoints were selected for the general population and females 13 to 49 years of age. For the general population, the point of departure is based on decreased motor activity observed in the acute neurotoxicity study. As there are no data available to examine the potency of X11719474 and X11519540 with respect to this endpoint, EPA has assumed that the two metabolites possess similar toxicity relative to sulfoxaflor in order to assess acute dietary risk for the general population. The EDWC for ground water is significantly greater than the acute estimate for surface water and, per Agency policy, is being used in the acute dietary assessment for the general population. As it is a ground water EDWC, it represents residues of the metabolites.

For females 13 to 49 years of age, the developmental endpoint of increased neonatal deaths was chosen because a single exposure during late gestation can adversely affect the developing fetus via agonism of the muscle nicotinic acetylcholine receptor (nAChR), and the age group represents women of child-bearing age. Studies with the metabolite X11719474 demonstrated that it does not cause agonism of the fetal rat muscle nAChR. Based on structural similarity between X11719474 and X11519540, the Agency further determined that X1159540 is not likely to result in agonism of the muscle nAChR. Therefore, both metabolites have been excluded from assessment scenarios using the developmental endpoint. Since the ground water EDWC represents residues of only these metabolites, the acute surface water EDWC, which consists of only parent sulfoxaflor, is the appropriate estimate for assessing dietary exposure for women of child-bearing age.

Chronic Exposure: The endpoint for assessing chronic dietary exposure is hepatotoxicity. The Agency has determined that it is appropriate to combine residues of sulfoxaflor, X11719474, and X11519540 when assessing chronic exposure and, furthermore, there is sufficient evidence to adjust the assessment to account for the different potencies of the metabolites. Based on NOAELs in the 28-day oral toxicity studies in rats, the potencies of the metabolites, relative to sulfoxaflor, are 0.3X for X11719474 and 3.4X for X11519540. To account for the relative toxicity, the EDWCs for each metabolite are multiplied by their respective potency factors.

EDWCs Used in the Assessment: For the acute dietary risk assessment of the general population, the groundwater EDWC is greater than the surface water EDWC and was used in the assessment. The residue profile in groundwater is 12 ppb X11719474 and 1.6 ppb X11519540 (totaling 13.6 ppb). Parent sulfoxaflor is not expected in groundwater. For this assessment, the regulatory toxicological endpoint is based on neurotoxicity. There is no information to relate the neurotoxicity of the metabolites to that of sulfoxaflor; therefore, no toxicity adjustment was made to the EDWC.

For the acute dietary risk assessment of females 13 to 49, the regulatory endpoint is attributable only to the parent compound (as previously discussed); therefore, the surface water EDWC is the most appropriate EDWC for this assessment even though it is of a lower value than the groundwater EDWC, which reflects metabolites only. The EDWC of 9.2 ppb was used and no toxicological adjustment was made.

For the chronic dietary risk assessment, the toxicological endpoint is liver effects, for which it is possible to account for the relative toxicities of X11719474 and X11519540 as compared to sulfoxaflor. The groundwater EDWC is greater than the surface water EDWC. The residue profile in groundwater consists of 8 ppb X11719474 and 1.1 ppb X11519540. Adjusting for the relative toxicity results in 2.4 ppb equivalents of X11719474 and 3.7 ppb X11519540 (totaling 6.1 ppb). The adjusted groundwater EDCW is greater than the surface water EDWC and was, therefore, used to assess the chronic dietary exposure scenario.

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). Sulfoxaflor is not registered for any specific use patterns that would result in residential exposure.

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 sulfoxaflor to share a common mechanism of toxicity with any other substances, and sulfoxaflor does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that sulfoxaflor 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. Developmental/offspring toxicity, manifested as skeletal abnormalities and neonatal deaths, was observed in rats only. The skeletal abnormalities, forelimb flexure, bent clavicles, and hindlimb rotation likely result from skeletal muscle contraction due to agonism of the muscle nAChR in utero. Similarly, contraction of the diaphragm muscle prevents normal breathing in neonates resulting in increased mortality. The skeletal abnormalities were observed at high doses in the developmental and reproduction studies and decreased neonatal survival was consistently observed in the reproduction and developmental neurotoxicity studies. These developmental effects were not observed in the rabbit.

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 sulfoxaflor is complete.

ii. In the acute neurotoxicity study, decreased motor activity and clinical signs associated with neurotoxicity (increased muscle tremors and twitches, convulsions, hindlimb splaying, increased lacrimation and salivation, decreased pupil size and response to touch, gait abnormalities and decreased rectal temperature) were observed. However, the level of concern for neurotoxicity is low because (1) the effects are well characterized; (2) the dose-response curve for these effects is well characterized; (3) clear NOAELs have been identified; and (4) the endpoints chosen for risk assessment are protective for the observed neurotoxicity.

iii. Although there was quantitative susceptibility observed in the DNT and developmental rat studies, there is no residual uncertainty because (1) the effects are well characterized; (2) clear NOAELs were identified; and (3) the endpoints chosen for risk assessment are protective of potential in utero and developmental effects. Quantitative susceptibility in the DNT was based on an increased rate of neonatal deaths at a dose where no maternal toxicity was observed. Quantitative susceptibility was also observed in the developmental rat study as decreased fetal weight, forelimb flexure, hindlimb rotation, and bent clavicles at a dose that did not cause maternal toxicity. However, the apparent enhanced sensitivity in this study may be due to the limited number of evaluations conducted in dams in the study rather than a true sensitivity of the young. In that regard, adverse liver effects were observed in the 90-day rat study at a LOAEL lower than the highest dose tested in the developmental rat study. The dams in the developmental rat study had increased liver weights but clinical chemistry and liver histopathological analysis were not investigated to determine if the effects on the liver were adverse. Qualitative susceptibility was observed in the two-generation reproduction study since neonatal deaths were observed at the same dose that resulted in hepatotoxicity in parental animals. However, these effects occurred at a higher dose compared to the offspring effects observed in the DNT. Finally, there was no evidence of quantitative or qualitative susceptibility in the developmental studies in the rabbit.

iv. There are no residual uncertainties with regard to dietary exposure. The dietary exposure assessments are based on high-end residue estimates, processing factors, and 100 PCT, as well as upper-bound modeled estimates of residues in drinking water. These assessments will not underestimate the exposure and risks posed by sulfoxaflor.

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 sulfoxaflor will occupy 28% of the aPAD for both children 1 to 2 years old and females 13 to 49 years old, the population groups 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 sulfoxaflor from food and water will utilize 47% of the cPAD for children 1 to 2 years old, the population group receiving the greatest exposure. There are no residential uses for sulfoxaflor.

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

Short- and intermediate-term adverse effects were identified; however, sulfoxaflor is not registered for any use patterns that would result in short- or intermediate-term residential exposure. Short- and intermediate-term risk is assessed based on short- and intermediate-term residential exposure plus chronic dietary exposure. Because there is no short- or 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 short- or intermediate-term risk), no further assessment of short- or intermediate-term risk is necessary, and EPA relies on the chronic dietary risk assessment for evaluating short- and intermediate-term risk for sulfoxaflor.

4. 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 sulfoxaflor. As the chronic dietary endpoint and dose are protective of potential cancer effects, sulfoxaflor is not expected to pose an aggregate cancer risk.

5. 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 sulfoxaflor residues.

High performance liquid chromatographic methods with positive-ion electro spray interface (ESI) and tandem mass spectrometric detection (LC/MS/MS) were previously reviewed and found to be acceptable for tolerance enforcement of sulfoxaflor residues (the two metabolites, X11719474 and X11721061, are also quantitated). The limit of quantitation (LOQ), determined as the lowest level of method validation (LLMV), is 0.010 ppm in all matrices.

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.

Codex has established MRLs for residues of sulfoxaflor on broccoli (3 ppm) and head cabbage (0.4 ppm). These commodities are covered in the U.S. crop group 5-16 (vegetable, brassica, head and stem), for which EPA is establishing a tolerance at 2 ppm in this rulemaking. This 2 ppm tolerance is part of a conversion from the existing group 5A, including broccoli and cabbage, to the new crop group 5-16. The old group was not harmonized with the Codex MRL. EPA is not harmonizing the new crop group 5-16 either because the representative commodity data for the new group 5-16 support establishing one tolerance level for all commodities in the group rather than a higher broccoli and lower cabbage tolerance.

In addition, Codex has established MRLs for leafy vegetables at 6 ppm. EPA's leafy vegetable crop group 4-16 is split into two subgroups: 4-16A for leafy greens and 4-16B for Brassica, leafy greens. Although EPA is establishing a subgroup 4-16A tolerance at 6 ppm, which harmonizes with the Codex MRL, EPA is also establishing a subgroup 4-16B tolerance at 2 ppm, which is not harmonized with the Codex MRL. This is because the representative commodity data for mustard greens indicates that lower residues of the pesticide are present on the brassica, leafy greens commodities.

The tolerances in meat and meat byproducts of hogs and poultry are being harmonized with the corresponding Codex MRLs instead of the levels proposed by the petitioner. Therefore, tolerances in hog meat and hog meat byproducts are being established at 0.3 and 0.6 ppm, respectively (rather than 0.07 and 0.2 ppm), in order to harmonize with MRLs of 0.3 mg/kg in meat from mammals other than marine mammals, and 0.6 mg/kg in mammalian edible offal. Similarly, tolerances in poultry meat and poultry meat byproducts are being established at 0.1 and 0.3 ppm, respectively (rather than 0.09 and 0.2 ppm), in order to harmonize with Codex MRLs of 0.1 mg/kg in poultry meat, and 0.3 ppm in poultry edible offal.

Thirteen comments were received in response to the NOF for petition 4F8237. Nine of these comments were primarily related to bee toxicity, which is not an issue that is relevant to the Agency's evaluation of safety of the sulfoxaflor tolerances under section 408 of the FFDCA, which requires the Agency to evaluate the potential harms to human health, not effects on the environment.

Another four comments were primarily related to a general disapproval of pesticides in general. 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 sulfoxaflor tolerances are safe. The commenters have provided no information supporting a contrary conclusion.

The Agency is establishing a tolerance of 0.01 ppm in asparagus as opposed to the 0.015 ppm proposed by the petitioner. In the field trials that serve as the basis for the tolerance level, the application rates were exaggerated by 4.2-6.5X the proposed application rate, and the resulting residues in all but one trial were <0.01 ppm and in the other trial the residues measured 0.011 ppm. When sulfoxaflor is used in accordance with the proposed label, all residues are expected to be <0.01 ppm. Therefore, the Agency is establishing the tolerance at the limit of quantification (0.01 ppm).

Tolerances are not being established in clover or buckwheat commodities (as these proposed new uses were subsequently withdrawn by the registrant after submission of the original petition), nor in non-grass feeds (group 18), for which clover is a representative commodity.

In order to maximize global regulatory harmonization, it became EPA policy in April 2011 to use the OECD calculation procedures to derive tolerance levels. As such, the proposed tolerance of 0.9 ppm in sorghum, grain, stover will be listed as 1 ppm; the proposed tolerance of 30 ppm in alfalfa seed will be changed to 40 ppm; the proposed tolerance of 0.09 ppm in pineapple will be changed to 0.1 ppm; and the proposed tolerance of 0.15 ppm in cacao, dried bean will be changed to 0.05 ppm.

For millet, there is no established “parent” millet term that covers more than one millet. As such, the tolerances are being established specifying both proso and pearl millet individually.

Tolerances of 0.6 and 2.5 ppm in the fat and meat byproducts, respectively, of cattle, goats, horses and sheep were proposed by the petitioner. However, revised tolerances of 0.2 and 0.8 ppm in these fat and meat byproducts are appropriate since the clover use was withdrawn, resulting in a lower dietary burden to livestock and lower anticipated residues in livestock commodities than originally considered by the petitioner.

Existing tolerances in cattle, meat; goat, meat; sheep, meat; and horse, meat is being revised in this action to 0.4 ppm, consistent with anticipated residues based upon a recalculated dietary burden of sulfoxaflor, and the results of a lactating dairy cattle feeding study.

For several commodities in the IR-4 petition (PP 8E8666), the requested tolerances include an additional significant figure (such as 1.0 ppm rather than 1 ppm). EPA is establishing the tolerances without the trailing zero to be consistent with current rounding practice.

In this final rule, EPA is reducing the existing tolerances for arugula; cress, garden; and cress, upland from 6 ppm to 2 ppm. Currently, these commodities are included in leafy greens subgroup 4A, which has a tolerance of 6 ppm. In 2016, EPA moved these commodities to the Brassica leafy greens subgroup 4-16B. (81 FR 26471; FRL-9944-87 (May 3, 2016)). In today's rule, EPA is establishing a tolerance for residues of sulfoxaflor in or on commodities in Brassica leafy greens subgroup 4-16B, which now includes arugula, garden cress, and upland cress, at 2 ppm, based on available residue data. This results in a reduction of tolerance levels for these three commodities.

In accordance with the World Trade Organization's (WTO) Sanitary and Phytosanitary Measures (SPS) Agreement, EPA intends to notify the WTO of this revision. In addition, the SPS Agreement requires that members provide a “reasonable interval” between the publication of a regulation subject to the agreement and its entry into force to allow time for producers in exporting member countries to adapt to the new requirement. At this time, EPA is establishing an expiration date for the existing tolerances to allow those tolerances to remain in effect for a period of six months after the effective date of this final rule, in order to address the requirement to provide a reasonable interval. After the six-month period expires, residues of sulfoxaflor on arugula; cress, garden; and cress, upland cannot exceed the newly established tolerances of 2 ppm.

This reduction in tolerance levels is not discriminatory; the same food safety standard contained in the FFDCA applies equally to domestically produced and imported foods. The new tolerance levels are supported by available residue data.

Therefore, tolerances are established for residues of sulfoxaflor in or on Alfalfa, forage at 7 ppm; Alfalfa, hay at 20 ppm; Alfalfa, seed at 40 ppm; Alfalfa, silage at 9 ppm; Artichoke, globe at 0.7 ppm; Asparagus at 0.01 ppm; Brassica, leafy greens, subgroup 4-16B, except watercress at 2 ppm; Bushberry subgroup 13-07B at 2 ppm; Cacao, dried bean at 0.05 ppm; Caneberry subgroup 13-07A at 1.5 ppm; Celtuce at 2 ppm; Corn, field, forage at 0.5 ppm; Corn, field, grain at 0.015 ppm; Corn, field, stover at 0.8 ppm; Corn, pop, grain at 0.015 ppm; Corn, pop, stover at 0.8 ppm; Corn, sweet, forage at 0.6 ppm; Corn, sweet, kernel plus cob with husks removed at 0.01 ppm; Corn, sweet, stover at 0.7 ppm; Fennel, Florence, fresh leaves and stalk at 2 ppm; Fruit, stone, group 12-12 at 3 ppm; Kohlrabi at 2 ppm; Leaf petiole vegetable subgroup 22B at 2 ppm; Leafy greens subgroup 4-16A at 6 ppm; Millet, proso, forage at 0.4 ppm; Millet, pearl, forage at 0.4 ppm; Millet, proso, grain at 0.3 ppm; Nut, tree, group 14-12 at 0.015 ppm; Oat, grain at 0.4 ppm; Oat, hay at 1 ppm; Oat, straw at 2 ppm; Pineapple at 0.1 ppm; Rye, forage at 1 ppm; Rye, grain at 0.08 ppm; Rye, hay at 1.5 ppm; Rye, straw at 2 ppm; Sorghum, grain, forage at 0.4 ppm; Sorghum, grain, grain at 0.3 ppm; Sorghum, grain, stover at 1 ppm; Sunflower subgroup 20B at 0.3 ppm; Teff, forage at 1 ppm; Teff, grain at 0.08 ppm; Teff, hay at 1.5 ppm; Teff, straw at 2 ppm; Teosinte, grain at 0.015 ppm; Triticale, forage at 1 ppm; Triticale, grain at 0.08 ppm; Triticale, hay at 1.5 ppm; Triticale, straw at 2 ppm; and Vegetable, brassica, head and stem, group 5-16, except cauliflower at 2 ppm.

Additionally, the following existing tolerances are revised as follows: Cattle, fat at 0.2 ppm; Cattle, meat at 0.4 ppm; Cattle, meat byproducts at 0.8 ppm; Egg at 0.06 ppm; Goat, fat at 0.2 ppm; Goat, meat at 0.4 ppm; Goat, meat byproducts at 0.8 ppm; Hog, fat at 0.03 ppm; Hog, meat at 0.3 ppm; Hog, meat byproducts at 0.6 ppm; Horse, fat at 0.2 ppm; Horse, meat at 0.4 ppm; Horse, meat byproducts at 0.8 ppm; Milk at 0.3 ppm; Poultry, fat at 0.02 ppm; Poultry, meat at 0.1 ppm; Poultry, meat byproducts at 0.3 ppm; Sheep, fat at 0.2 ppm; Sheep, meat at 0.4 ppm; and Sheep, meat byproducts at 0.8 ppm.

The established tolerances for Fruit, stone, group 12; Leafy greens, subgroup 4A; Leafy petiole, subgroup 4B; Nuts, tree, group 14; Pistachio; and Vegetable, Brassica, leafy, group 5, except cauliflower are removed as unnecessary due to the establishment of the above tolerances.

Lastly, in order to provide a reasonable interval for implementation of certain tolerances being reduced through this rule, EPA is leaving in place the following individual tolerances for a period of six months: Arugula; cress, garden; and cress, upland.

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:

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

In this document, EPA denies all objections in response to a March 29, 2017 order denying the 2007 PANNA and NRDC petition requesting that EPA revoke all tolerances and cancel all pesticide product registrations for chlorpyrifos. In addition to the Petitioners, this action may be of interest to agricultural producers, food manufacturers or pesticide manufacturers, and others interested in food safety issues generally. 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), e.g., agricultural workers; greenhouse, nursery, and floriculture workers; farmers.

• Animal production (NAICS code 112), e.g., cattle ranchers and farmers, dairy cattle farmers, livestock farmers.

• Food manufacturing (NAICS code 311), e.g., agricultural workers; farmers; greenhouse, nursery, and floriculture workers; ranchers; pesticide applicators.

• Pesticide manufacturing (NAICS code 32532), e.g., agricultural workers; commercial applicators; farmers, greenhouse, nursery, and floriculture workers; residential users.

In this order, EPA denies objections to EPA's order of March 29, 2017 (the Denial Order), in which EPA denied a 2007 petition (the Petition) from PANNA and NRDC (the Petitioners) that requested that EPA revoke all tolerances for the pesticide chlorpyrifos established under FFDCA section 408. (Ref. 1) The Petition also sought the cancellation of all chlorpyrifos pesticide product registrations under section 6 the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 7 U.S.C. 136d.

The Petition raised the following claims regarding both EPA's 2006 FIFRA reregistration decision and active registrations of chlorpyrifos in support of the request for tolerance revocations and product cancellations:

1. EPA has ignored genetic evidence of vulnerable populations.

2. EPA has needlessly delayed a decision regarding endocrine disrupting effects.

3. EPA has ignored data regarding cancer risks.

4. EPA's 2006 cumulative risk assessment (CRA) for the organophosphates misrepresented risks and failed to apply FQPA 10X safety factor. ( Note: For convenience's sake, the legal requirements regarding the additional safety margin for infants and children in FFDCA section 408(b)(2)(C) are referred to throughout this response as the “FQPA 10X safety factor” or simply the “FQPA safety factor.” Due to Congress' focus on both pre- and post-natal toxicity, EPA has interpreted this additional safety factor as pertaining to risks to infants and children that arise due to pre-natal exposure as well as to exposure during childhood years.)

5. EPA has over-relied on registrant data.

6. EPA has failed to properly address the exporting hazard in foreign countries from chlorpyrifos.

7. EPA has failed to quantitatively incorporate data demonstrating long-lasting effects from early life exposure to chlorpyrifos in children.

8. EPA has disregarded data demonstrating that there is no evidence of a safe level of exposure during pre-birth and early life stages.

9. EPA has failed to cite or quantitatively incorporate studies and clinical reports suggesting potential adverse effects below 10% cholinesterase inhibition.

10. EPA has failed to incorporate inhalation routes of exposure.

EPA's Denial Order denied the Petition in full (82 FR 16581). Prior to issuing that order, EPA provided the Petitioners with two interim responses on July 16, 2012 and July 15, 2014. The July 16, 2012 response denied claim 6 (export hazard) completely, and that portion of the response was a final agency action. The remainder of the July 16, 2012 response and the July 15, 2014 response expressed EPA's intention to deny six other petition claims (1-5 and 10). ( Note: In the 2012 response, EPA did, however, inform Petitioners of its approval of label mitigation (in the form of rate reductions and spray drift buffers) to reduce bystander risks, including risks from inhalation exposure, which in effect partially granted Petition claim 10.) EPA made clear in both the 2012 and 2014 responses that, absent a request from Petitioners, EPA's denial of those six claims would not be made final until EPA finalized its response to the entire Petition. Petitioners made no such request, and EPA therefore finalized its response to those claims in the Denial Order.

The remaining Petition claims (7-9) all related to same issue: Whether the potential exists for chlorpyrifos to cause neurodevelopmental effects in children at exposure levels below EPA's existing regulatory standard (10% cholinesterase inhibition). Because these claims raised novel, highly complex scientific issues, EPA originally decided it would be appropriate to address these issues in connection with the registration review of chlorpyrifos under FIFRA section 3(g) and decided to expedite that review, intending to finalize it several years in advance of the October 1, 2022 registration review deadline. EPA decided as a policy matter that it would address the Petition claims raising these matters on a similar timeframe. Although EPA had expedited its registration review to address these issues, the Petitioners were not satisfied with EPA's progress in responding to the Petition, and they brought legal action in the Ninth Circuit Court of Appeals to compel EPA to either issue an order denying the Petition or to grant the Petition by initiating the tolerance revocation process. Following several rounds of litigation (see discussion of the litigation in Unit III. of this Order), EPA was ordered by the Ninth Circuit to issue either a tolerance revocation rule or an order denying the Petition by March 31, 2017. In re Pesticide Action Network of North America v. EPA, 840 F.3d (9th Cir. 2016). Accordingly, in compliance with the court's order, the Denial Order also finalized EPA's response on claims 7-9. As to those claims, EPA concluded that, despite several years of study, the science addressing neurodevelopmental effects remains unresolved and that further evaluation of the science during the remaining time for completion of registration review was warranted regarding whether the potential exists for adverse neurodevelopmental effects to occur from current human exposures to chlorpyrifos. EPA therefore denied the remaining Petition claims, concluding that it was not required to complete—and would not complete—the human health portion of the registration review or any associated tolerance revocation of chlorpyrifos without resolution of those issues during the ongoing FIFRA registration review of chlorpyrifos.

In June 2017, several public interest groups and states filed objections to the Denial Order pursuant to the procedures in FFDCA section 408(g)(2). Specifically, Earthjustice submitted objections on behalf of the following 12 public interest groups: Petitioners PANNA and NRDC, United Farm Workers, California Rural Legal Assistance Foundation, Farmworker Association of Florida, Farmworker Justice, GreenLatinos, Labor Council for Latin American Advancement, League of United Latin American Citizens, Learning Disabilities Association of America, National Hispanic Medical Association and Pineros y Campesinos Unidos del Noroeste. Another public interest group, the North Coast River Alliance, submitted separate objections. With respect to the states, New York, Washington, California, Massachusetts, Maine, Maryland, and Vermont submitted a joint set of objections (Ref. 2).

The objections focus on three main topics: (1) The Objectors assert that the FFDCA requires EPA apply to the FFDCA safety standard in reviewing any petition to revoke tolerances and that EPA's decision to deny the Petition failed to apply that standard; (2) The Objectors contend that the record before EPA demonstrates that chlorpyrifos results in unsafe drinking water exposures and adverse neurodevelopmental effects and that EPA must therefore issue a final rule revoking all chlorpyrifos tolerances; and (3) The Objectors claim that EPA committed procedural error in failing to respond to comments, and they specifically point to comments related to neurodevelopmental effects, inhalation risk, and Dow AgroSciences' physiologically based pharmacokinetic model (PBPK model) used in EPA's risk assessment. Dow AgroSciences, which is now Corteva AgriScience, will be referred to as Corteva throughout the remainder of this Order.

On June 5, 2017, the same the day the Objectors were required to submit their objections to EPA, the League of United Latin American Citizens (LULAC) and the other 11 public interest Objectors represented by Earthjustice filed suit in the U.S. Court of Appeals for the 9th Circuit directly challenging the Denial Order, asserting that the court could review the order directly, even in the absence of EPA's final order under FFDCA section 408(g)(2)(C) responding to the objections they had just submitted. LULAC, et al. v. Wheeler, et al., No. 17-71636. In their pleadings, Petitioners alternatively asked the court to issue a mandamus order compelling EPA to respond to the June 2017 objections within 60 days. On August 9, 2018, a three-judge panel of the 9th Circuit vacated the Denial Order and ordered EPA to revoke all chlorpyrifos tolerances and cancel all chlorpyrifos registrations within 60 days. Id., 899 F.3d 814. EPA sought rehearing of that decision before an en banc panel of the 9th Circuit, a request that was granted on February 6, 2019, effectively vacating the August 9, 2018 panel decision. On April 19, 2019, the en banc panel granted the request for mandamus and directed EPA to respond to the objections not later than 90 days from that date. The court did not otherwise address the claims in the case.

After reviewing the objections, EPA has determined that the objections related to Petition claims regarding neurodevelopmental toxicity must be denied because the objections and the underlying Petition are not supported by valid, complete, and reliable evidence sufficient to meet the Petitioners' burden under the FFDCA, as set forth in EPA's implementing regulations. Further, for reasons stated in the Denial Order, EPA has concluded that it is also appropriate to deny the objections related to new issues raised after EPA's 2006 tolerance reassessment and reregistration of chlorpyrifos. These issues are being addressed according to the schedule for EPA's ongoing registration review of chlorpyrifos. EPA is also denying all claims related to drinking water risk and the use of the Corteva PBPK model in EPA's 2014 risk assessment and 2015 proposed rule because these claims were not made in the Petition and the objections process cannot be used to raise new issues and restart the petition process. Finally, EPA is denying the objections claiming procedural error, as EPA is not required to respond to comments made during the rulemaking process in this adjudication denying petition objections. Any response to comments will be completed in connection with EPA's final action in registration review.

The procedure for filing objections to EPA's final rule or order issued under FFDCA section 408(d) and EPA's authority for acting on such objections is contained in FFDCA section 408(g) (21 U.S.C. 346a(g)) and EPA's regulations at 40 CFR part 178.

In this unit, EPA provides background on the relevant statutes and regulations governing the objections as well as on pertinent Agency policies and practices.

EPA establishes maximum residue limits, or “tolerances,” for pesticide residues in food and feed commodities under FFDCA section 408. Without a tolerance or an exemption from the requirement of a tolerance, food containing a pesticide residue is “adulterated” under FFDCA section 402 and may not be legally moved in interstate commerce. FFDCA section 408 was substantially rewritten by the Food Quality Protection Act of 1996 (FQPA) (Pub. L. 104- 170, 110 Stat. 1489 (1996)), which established a detailed safety standard for pesticides and integrated EPA's regulation of pesticide food residues under the FFDCA with EPA's registration and re-evaluation of pesticides under FIFRA. The standard to establish, leave in effect, modify, or revoke a tolerance is stated in FFDCA section 408(b)(2)(A)(i). “The Administrator may establish or leave in effect a tolerance for a pesticide chemical residue in or on a food only if the Administrator determines that the tolerance is safe.” Id. “The Administrator shall modify or revoke a tolerance if the Administrator determines it is not safe.” Id. “Safe” is defined by FFDCA section 408(b)(2)(A)(ii) 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.” Among the factors that must be addressed in making a safety determination, FFDCA section 408(b)(2)(D) directs EPA to consider “validity, completeness, and reliability of the available data from studies of the pesticide chemical and pesticide chemical residue.”

Risks to infants and children are given special consideration. Specifically, FFDCA section 408(b)(2)(C)(i)(II) requires that EPA assess the risk of pesticides based on “available information concerning the special susceptibility of infants and children to the pesticide chemical residues, including neurological differences between infants and children and adults, and effects of in utero exposure to pesticide chemicals . . . .” (21 U.S.C. 346a(b)(2)(C)(i)(II)). This provision also creates a presumption that EPA will use an additional safety factor for the protection of infants and children. Specifically, it directs that “[i]n the case of threshold effects, . . . an additional tenfold margin of safety for the pesticide chemical residue and other sources of exposure shall be applied for infants and children to take into account potential pre- and post-natal toxicity and completeness of the data with respect to exposure and toxicity to infants and children.” (21 U.S.C. 346a(b)(2)(C)). EPA is permitted to “use a different margin of safety for the pesticide chemical residue only if, on the basis of reliable data, such margin will be safe for infants and children.” Id.

While the FFDCA authorizes the establishment of legal limits for pesticide residues in food, FIFRA section 3(a) requires the approval of pesticides prior to their sale and distribution and establishes a registration regime for regulating the use of pesticides. FIFRA regulates pesticide use in conjunction with its registration scheme by requiring EPA review and approval of pesticide labels and specifying that use of a pesticide inconsistent with its label is a violation of federal law. In the FQPA, Congress integrated action under the two statutes by requiring that the safety standard under the FFDCA be used as a criterion in FIFRA registration actions for pesticide uses that result in residues in or on food, ( see FIFRA section 2(bb)), and directing that EPA coordinate, to the extent practicable, revocations of tolerances with pesticide cancellations under FIFRA. ( see FFDCA section 408(l)(1)). FIFRA section 4 directed EPA to determine whether pesticides first registered prior to 1984 should be reregistered, including whether any associated FFDCA tolerances are safe and should be left in effect ( see FIFRA section 4(g)(2)(E)). FFDCA section 408(q) directed EPA to complete that tolerance reassessment (which included the reassessment of all chlorpyrifos tolerances) by 2006. Following the completion of FIFRA reregistration and tolerance reassessment, FIFRA section 3(g) requires EPA to re-evaluate pesticides under the FIFRA standard—which includes a determination whether to leave in effect existing FFDCA tolerances—every 15 years under a program known as “registration review.” The deadline for completing the current registration review for chlorpyrifos is October 1, 2022.

Tolerances are established, modified, or revoked by rulemaking under the unique procedural framework set forth in the FFDCA. Generally, a tolerance rulemaking is initiated by the party seeking to establish, modify, or revoke a tolerance by means of filing a petition with EPA. ( See FFDCA section 408(d)(1)). EPA publishes in the Federal Register a notice of the petition filing and requests public comment. After reviewing the petition and submitted comments, FFDCA section 408(d)(4) provides that EPA may issue a final rule establishing, modifying, or revoking the tolerance; issue a proposed rule to do the same; or issue an order denying the petition.

Once EPA takes action granting or denying the petition, FFDCA section 408(g)(2) allows any party to file objections with EPA and seek an evidentiary hearing on those objections. Objections and hearing requests must be filed within 60 days after the date on which EPA issues its rule or order under FFDCA section 408(d). A party may not raise issues in objections unless they were part of the petition and an objecting party must state objections to the EPA decision and not just repeat the allegations in its petition. Corn Growers v. EPA, 613 F.3d 266 (D.C. Cir. 2010), cert. denied, 131 S. Ct. 2931 (2011). EPA's final order on the objections, issued under FFDCA section 408(g)(2)(C), is subject to judicial review. (21 U.S.C. 346a(h)(1)).

Chlorpyrifos (0,0-diethyl-0-3,5,6-trichloro-2-pyridyl phosphorothioate) is a broad-spectrum, chlorinated organophosphate (OP) insecticide that has been registered for use in the United States since 1965. By pounds of active ingredient, it is the most widely used conventional insecticide in the country. Currently registered use sites include a large variety of food crops ( e.g., tree fruits and nuts; many types of small fruits and vegetables, including vegetable seed treatments; grain/oilseed crops; cotton), and non-food use settings ( e.g., ornamental and agricultural seed production; non-residential turf; industrial sites/rights of way; greenhouse and nursery production; sod farms; pulpwood production; public health; and wood protection). For some of these crops, chlorpyrifos is currently the only cost-effective choice for control of certain insect pests. In 2000, the chlorpyrifos registrants reached an agreement with EPA to voluntarily cancel all residential use products except those registered for ant and roach baits in child-resistant packaging and fire ant mound treatments ( e.g., 65 FR 76233 (Dec. 6, 2000); 66 FR 47481 (Sept. 12, 2001).

The OPs are a group of closely related pesticides that affect functioning of the nervous system. The OPs were included in the Agency's first priority group of pesticides to be reviewed under FQPA. In 2006, EPA completed FIFRA section 4 reregistration and FFDCA tolerance reassessment for chlorpyrifos and the OP class of pesticides and determined those tolerances were safe and should be left in effect (Ref. 3). Having completed reregistration and tolerance reassessment, EPA is required to complete the next re-evaluation of chlorpyrifos under the FIFRA section 3(g) registration review program by October 1, 2022. Given ongoing scientific developments in the study of the OPs generally, in March 2009 EPA announced its decision to prioritize the FIFRA section 3(g) registration review of chlorpyrifos by opening a public docket and releasing a preliminary work plan to complete the chlorpyrifos registration review by 2015—7 years in advance of the date required by law.

The registration review of chlorpyrifos has proven to be far more complex than originally anticipated. The OPs presented EPA with numerous novel scientific issues that the agency has taken to multiple FIFRA Scientific Advisory Panel (SAP) meetings since the completion of reregistration in 2006. ( Note: The SAP is a federal advisory committee created by FIFRA section 25(d) and serves as EPA's primary source of peer review for significant regulatory and policy matters involving pesticides.) Many of these complex scientific issues formed the basis of the 2007 petition filed by PANNA and NRDC, specifically issues related to potential human health risks associated with volatilization and neurodevelopmental effects. During the registration review process, EPA reviews the currently available body of scientific data, including animal and epidemiology data, and the assessment of potential risks from various routes of exposure. Therefore, when EPA began the registration review for chlorpyrifos in March 2009, the Agency indicated that the Agency had decided to address the Petition on a similar timeframe to EPA's expedited registration review schedule.

Although EPA has expedited the chlorpyrifos registration review to address the novel scientific issues raised by the Petition in advance of the statutory deadline, the complexity of the issues has precluded EPA from finishing this review according to the Agency's original timeframe. The Petitioners were dissatisfied with the pace of EPA's response efforts and sued EPA in federal court on three separate occasions to compel a faster response to the Petition. As explained in Unit I. of this Order, EPA addressed 7 of the 10 claims asserted in the Petition by either denying the claim, issuing a preliminary denial or approving label mitigation to address the claims, but notwithstanding these efforts, on August 10, 2015, the court issued a mandamus order directing EPA to “issue either a proposed or final revocation rule or a full and final response to the administrative Petition by October 31, 2015.” In re Pesticide Action Network of North America v. EPA, 798 F.3d (9th Cir. 2015).

In response to that order, EPA issued a proposed rule to revoke all chlorpyrifos tolerances on October 30, 2015 (published in the Federal Register on November 6, 2015 (80 FR 69080)), based on its unfinished registration review risk assessment. EPA acknowledged it had insufficient time to complete its drinking water assessment and its review of data addressing the potential for neurodevelopmental effects.

On December 10, 2015, the Ninth Circuit issued a further order requiring EPA to complete any final rule (or petition denial) and fully respond to the Petition by December 30, 2016. On June 30, 2016, EPA sought a six-month extension to that deadline in order to allow EPA to fully consider the most recent views of the FIFRA SAP with respect to chlorpyrifos toxicology. The FIFRA SAP report was finalized and made available for EPA consideration on July 20, 2016 (Ref. 4). On August 12, 2016, the court rejected EPA's request for an extension and ordered EPA to complete its final action by March 31, 2017 (effectively granting EPA a three-month extension). On November 17, 2016, EPA published a notice of data availability (NODA) seeking public comment on both EPA's revised risk and water assessments and reopening the comment period on the proposal to revoke all chlorpyrifos tolerances (81 FR 81049). The comment period for the NODA closed on January 17, 2017.

Following the close of the comment period on the NODA, EPA issued the Denial Order on March 29, 2017, as described in Unit I. of this Order. As noted, in June 2017, EPA received objections to the Denial Order from both public interest groups and states, and some of those same organizations simultaneously filed suit in the Ninth Circuit seeking to challenge the Denial Order in advance of EPA's response to the submitted objections. That litigation is summarized in Unit I. of this Order.

As explained in Unit I. of this Order, PANNA and NRDC submitted the Petition in 2007, raising 10 claims in support of their request that EPA revoke all chlorpyrifos tolerances under the FFDCA and cancel all chlorpyrifos registrations under FIFRA. EPA's Denial Order denied the Petition in full. The following is a summary of EPA's response in the Denial Order to the 10 Petition claims.

The Petitioners claimed that as part of EPA's 2006 reregistration and tolerance reassessment decision the Agency failed to calculate an appropriate intra-species uncertainty factor ( i.e., within human variability) for chlorpyrifos in both its aggregate and cumulative risk assessments (CRA). They asserted that certain data (the “Furlong study”) addressing intra-species variability in the behavior of the detoxifying enzyme paraoxonase (PON1), indicates that the Agency should have applied an intra-species safety factor “of at least 150X in the aggregate and cumulative assessments” rather than the 10X factor EPA applied.

In the Denial Order, EPA explained that it carefully considered the issue of PON1 variability and determined that data addressing PON1 in isolation are not appropriate for use alone in deriving an intra-species uncertainty factor and that the issue is more appropriately handled using a PBPK model. Further, the derivation of an intra-species factor of over 150X advocated by the Petitioners is based on combining values from humanized mice with human measured values with a range from highest to lowest; the Furlong study derivation is inappropriate and inconsistent with international risk assessment practice. In addition, the 2008 FIFRA SAP did not support the PON1 data used in isolation. Finally, Petitioners' statement that the Furlong study supports an intra-species uncertainty factor of at least 150X likely overstates potential variability. EPA therefore denied this aspect of the Petition.

Petitioners summarized a number of studies evaluating the effects of chlorpyrifos on the endocrine system, asserting that, taken together, the studies “suggest that chlorpyrifos may be an endocrine disrupting chemical, capable of interfering with multiple hormones controlling reproduction and neurodevelopment.”

EPA denied this claim because the Petition did not explain whether and how endocrine effects should form the basis of a decision to revoke tolerances. The basis for seeking revocation of a tolerance is a showing that the pesticide is not “safe.” Petitioners neither asserted that EPA should revoke tolerances because effects on the endocrine system render the tolerances unsafe, nor did Petitioners submit a factual analysis demonstrating that aggregate exposure to chlorpyrifos presents an unsafe risk to humans based on effects on the endocrine system.

EPA noted that while the cited studies provide qualitative information that exposure to chlorpyrifos may be associated with effects on the androgen and thyroid hormonal pathways, these data alone do not demonstrate that current human exposures from existing tolerances are unsafe. Further, EPA explained that in June 2015, it completed an Endocrine Disruption Screening Program weight-of-evidence conclusion for chlorpyrifos. That analysis evaluated all observed effects induced, the magnitude and pattern of responses observed across studies, taxa, and sexes, and the Agency also considered the conditions under which effects occurred, in particular whether or not endocrine-related responses occurred at dose(s) that also resulted in general systemic or overt toxicity. The Agency concluded that, based on weight-of-evidence considerations, further testing was not recommended for chlorpyrifos since there was no evidence of potential interaction with the estrogen, androgen, and thyroid pathways.

Petitioners claim that the Agency “ignored” a December 2004 National Institutes of Health Agricultural Health Study showing that the incidence of lung cancer has a statistically significant association with chlorpyrifos exposure. Petitioners did not otherwise explain whether and how these data support the revocation of tolerances or the cancellation of pesticide registrations. Specifically, Petitioners did not present any fact-based argument demonstrating that aggregate exposure to chlorpyrifos poses an unsafe carcinogenic risk. Accordingly, EPA denied the Petition to revoke chlorpyrifos tolerances or cancel chlorpyrifos registrations to the extent the Petition relies on claims pertaining to carcinogenicity. EPA went on to note, however, that while there is initial suggestive epidemiological evidence of an association between chlorpyrifos and lung cancer, it is reasonable to conclude chlorpyrifos is not a carcinogen in view of the lack of carcinogenicity in the rodent bioassays and the lack of a genotoxic or mutagenic potential.

Petitioners asserted that EPA relied on limited data and inaccurate interpretations of a specific study (the “Zheng study”) to support its decision to remove the FQPA safety factor in the 2006 OP cumulative risk assessment (CRA). Petitioners claimed the Zheng study showed an obvious difference between juvenile and adult responses to chlorpyrifos that supported retention of the 10X safety factor for chlorpyrifos in the CRA. EPA concluded that Petitioners' assertions did not provide a sufficient basis for revoking chlorpyrifos tolerances. The Petitioners' claim that the data EPA relied upon support a different FQPA safety factor for chlorpyrifos in the CRA did not amount to a showing that chlorpyrifos tolerances are unsafe as Petitioners did not present a factual analysis demonstrating that the lack of a 10X safety factor in the CRA for chlorpyrifos poses unsafe cumulative exposures to the OPs. For this reason, EPA denied the Petitioners' request to revoke chlorpyrifos tolerances or cancel chlorpyrifos registrations on the basis of the FQPA safety factor in the CRA.

Despite the inadequacy of Petitioners' FQPA CRA safety factor claims, EPA nonetheless examined the evidence Petitioners cited regarding the Zheng study. EPA acknowledged that in that study, pups appeared to be more sensitive than adults at the tested high dose. However, at the low-dose end of the response curve, relevant for human exposures, little to no difference was observed. This result is consistent with a comparative cholinesterase study submitted by Corteva that specifically compared the dose-response relationship in juvenile and adult rats and found no basis for concluding that juveniles are more sensitive, further supporting EPA's use of an FQPA safety factor of 1X for the AChE inhibition endpoint used in the 2006 OP CRA.

Petitioners asserted that in reregistering chlorpyrifos EPA “cherry picked” data, “ignoring robust, peer-reviewed data in favor of weak, industry-sponsored data to determine that chlorpyrifos could be re-registered and food tolerances be retained.” As such, Petitioners argued that the Agency's reassessment decision is not scientifically defensible. EPA concluded that this Petition claim was not purported to be an independent basis for revoking chlorpyrifos tolerances or cancelling chlorpyrifos registrations but simply support for Petitioners' arguments in other parts of the Petition. While Petitioners claim that EPA ignored robust, peer-reviewed data in favor of weak, industry-sponsored data for the reregistration of chlorpyrifos, Petitioners did not cite to any studies other than those used to support their other claims. In general, Petitioners did not provide any studies in the Petition that EPA failed to evaluate. Since the specific studies cited by Petitioners were not associated with this claim, but rather their other claims, EPA's response to the specific studies were, therefore, addressed in its responses to Petitioners' other claims. EPA went on to explain, however, that the Agency does not ignore robust, peer-reviewed data in favor of industry-sponsored data and that EPA has a public and well-documented set of procedures that it applies to the use and significance of all data utilized to inform risk management decisions. EPA does rely on registrant-generated data submitted in response to FIFRA and FFDCA requirements, as these data are conducted and evaluated in accordance with a series of internationally harmonized and scientifically peer-reviewed study protocols designed to maintain a high standard of scientific quality and reproducibility. But EPA does not end its review there. To further inform the Agency's risk assessment, EPA is committed to the consideration of other sources of information such as data identified in the open, peer-reviewed literature and information submitted by the public as part of the regulatory evaluation of a pesticide.

In the July 16, 2012 interim Petition response, EPA issued a final denial of this claim, as it was not a claim subject to the FFDCA, which provides for an administrative objections process following the denial of a petition. EPA explained in the interim response that it lacked authority to address the risks chlorpyrifos may pose to workers in foreign countries who may not utilize worker protection equipment that the United States requires. Further, EPA noted that it has no authority to ban the export of pesticides to foreign countries regardless of whether those pesticides may be lawfully used in the United States. Accordingly, EPA denied this claim, and that denial constituted final agency action.

The Petitioners asserted that human epidemiology and rodent developmental neurotoxicity data suggest that pre-natal and early life exposure to chlorpyrifos can result in long-lasting, possibly permanent damage to the nervous system and that these effects are likely occurring at exposure levels below 10% cholinesterase inhibition, EPA's existing regulatory standard for chlorpyrifos and other OPs. They assert that EPA has therefore used the wrong endpoint as a basis for regulation and that, taking into account the full spectrum of toxicity, chlorpyrifos does not meet the FFDCA safety standard or the FIFRA standard for registration.

EPA grouped these claims together because they fundamentally all raised the same issue: Whether the potential exists for chlorpyrifos to cause neurodevelopmental effects in infants and children from exposures (either to mothers during pregnancy or directly to infants and children) that are lower than those resulting in 10% cholinesterase inhibition—the basis for EPA's long-standing point of departure (POD) in regulating chlorpyrifos and other OPs. EPA noted that these claims were not challenges to EPA's 2006 reregistration decision for chlorpyrifos, but rather, new challenges to EPA's ongoing approval of chlorpyrifos under FIFRA and the FFDCA because they rely in large measure on data published after EPA completed both its 2001 chlorpyrifos Interim Reregistration Decision and the 2006 OP CRA that concluded the reregistration process for chlorpyrifos and all other OPs. As matters that largely came to light after the completion of reregistration, EPA made clear that these Petition issues are being addressed as part of the registration review of chlorpyrifos—the next round of re-evaluation under FIFRA section 3(g). The Denial Order noted that the question of OP neurodevelopmental toxicity was, and remains, an issue at the cutting edge of science, involving significant uncertainties.

During registration review, EPA conducted an in-depth analysis of the available OP and chlorpyrifos biomonitoring data and of the available epidemiologic studies from three major children's health cohort studies in the U.S., specifically from the Columbia Center for Children's Environmental Health (CCCEH), Center for the Health Assessment of Mothers and Children of Salinas (CHAMACOS), and Mt. Sinai. EPA three times, in 2008, 2012, and 2016 has presented approaches and proposals to the FIFRA SAP for evaluating this epidemiologic data exploring the possible connection between in utero and early childhood exposure to chlorpyrifos and adverse neurodevelopmental effects. The SAP's reports have rendered numerous recommendations for additional study and sometimes conflicting advice for how EPA should consider (or not consider) the epidemiology data in conducting EPA's registration review human health risk assessment for chlorpyrifos and served to underscore that the science on this question is not resolved and would benefit from additional inquiry. Indeed, EPA explained in the Denial Order that the comments received by EPA indicate that there are considerable areas of uncertainty with regard to what the epidemiology data show and deep disagreement over how those data should be considered in EPA's risk assessment. In August 2016, the Ninth Circuit made clear, however, that EPA was to provide a final response to the Petition by March 31, 2017, and that no more extensions would be granted—regardless of whether the science remains unsettled and irrespective of whatever options may exist for resolution of these issues during the registration review process.

While EPA acknowledged its obligation to respond to the Petition as required by the court, EPA noted that the court's order did not and could not compel EPA to complete the registration review of chlorpyrifos and the issues required for that determination in advance of the October 1, 2022 deadline provided in FIFRA section 3(g), 7 U.S.C. 136a(g). Although past EPA Administrators had proposed to attempt to complete that review several years in advance of the statutory deadline (and respond to the Petition on the same time frame), it was not possible to fully address these registration issues earlier than the registration review period. As a result, EPA concluded that it needed to adjust the schedule for chlorpyrifos so that it could complete its review of the science addressing neurodevelopmental effects prior to making a final registration review decision whether to retain, limit, or remove chlorpyrifos from the market. Accordingly, EPA denied the Petition claims and stated its intention to complete a full and appropriate review of the neurodevelopmental data before either finalizing the proposed rule of October 30, 2015, or taking an alternative regulatory path.

EPA explained that that denial of the Petition on these grounds provided was consistent with governing law because the petition provision in FFDCA section 408(d) does not address the timing for responding to a petition, nor does it limit the extent to which EPA may coordinate or stage its petition responses with the registration review provisions of FIFRA section 3(g). Provided EPA completes registration review by October 1, 2022, Congress otherwise gave the EPA Administrator the discretion under FIFRA to determine the schedule and timing for completing the review of the over 1000 pesticide active ingredients currently subject to evaluation under FIFRA section 3(g). EPA may lawfully re-prioritize the registration review schedule developed by earlier administrations provided that decision is consistent with law and an appropriate exercise of discretion. See Federal Communications Commission v. Fox Television Stations, 129 S.Ct. 1800 (2009) (Administrative Procedure Act does not require that a policy change be justified by reasons more substantial than those required to adopt a policy in the first instance). Nothing in FIFRA section 3(g) precludes EPA from altering a previously established registration review schedule. Given the absence of a clear statutory directive, FIFRA and the FFDCA provide EPA with discretion to take into account EPA's registration review of a pesticide in determining how and when the Agency responds to FFDCA petitions to revoke tolerances. As outlined previously, given the importance of this matter and the fact that critical questions remained regarding the significance of the data addressing neurodevelopmental effects, EPA asserted that there is good reason to extend the registration review of chlorpyrifos and therefore to deny the Petition. To find otherwise would effectively give petitioners under the FFDCA the authority to re-order scheduling decisions regarding the FIFRA registration review process that Congress has vested in the Administrator.

Petitioners assert that when EPA completed its 2006 OP CRA, EPA failed to consider and incorporate significant exposures to chlorpyrifos-contaminated air that exist for some populations in communities where chlorpyrifos is applied. Petitioners assert that these exposures exceeded safe levels when considering cholinesterase inhibition as a POD and that developmental neurotoxicity may occur at even lower exposure levels than those resulting in cholinesterase inhibition.

To the extent Petitioners are asserting that human exposure to chlorpyrifos spray drift and volatilized chlorpyrifos present neurodevelopmental risks for infants and children, EPA denied this claim for the reasons stated in EPA's response to claims 7-9.

With respect to Petitioners' claim that exposures to spray drift and volatilized chlorpyrifos present a risk from cholinesterase inhibition, EPA denied the Petition for the reasons identified in EPA's Spray Drift Mitigation Decision of July 16, 2012, and EPA's interim response of July 15, 2014, addressing chlorpyrifos volatilization. Specifically, in the Spray Drift Mitigation Decision, EPA determined that the chlorpyrifos registrants' adoption of label mitigation (in the form of label use rate reductions and no-spray buffer zones) eliminated risk from cholinesterase inhibition as a result of spray drift. As for risks presented by volatilized chlorpyrifos that may occur following application, EPA's July 15, 2014 interim response to the Petition explained that vapor-phase inhalation studies for both chlorpyrifos and chlorpyrifos-oxon made clear that neither vapor-phase chlorpyrifos nor chlorpyrifos oxon presents a risk of cholinesterase inhibition.

The three separate sets of objections to the Denial Order filed with EPA in June 2017 raise similar concerns and can be reduced to the following three primary arguments:

• The Objectors argue that EPA's Denial Order applied the wrong legal standard. (Note: All persons filing objections will be referred to as “Objectors.”) They assert that neither “scientific uncertainty” nor the October 2022 deadline for registration review under FIFRA section 3(g), nor the widespread agricultural use of chlorpyrifos, provide a basis for denying petitions to revoke. They claim that EPA has unlawfully left chlorpyrifos tolerances in place without making the safety finding required by the FFDCA.

• The Objectors assert that EPA has previously found that chlorpyrifos tolerances are unsafe and has not disavowed those findings. Specifically, they claim that EPA has found that chlorpyrifos results in unsafe drinking water exposures and results in adverse neurodevelopmental effects to children and that EPA must therefore revoke the tolerances.

• The Objectors argue that EPA's Denial Order committed a procedural error by failing to address significant concerns raised in the comments on EPA's 2014 risk assessment and 2015 proposed revocation that EPA's assessment fails to protect children. In particular, the Objectors focus on concerns raised in comments asserting that (1) EPA's use of 10% cholinesterase as a regulatory standard is not protective for effects to children's developing brains; (2) EPA has not properly accounted for effects from inhalation of chlorpyrifos from spray drift and volatilization; and (3) EPA inappropriately used the Corteva PBPK model to reduce inter- and intra-species safety factors because the model is ethically and scientifically deficient.

Corteva, the primary registrant of chlorpyrifos products registered for use in agriculture, submitted a response to the objections on August 27, 2018, raising specific detailed scientific concerns with the objections (Ref. 4). In addition, Corteva states that there is nothing in the FFDCA suggesting that statute requires EPA to make a safety finding in order to deny a response to a petition and that the FFDCA's implementing regulations place the burden on a petitioner to prove that a pesticide is unsafe. Corteva argues that to find otherwise would lead to the result that EPA is required to renew its safety finding every time a petition is filed, irrespective of the strength and quality of the evidence cited and regardless of whether EPA is engaged in an ongoing scientific review of issues addressed in the petition through FIFRA registration review.

EPA's responses to the specific objections summarized in Unit V. are provided in this unit.

Before addressing the specific legal objections, EPA notes that the Objectors' concerns focus primarily on EPA's denial of Petition claims 7-10 as they relate to the potential for adverse neurodevelopmental effects to children from exposure to chlorpyrifos in food, drinking water, and from spray drift. These concerns fundamentally relate to issues EPA is evaluating in its current registration review of chlorpyrifos. EPA is in the process of completing revised risk assessments to address new data and advancements in risk assessment methodology since EPA's 2006 safety finding for chlorpyrifos as part of FIFRA section 4 reregistration and FFDCA section 408(q) tolerance reassessment to review tolerances for pesticide residues in effect (Ref. 3). The Objectors have not materially challenged EPA's denial of Petition claims that related to matters before EPA at the time of EPA's 2006 safety finding. Specifically, they have not raised objections to the denial of claims relating to the genetic evidence for human vulnerability with respect to the detoxifying enzyme paraoxonase, endocrine-related effects, or carcinogenicity (claims 1-3). Nor have Objectors challenged most aspects of EPA's conclusions in the Denial Order respecting the potential for current chlorpyrifos exposures to result in acetyl cholinesterase inhibition—the regulatory POD used in EPA's 2006 reregistration and tolerance reassessment decisions.

In sum, the objections are focused on EPA's ongoing work in FIFRA registration review to evaluate more recent information addressing the risk of adverse neurodevelopmental effects. With respect to these claims, EPA has concluded, after many years of attempting to obtain information necessary to validate this information, that the objections and the underlying petition fail to provide evidence of neurodevelopmental effects that is sufficiently valid, complete, and reliable at this time to meet the burden petitioners for revocation bear in presenting a case that tolerances are unsafe, pursuant to the standard under FFDCA section 408(b)(2). In addition, as provided in the Denial Order, EPA has concluded that it is also appropriate to deny the petition to allow EPA to complete its assessment of the potential for adverse neurodevelopmental outcomes in connection with the ongoing chlorpyrifos FIFRA registration review.

1. Burden of coming forward with valid, complete, and reliable evidence. In response to the Objectors' claims that EPA applied an incorrect legal standard in denying the Petition, EPA disagrees that the FFDCA requires EPA to make a new safety determination in response to every petition to revoke under FFDCA section 408(d) or that it must revoke tolerances in the absence of making a renewed safety determination in response to a petition. Petitioners cite the FFDCA safety definition and the findings EPA must make to establish a tolerance or leave a tolerance in effect when reassessing the safety of tolerance under FFDCA section 408(q) and FIFRA section 3(g). None of their arguments, however, specifically focus on the FFDCA section 408(d) petition process to modify or revoke a tolerance and EPA's implementing procedural regulations that require persons seeking tolerance revocation to come forward with evidence sufficient to support a finding that the applicable safety standard has not been met. In other words, even if one were to assume, arguendo, that the same safety standard applies to EPA action on a petition to revoke a tolerance as applies to the Agency's initial establishment of a tolerance, that is a separate issue from the evidentiary burden a petitioner must meet to support its position. As explained in this unit, in this case, EPA reasonably construes the FFDCA and the Agency's implementing regulations to require petitioners seeking withdrawal of a tolerance to support this request with valid, complete and reliable data that set forth why the tolerances are unsafe, a burden Petitioners here have failed to meet.

By way of background, it is important to note that while Congress addressed the requirements for petitions to establish a tolerance with considerable specificity, see FFDCA section 408(d)(2)(A), it by contrast expressly left the specific requirements for petitions to modify or revoke a tolerance to EPA's rulemaking discretion. Id., FFDCA section 408(d)(2)(B). In turn, EPA's long-standing regulations require petitions seeking modification or revocation of a tolerance based on “new data” to furnish that data in the same form required for petitions seeking to establish tolerances, to the extent applicable. 40 CFR 180.32(b) (“New data should be furnished in the form specified in 180.7(b) [pertaining to “[p]etitions proposing tolerances”] for submitting petitions, as applicable.”). Thus, Congress expressly conferred discretion on EPA to specify the requirements for withdrawal of an existing tolerance, and EPA's long-standing regulations require a petitioner seeking revocation to meet the same standard of data reliability as a petitioner seeking to establish a tolerance.

FFDCA section 408(b)(2)(D)(i) requires that all actions of the Administrator to establish, modify, leave in effect, or revoke tolerances must consider, among other factors, “the validity, completeness, and reliability of the available data from studies of the pesticide chemical and pesticide chemical residue.” Consistent with this obligation, EPA regulations provide that a petitioner has a burden to provide “reasonable grounds” for revocation, including an assertion of facts to justify the modification or revocation of the tolerance (40 CFR 180.32(b)). Further, the regulations also make clear that persons seeking revocation have an initial evidentiary burden that must be met before the question of whether the applicable safety standard under FFDCA section 408(b)(2) is met is properly placed before EPA. See 40 CFR 179.91 (Party requesting revocation hearing has initial burden of going forward with evidence). This longstanding interpretation of the statute and the procedures Congress established is permissible and entitled to substantial deference. Sebelius v. Auburn Reg'l Med. Ctr., 133 S. Ct. 817, 826-827 (2013) (citing National Cable & Telecomm. Ass'n v. Brand X internet Servs., 545 U.S. 967, 980 (2005)). Notably, this regulation mirrors EPA's implementing FIFRA hearing regulations at 40 CFR 164.80(a), which likewise make clear that a person seeking cancellation or suspension must present the case that the standards for those actions have been met.

Recently, in Ellis v. Housenger, 252 F. Supp. 3d 800, 809 (N.D. Cal. 2017), the U.S. District for the Northern District of California interpreted those regulations, explaining that the FIFRA hearing regulations place the burden on the proponent of a regulatory action to present an affirmative case for action, and that initial burden is properly applied to petitions seeking immediate action. Similarly, before the question whether the applicable safety standard under FFDCA section 408(b)(2) is met is properly placed before the EPA, petitioners must first meet their burden of coming forward with sufficient evidence to show that pesticide tolerances to be modified or revoked are not safe.

EPA concludes that Petitioners have not met that burden. Petitioners have not presented evidence to establish that chlorpyrifos tolerances must be revoked because of the risk of neurodevelopmental effects at levels lower than EPA's currently regulatory standard. After several years and numerous, significant efforts to evaluate the petition claims related to neurodevelopmental toxicity, including communications with study authors and researchers in an effort to obtain underlying data and validate and replicate reported results, EPA concludes that the information yet presented by Petitioners is not sufficiently valid, complete, and reliable to support abandoning the use of AChE inhibition as the critical effect for regulatory purposes under the FFDCA section 408.

Cholinesterase inhibition and the cholinergic effects ( i.e., the physiological or behavioral changes) caused by organophosphorous pesticides, including chlorpyrifos, have long been the endpoints that EPA and nearly every other pesticide regulatory body in the world have used in assessing potential human health hazards. EPA has regarded data showing cholinesterase inhibition in brain, red blood cell (RBC), or plasma, and data on physiological or behavioral changes as critical effects for regulatory purposes. Guideline animal toxicity studies have historically been used in support of the 10% RBC acetylcholinesterase (AChE) inhibition point of departure (POD) for chlorpyrifos in EPA risk assessments.

EPA's 2006 Registration Eligibility Decision (RED) for chlorpyrifos relied on AChE inhibition results from laboratory animals for deriving the POD. Although not acknowledged by the Petitioners and Objectors, in conducting risk assessments in support of the chlorpyrifos RED, EPA also considered the emerging new information from laboratory studies that identified potential concern for increased sensitivity and susceptibility for the young from neurodevelopmental effects unrelated to AChE inhibition. At that time, EPA did not believe those studies support a neurodevelopmental POD for quantitative risk assessment, but it did provide the support for EPA's retention of the FQPA 10X factor in the 2001 chlorpyrifos IRED (Ref. 5).

While Petitioners and Objectors are correct that EPA did not retain the FQPA 10X for chlorpyrifos in the OPs 2006 cumulative risk assessment, that assessment dealt only with the established common mechanism of toxicity for the OPs—AChE inhibition—not with potential hazards that relate to the OPs individually. Accordingly, EPA did not reduce the 10X safety factor as it relates to chlorpyrifos specifically in its 2006 tolerance reassessment and reregistration determination that chlorpyrifos tolerances are safe. To the extent the Objectors are therefore arguing that EPA must, at a minimum, retain the FQPA 10X factor for chlorpyrifos because of the potential for neurodevelopmental effects, those objections are denied as moot. EPA's most recent assessment of the chlorpyrifos tolerances that was challenged in the Petition did retain the FQPA 10X, in part because of neurodevelopmental studies.

The Petition and the objections also argue, however, that EPA should not simply retain the FQPA 10X safety factor but should revoke chlorpyrifos tolerances because of evidence showing the potential for neurodevelopmental effects to occur well below EPA's existing regulatory standard. In sum, they believe EPA should be using the results of existing epidemiologic data to set a regulatory POD for chlorpyrifos at levels that would require EPA to revoke all chlorpyrifos tolerances.

EPA has, since the issuance of the 2006 RED, consistently concluded that the available data support a conclusion of increased sensitivity of the young to the neurotoxic effects of chlorpyrifos and for the susceptibility of the developing brain to chlorpyrifos. This conclusion comes from an evaluation across multiples lines of evidence including mechanistic studies and newer in vivo laboratory animal studies, but particularly with the available epidemiology reports along with feedback from the 2012 and 2016 FIFRA SAP meetings. As noted, EPA has retained the FQPA 10X safety factor on these grounds. However, EPA and the FIFRA SAP have also consistently cited the lack of robustness of these data for deriving a POD for neurodevelopmental effects given (1) the absence of a clear mechanism of action for chlorpyrifos in the developing brain; (2) the dosing regimen in in vivo studies that differs from internationally accepted protocols; and (3) the lack of any meaningful raw data from the epidemiologic data that are the centerpiece of this area of inquiry.

The lack of a mechanistic understanding for effects on the developing brain precludes EPA from validly or reliably assessing potential differences (and similarities) between laboratory animals and humans with respect to dose-response and temporal windows of susceptibility. In the absence of this information, EPA has no valid or reliable ways to bridge the scientific interpretation of the laboratory studies and epidemiology studies with chlorpyrifos. In addition, the dosing regimen used in the in vivo studies means the data are not sufficiently valid, complete and reliable for regulatory purposes given the problems they present for the quantitative interpretation and extrapolation of the results. Specifically, the in vivo laboratory animal studies generally use fewer days of dosing that are aimed at specific periods of rodent fetal or early post-natal development compared to internationally adopted guideline studies which are intended to cover both pre- and post-gestational periods. The degree to which these shorter dosing periods coincide with comparable windows of susceptibility in human brain development is unclear. In addition, except for some studies conducted recently, most of the in vivo laboratory studies use doses that are higher than doses that cause 10% RBC AChE inhibition. These studies are therefore are not useful quantitatively to evaluate whether EPA's current regulatory standard is or is not sufficient to preclude the potential for neurodevelopmental effects.

Finally, and most significantly, despite numerous requests over the last decade, the authors of the epidemiologic studies that provide potentially the most relevant information regarding effects to humans have never provided the underlying data from their studies to EPA to allow EPA and others to independently verify the validity and reliability of the results reported in their published articles. EPA believes it is necessary to first replicate the statistical analyses used in the studies to ensure their accuracy. In addition, EPA wants to examine the raw data used in the analysis to ensure appropriate handling of data points and in potentially conducting alternative statistical analyses. For example, EPA would want to evaluate the elimination of certain study participants from the CCCEH study that were deemed to be outliers in order to determine whether their exclusion was proper and how it may have affected the results. The lack of publicly available raw data does not necessarily preclude EPA from reliance on such information for the purpose of risk assessment. Given the long history and internationally harmonized use of acetylcholinesterase inhibition as the point of departure for chlorpyrifos, however, EPA reasonably requires more complete information regarding the studies in the published articles to establish a POD and that threshold has not been met in this instance. Due to these limitations, EPA does not believe the Petition, or the objections make the case for EPA to establish a POD based on neurodevelopmental effects, which remains central to the Petitioners' claims 7-9.

EPA understands that this conclusion is at odds with its revised risk assessment that it published for comment with the NODA in November 2016. By way of explanation, EPA notes that it has undertaken considerable efforts to assess the available chlorpyrifos data, including the references cited by the Petitioners in support for their claims related to neurodevelopmental effects. Specifically, in Chapter 4 and Appendices 2-4 of the 2014 human health risk assessment, EPA provides a detailed discussion of the strengths and uncertainties associated with the epidemiology studies. For example, although the studies used US-based exposure profiles in real world situations, EPA noted that the lack of data on the timing of chlorpyrifos applications was a key concern in the exposure assessment. EPA conducted a preliminary review of available literature and research on epidemiology in mothers and children following exposures chlorpyrifos and other OPs, laboratory studies on animal behavior and cognition, AChE inhibition, and mechanisms of action, and took it to the SAP in 2008.

The CCCEH study used concentrations of pesticides (including chlorpyrifos) in umbilical cord blood as a measure of exposure, while two other birth cohorts used urinary biomarkers in the mothers to estimate pesticide exposure. In 2012, the EPA convened another meeting of the FIFRA SAP to review the latest experimental data related to AChE inhibition, cholinergic and non-cholinergic adverse outcomes, including neurodevelopmental studies on behavior and cognition effects. The EPA also performed an in-depth analysis of the available chlorpyrifos biomonitoring data and of the available epidemiologic studies from three major children's health cohort studies in the U.S., including those from the CCCEH, Mt. Sinai, and CHAMACOS. The EPA explored plausible hypotheses on mode of actions/adverse outcome pathways (MOAs/AOPs) leading to neurodevelopmental outcomes seen in the biomonitoring and epidemiology studies.

EPA convened another meeting of the FIFRA SAP in April 2016, which was unique in focus compared to the previous meetings in that EPA explicitly proposed using information directly from the CCCEH published articles for deriving the POD. The 2016 SAP did not support the “direct use” of the cord blood and working memory data for deriving the regulatory endpoint for several reasons, among them, the lack of raw data from the epidemiology study (Ref. 4).

This feedback is consistent with concerns raised in public comments EPA received on the use of the epidemiology data throughout the course of registration review from the grower community, pesticide registrants, and the U.S. Department of Agriculture. The final FIFRA SAP report provides a detailed account of the concerns associated with the Agency's April 2016 proposed approach to selecting the point of departure (POD) and its use in quantitative risk assessment. Specifically, the SAP report noted that “[t] he majority of the panel stated that using cord concentrations for derivation of the POD could not be justified by any sound scientific evaluation. The Panel was conflicted with respect to the importance of a 2% change in working memory.” Id. at 19. The Panel went on to note that “the Agency's inability to confidently estimate previous exposure patterns and/or intensity hinders the use of cord blood at delivery as an anchor from which to extrapolate back to a more toxicologically meaningful internal exposure metric.” Id. at 42. The SAP also noted the insufficient information about timing of chlorpyrifos applications in relation to cord blood concentrations at the time of birth, as well as uncertainties about the prenatal window(s) of exposure linked to reported effects.

EPA acknowledges that the 2012 and 2016 SAPs note effects in the epidemiology and experimental studies below 10% AChE inhibition. In addition, both the 2008 and 2012 SAP commented on the strengths of the CCCEH epidemiologic studies and the value of the information they provide. However, despite these strengths, both the 2008 and 2012 Panels recommended that AChE inhibition remain as the source of data for the PODs. The 2016 SAP expressed significant reservations about the proposed approach to use the cord blood as the source of data for the POD. It noted the incompleteness of the information, including the lack of raw data, reproducibility of analytical blood data, and knowledge about chlorpyrifos application timing relative to pregnancy. EPA has evaluated the SAP's concerns, as well as public comments received on the 2016 updated human health risk assessment echoed a number of the SAP's concern regarding use of the CCCEH study. Based on the uncertainties identified by the 2016 SAP, the published articles from CCCEH are not complete for deriving a POD. EPA acknowledges this conclusion differs from the position supported in the 2016 revised human health risk assessment, but EPA believes the shortcomings of the data identified raise issues of validity, completeness and reliability under the FFDCA that direct against using the data for risk assessment at this time. As stated in the Denial Order, EPA intends to continue its exploration of the uncertainty around using neurodevelopmental effects to establish a POD as it works to complete registration review, including renewed efforts to obtain the raw data from the epidemiologic studies that are the central to consideration of potential neurodevelopmental effects.

Notably, EPA has made requests to CCCEH, CHAMACOS, and Mt. Sinai to obtain the raw data, and visited Columbia University in an attempt to better understand their study results and what raw data exist. EPA also requested the original CCCEH study protocol to determine whether its specific questions regarding exposure timing could be addressed with the raw data. EPA was informed the CCCEH protocol was not available, and EPA did not receive the raw data from any of those research institutions. Columbia made a public commitment to “share all data gathered,” however, to date, CCCEH has not provided EPA with the data, citing subject privacy concerns. In 2018, EPA explored options for blinding the data to eliminate this concern. However, through these conversations, CCCEH indicated there is no effective way to remedy this issue, citing that since the cohort is from a very small geographic area, subject identification would still be possible, and therefore, was still of concern.

In addition, EPA actively sought clarification on the kinds of residential application methods of chlorpyrifos used in New York City (NYC) during the time the CCCEH study was conducted (1998-2000) in order to provide additional context to the results of the CCCEH study conclusions. Through a series of email and telephone conversations with NYC pest control officials in 2016, EPA consistently heard that chlorpyrifos was typically applied as a crack and crevice application between 1998 and 2000. Unfortunately, EPA has no way to verify that this use pattern aligns with the exposures of participants in the CCCEH study and would not be able to corroborate the correlation between crack and crevice application and the observed neurodevelopmental effects.

As indicated, EPA has undertaken considerable efforts to assess the CCCEH study, including submitting EPA's evaluation of the CCCEH study to multiple SAPs. Given that CCCEH has not shared the raw data or the results of their exploratory analyses, EPA cannot validate or confirm the data analysis performed, the degree to which the statistical methods employed were appropriate, or the extent to which (reasonable or minor) changes in assumptions may have changed any final results or conclusions. EPA has been unable to conduct its own evaluation of the study conclusions utilizing the raw data nor has EPA has been able to address the issues identified by the 2016 SAP. While EPA has retained the FQPA 10x safety factor in order to address this potential uncertainty, given the shortcomings to date of the published epidemiology data, EPA does not have sufficiently complete information to currently support using the epidemiology studies as the POD in place of AChE inhibition as the POD.

In conclusion, the epidemiologic studies are central to the Petitioner's claims regarding neurodevelopmental effects, yet the Petitioners and Objectors rely only on summaries in publications to present their case. Petitioners have not presented the raw data from the epidemiology studies for consideration of their claims. EPA has likewise been unable to obtain this critical information, though the FIFRA SAP and commenters have raised many questions about it. So, EPA has not been able to verify the conclusions of the epidemiology studies due to this lack of raw data. Further, the lack of a clear mechanism of action and the lack of an internationally accepted dosing regimen in the in vivo data also preclude EPA from determining the relevance of the limited animal data addressing the potential for neurodevelopmental effects. The Petitioners have therefore failed to meet their initial burden of providing sufficiently valid, complete, and reliable evidence that neurodevelopmental effects may be occuring at levels below EPA's current regulatory standard and no information submitted with the objections addresses this shortcoming of the Petition.

2. Reconciling FFDCA petitions to revoke and FIFRA Registration Review. EPA also continues to conclude that denial is appropriate for claims related to matters that are the subject of registration review, specifically for chlorpyrifos, claims related to neurodevelopmental toxicity. In this case, the data deficiencies in the Petition related to neurodevelopmental toxicity that EPA is currently studying in a more up-to-date, thorough and methodical fashion in conjunction with the statutorily prescribed FIFRA re-registration process. In this context, it is particularly appropriate for EPA to take into account the substantive work that it is conducting under FIFRA in reaching its decision on the Petition.

As EPA explained in the Denial Order, to reconcile the FFDCA petition procedures with the FIFRA registration review provisions that require EPA to conduct periodic reviews of all pesticides, EPA must be able to take account of the FIFRA registration review schedule for a pesticide in determining how and when to respond to an FFDCA petition that raises issues that are also the subject of a current registration review. As noted, the Denial Order fully responded to Petitioners' claims that address the substance of EPA's 2006 safety finding, and Petitioners and the other Objectors could have chosen to challenge and litigate that determination through the petition and judicial review provisions of the FFDCA, had they wished. The objections, however, do not for the most part go to the substance of EPA's 2006 safety finding. Those claims have largely been abandoned and instead the objections now focus only on compelling EPA to resolve on a petitioner-dictated schedule new issues regarding the potential for neurodevelopmental toxicity that are part of an ongoing evaluation in registration review in advance of the statutory deadline (October 1, 2022) provided by Congress in FIFRA section 3(g) for completing that assessment. To that end, Objectors argue that the fact Congress established a 2022 deadline for registration review is no license for EPA to delay its response to an FFDCA petition and that EPA is in fact prohibited from relying on registration review as a basis for determining how to complete other reviews of a pesticide. Specifically, they cite to language in FIFRA section 3(g)(1)(C) that states that “[n]othing in this subsection shall prohibit the Administrator from undertaking any other review of a pesticide under this chapter.” Objectors have overlooked the critical language at the end of this passage (“under this chapter”) that by its terms only speaks to how EPA should reconcile registration review with other reviews under FIFRA. The language does not address reviews under the FFDCA, much less prohibit EPA from reconciling its responses to FFDCA petitions with the timeframe for registration review under FIFRA. The Objectors also do not point to any language in the FFDCA prohibiting the reconciliation of a response to a petition to revoke tolerances with the registration review schedule for reviewing the pesticide—which includes a determination whether to leave existing tolerances in effect. The 15-year registration review interval reflects Congress's effort to balance the need for EPA to assure that pesticides meet the FFDCA and FIFRA standards, while at the same time recognizing that completing scientific evaluations for over 1000 active ingredients is both time-consuming and resource-intensive. During a registration review, EPA is required to “assess changes since a pesticide's last [registration] review,” including new risk assessment methods, new studies and new data on pesticides. 40 CFR 155.53(a). This is precisely the assessment EPA is in the process of undertaking in the chlorpyrifos registration review with respect to the Petition claims addressing new information on the potential for adverse neurodevelopmental effects. If, as Petitioners and Objectors argue, EPA were required to truncate its ongoing registration review process to make a new FFDCA safety finding every time it received a petition to modify or revoke tolerances, petitioners would effectively have the authority to re-order the Administrator's scheduling of registration review decisions under FIFRA and dictate the extent of inquiry EPA may put to a matter before reaching a resolution. EPA continues to believe that with the passage of FIFRA section 3(g) and the 15-year review cycle created by that provision, Congress directed the Administrator, not FFDCA petitioners, to determine the appropriate timing and process for completing the review of dietary risk within that 15-year review period. EPA therefore concludes that it is also appropriate to deny the objections and the underlying petition to the extent they seek to compel EPA's consideration of neurodevelopmental toxicity issues raised during the course of the current registration review in advance of the schedule provided by Congress under FIFRA section 3(g).

As described previously, EPA has compelling reasons to follow its regulatory process through registration review. Specifically, EPA is working to update a number of assessments that will result in a more complete, accurate assessment of the risks of chlorpyrifos than if EPA were compelled to truncate that review now. The key components of EPA's updates to its analysis are (1) Review of five new laboratory animal studies for consideration in the updated human health risk assessment, and (2) Incorporating refined use information into the 2016 updated drinking water assessment.

With respect to the animal data, in 2018, the California Department of Pesticide Regulation (CDPR) proposed to adopt a regulation designating chlorpyrifos as a toxic air contaminant (TAC) in California. As part of this determination, CDPR developed its “Final Toxic Air Contaminant Evaluation of Chlorpyrifos Risk Characterization of Spray Drift, Dietary, and Aggregate Exposures to Residential Bystanders.” The CDPR risk characterization document cites five new laboratory animal studies not previously reviewed by EPA (Gomez-Gimenez et al., 2017, 2018; Silva et al., 2017; Lee et al., 2015; Carr et al., 2017). It is appropriate for EPA to review these five new studies in order to complete EPA's evaluation of potential neurodevelopmental effects. CDPR is using these studies as the main source of information for their new POD for acute oral exposure, so it is prudent for EPA to evaluate the data's quality and whether it provides the strong support for the conclusion that effects on the developing brain may occur below a dose eliciting 10% AChE inhibition that would be used to establish a new POD for the EPA's risk assessment. EPA is conducting its review in accordance with OPP's Guidance for Considering and Using Open Literature Toxicity Studies to Support Human Health Risk Assessment. It has contacted the primary investigators associated with the new animal studies in July-August 2018, and received the raw data associated with one of these studies.

As for EPA's drinking water assessment, the Agency identified certain uses, application rates, and practices described in the current chlorpyrifos labels that are not actually being used in the field and are contributing to an over-estimate of potential drinking water concentrations. EPA has requested additional information from the registrants to confirm the accuracy of these assumptions and anticipates including these updates in the Proposed Interim Decision.

To be clear, EPA remains committed to expediting its registration review determination so that it is completed well in advance of the October 2022 deadline. To that end, EPA anticipates making available any updates to the human health and drinking water assessments for public availability and comment by summer of 2020. Updates will also include EPA's response to public comments from the previous comment periods. In addition, EPA has been engaged in discussions with the chlorpyrifos registrants that could result in further use limitations affecting the outcome of EPA's assessment. The Proposed Interim Decision incorporating these updated assessments is anticipated for public availability and comment by October 2020. If EPA were compelled to act in advance of these registration review activities, none of these assessments would be available to inform that review. For example, OPP is pursuing the use of surface water monitoring data to confidently estimate pesticide concentrations in surface water that may be sourced by community water systems. A meeting of the FIFRA Scientific Advisory Panel is planned for obtaining expert feedback on tools and methodologies currently in development for using surface water monitoring data quantitatively in drinking water assessments. While the focus of the SAP is not specific to chlorpyrifos, the EPA will consider any recommendations from the SAP that are appropriate for inclusion in the chlorpyrifos drinking water assessment.

The Objectors argue that EPA not only failed to make a safety finding in denying the Petition, but that it has never disavowed previous EPA findings that it could not conclude chlorpyrifos is safe with respect to both the potential for adverse neurodevelopmental effects and harmful drinking water exposures. In particular, the objections point to various statements in EPA risk assessments and in EPA's 2015 proposed tolerance revocation action asserting that EPA is unable to conclude that chlorpyrifos tolerances are safe.

Contrary to these assertions, as noted by Corteva in its response to the objections, EPA has not made any findings that chlorpyrifos tolerances are not safe. In fact, EPA's last final action with respect to the safety of chlorpyrifos tolerances was its determination in 2006 that chlorpyrifos and the other pesticides in the organophosphate class meet the FFDCA safety standard in connection with FIFRA section 4 reregistration and FFDCA section 408(q) tolerance reassessment. This is the only regulatory finding currently in effect for chlorpyrifos as EPA has taken no final action on the proposed rule it published in 2015 to comply with the Ninth Circuit mandamus order in the PANNA v. EPA decision. Proposed rules are just that—proposals; they do not bind federal agencies. Indeed, EPA made clear it was issuing the proposal because of the court order, without having resolved many of the issues critical to EPA's FFDCA determination and without having fully considered comments previously submitted to the Agency (69 FR 69079, 69081-83). Similarly, risk assessments that underly proposed rules are not final agency actions and likewise are not binding.

At this stage, EPA may choose to finalize, modify or withdraw the proposal based on the comments received and EPA's evaluation following its review of the comments. Until such time, EPA's statements in the proposed rule are not binding pronouncements with respect to EPA's decision whether to grant or deny the Petition. See, e.g., Northwest Coalition for Alternatives to Pesticides v. EPA, 544 F.3d 1043, 1051 (9th Cir. 2008) (“as long as agencies follow the proper administrative procedures, they have the authority to change their minds before issuing a final order”); Public Citizen Health Research Grp. v. FDA, 740 F.2d 21 (D.C. Cir. 1984) (“Neither the substance of the decision to require further study nor the circumstances leading to the decision . . . suffice, however, to permit us to leapfrog back over the Secretary's decision . . . hold the agency to its preliminary decision to promulgate a labeling requirement. In connection with the registration review of chlorpyrifos, which EPA expects to complete in advance of the October 1, 2022 statutory deadline, EPA will make a determination regarding the safety of chlorpyrifos and will either finalize, modify or withdraw the proposal at that time.

With respect to objections related to drinking water, as explained in Unit II., a party may not raise issues in objections unless they were part of the petition. Corn Growers v. EPA, 613 F.3d 266 (D.C. Cir. 2010), cert. denied, 131 S. Ct. 2931 (2011). The Petition did not identify drinking water exposure as a basis for seeking tolerance revocation, and the Objectors cannot therefore raise that concern as a basis for challenging EPA's denial of the Petition. The mere fact that EPA is considering the potential impact of chlorpyrifos exposures in drinking water in the Agency's FIFRA section 3(g) registration review does not somehow provide Petitioners and Objectors with a vehicle for introducing that topic in the objections process on the Petition denial. And the objections phase of the petition process does not provide Petitioners a means to effectively start the petition process over again by raising issues that were not originally raised in the 2007 petition to revoke. Accordingly, EPA denies all objections regarding drinking water exposures. To be clear, however, EPA is continuing its FIFRA section 3(g) registration review and to complete its evaluation of drinking water exposures to chlorpyrifos. EPA will address these issues in its upcoming registration review decision.

The Objectors claim that EPA has committed procedural error in failing to respond to certain comments raised in comments to EPA's 2014 Revised Human Health Risk Assessment and the 2015 proposed revocation. The Objectors appear to assert that in the absence of any comment response document in the record, EPA has violated the requirements of section 553(c) of the Administrative Procedure Act (APA) which requires agencies to give consideration to relevant matter submitted during the comment period on proposed rules. While these objections correctly recite the requirements of the APA rulemaking provisions, the requirement to respond to comments on proposed rules applies to the “rules adopted” by agencies— i.e., final rules—and EPA has neither finalized nor withdrawn the 2015 proposed revocation rule. Further, the FFDCA does not require EPA to respond to rulemaking comments in issuing petition denial orders under FFDCA section 408(d)(4). In connection with EPA's completion of the FIFRA section 3(g) registration review of chlorpyrifos, EPA will either finalize or withdraw the proposed rule and address significant comments on the proposal at that time. But EPA has no obligation to respond to rulemaking comments in denying the Petition or responding to objections, both of which are adjudicatory actions that are not part of the rulemaking process.

In addition to raising procedural error, Objectors appear to adopt as their own substantive objections some of the comments on the proposed rule and risk assessment. Specifically, they focus on comments asserting that (1) EPA's use of 10% cholinesterase as a regulatory standard is not protective for effects to children's developing brains; (2) EPA inappropriately used Corteva's PBPK model, which is ethically and scientifically deficient, to reduce inter and intra-species safety factors; and (3) EPA has not properly accounted for effects from inhalation of chlorpyrifos from spray drift and volatilization.

The comments adopted by the Objectors regarding effects on the developing brain mirror the claims raised in the Petition regarding the potential for adverse neurodevelopmental effects. Accordingly, EPA restates its response provided in Unit VII.A.1. that the Petition and the objections fail to meet burden of presenting evidence sufficiently valid, complete and reliable to demonstrate that chlorpyrifos results in neurodevelopmental effects that render its tolerances not safe.

With respect to EPA's use of the Corteva PBPK model, these claims, as with claims respecting drinking water, were not raised in the Petition and cannot be raised for the first time in the objections phase of the petition process. Further, the Objections appear to oppose EPA's use of the PBPK model in conducting the assessment underlying EPA's 2014 and 2016 risk assessments and 2015 proposed tolerance revocation and do not appear to address EPA's Petition denial. This objection therefore does not appear to be relevant to the Denial Order. For these reasons, this objection is also denied.

Regarding the objections related to inhalation risk, Objectors raise three distinct issues from the public comments that relate to EPA's completed inhalation exposure assessment addressing the potential for bystanders to experience cholinesterase inhibition from exposure to spray drift at the time of application and volatilized chlorpyrifos following application. First, the Objectors dispute EPA' s legal authority not to consider in its risk assessment exposures to chlorpyrifos from illegal spraying prohibited by product labeling. Second, the Objectors assert that the Denial Order inappropriately relied on two recent Corteva studies on the effects of chlorpyrifos in its vapor phase to conclude that volatilized chlorpyrifos presents no risk of cholinesterase inhibition. Third, the Objectors assert that documented poisoning incidents demonstrate that the no-spray buffer-zones that EPA approved on product labeling in 2012 are inadequate to address harm from spray drift. Objectors point specifically to a May 2017 poisoning incident in Kern County, California, involving a total of 50 people who were either harmed or put at risk, as evidence for their concern.

In response, EPA believes it is lawful and appropriate for it to consider federally enforceable chlorpyrifos product labeling restrictions in assessing the extent of bystander risk from spray drift under both the FFDCA and FIFRA. Under FIFRA, pesticide labeling use instructions are enforceable limits on the use of the product that serve as the basis for EPA's evaluation of potential risks. Indeed, in registering pesticides, FIFRA section 3(c)(5) directs EPA to register pesticides when, among other things, a pesticide “will perform its intended function without unreasonable effects on the environment” and “when used in accordance with widespread and commonly recognized practice it will not generally cause unreasonable adverse effects on the environment.” These directives functionally instruct EPA to consider the intended, widespread and commonly recognized use of a pesticide as set forth on proposed product labeling in determining whether the pesticide will cause unreasonable adverse on the environment. While these provisions do not serve as a bar to EPA considering the impacts from unlawful misuse, unless such misuse is a widespread or commonly recognized practice, it does not provide a basis for regulatory action under FIFRA or a basis for determining that current tolerance levels are unsafe. Rather, misuse is first and foremost a matter for enforcement under FIFRA. It should also be noted that because chlorpyrifos is a restricted use pesticide, applicators must have specific training meant, in part, to assure proper pesticide application. When these restrictions are followed, exposures are significantly limited. To be clear, while drift is minimized when applicators follow label directions, EPA does assume that some residues may settle off-target, and that there may be dermal and incidental oral exposure from contacting residential turf adjacent to treated fields. To address the potential for cholinesterase inhibition from these exposures, EPA assessed the risk from these exposures and establishes appropriate distances between such locations and the site of application. Accordingly, following EPA's assessment of spray drift in 2012, the chlorpyrifos registrants agreed to place additional limitations on use to include use rate reductions and spray drift buffers that are sufficient to eliminate a risk of cholinesterase inhibition from lawful use.

With respect to the objections concerning volatility and the potential for cholinesterase inhibition, EPA has not changed its position set forth in the Denial Order and does not believe it is disregarding the potential for volatilization exposures. Exposure to low levels of vapor-phase chlorpyrifos following application near treated fields is possible. After the Agency's 2011 preliminary risk assessment, Corteva submitted toxicity data that measured cholinesterase inhibition resulting from acute exposure to vapors of chlorpyrifos and its oxon rather than exposure to aerosols of these compounds as was done for previous assessments. Since inhalation exposure to bystanders will be only to vapor phase chlorpyrifos rather than aerosols due to spray drift restrictions, use of these data to assess inhalation risk of cholinesterase inhibition to bystanders is appropriate. In these vapor-phase toxicity studies, test animals were exposed in atmospheres containing saturation concentrations of chlorpyrifos and its oxon, the maximum potential level of the compounds in air. No cholinesterase inhibition was observed, and the studies were determined to have been conducted properly using saturation concentrations of the compounds and controls appropriate for these types of studies, i.e., animals receiving no pesticide exposure, as further explained in “Chlorpyrifos: Reevaluation of the Potential Risks from Volatilization in Consideration of Chlorpyrifos Parent and Oxon Vapor Inhalation Toxicity Studies, W. Britton, W. Irwin, 6/25/14.”

EPA has also done a comprehensive review of chlorpyrifos incidents and found that most were due to accidents and misuse as specified in EPA's most recent final incident review “ Chlorpyrifos: Tier II Incident Report, S. Recore and K. Oo, 7/27/11.” The agency is aware of the referenced Kern County chlorpyrifos incident that occurred in 2017 in which the pesticide appears to have been applied in a manner in which direct drift onto bystanders occurred, a case of misuse. Spray drift buffers address exposure to bystanders when chlorpyrifos is applied as required by the pesticide label. In addition, it should be noted that EPA's 2000 cancellation of homeowner products and many indoor and outdoor non-residential uses ( e.g., schools and parks where children may be exposed) has led, according to data from 2002-2010, to a 95% decrease in the number of incidents reported in residential areas. In sum, EPA does not believe available incident data suggests that there exists a widespread and commonly recognized practice of misusing chlorpyrifos and EPA therefore believes it is appropriate to use the enforceable label instructions as the basis for evaluating the potential for inhalation exposure from spray drift and volatilization.

As indicated previously, this action announces the Agency's order denying objections filed under FFDCA section 408. As such, this action is an adjudication and not a rule. The regulatory assessment requirements imposed on rulemaking do not, therefore, apply to this action.

The Congressional Review Act, 5 U.S.C. 801 et seq., does not apply because this action is not a rule for purposes of 5 U.S.C. 804(3).

The following is a listing of the documents that are specifically referenced in this document. The docket includes these documents and other information considered by EPA, including documents that are referenced within the documents that are included in the docket, even if the referenced document is not physically located in the docket. For assistance in locating these other documents, please consult the person listed under FOR FURTHER INFORMATION CONTACT .

Pelagic longline fishing in the western and central Pacific Ocean is managed, in part, under the Western and Central Pacific Fisheries Convention Implementation Act (Act). Regulations governing fishing by U.S. vessels in accordance with the Act appear at 50 CFR part 300, subpart O.

NMFS established a calendar year 2019 limit of 3,554 metric tons (t) of bigeye tuna ( Thunnus obesus ) that may be caught and retained in the U.S. pelagic longline fishery in the area of application of the Convention on the Conservation and Management of Highly Migratory Fish Stocks in the Western and Central Pacific Ocean (Convention Area) (83 FR 33851, July 18, 2018). NMFS monitored the retained catches of bigeye tuna using logbook data submitted by vessel captains and other available information, and determined that the fishery will reach the 2019 catch limit by July 27, 2019.

In accordance with 50 CFR 300.224(e), this rule serves as notification to fishermen, the fishing industry, and the public that the U.S. longline fishery for bigeye tuna in the Convention Area will be closed during the dates provided in the DATES heading. The fishery is scheduled to reopen on January 1, 2020. This rule does not apply to the longline fisheries of American Samoa, Guam, or the Northern Mariana Islands, collectively “the territories,” as described below.

During the closure, a U.S. fishing vessel may not retain on board, transship, or land bigeye tuna caught by longline gear in the Convention Area, except that any bigeye tuna already on board a fishing vessel upon the effective date of the restrictions may be retained on board, transshipped, and landed, provided that they are landed within 14 days of the start of the closure, that is, by August 10, 2019.

During the effective period of the restrictions, longline-caught bigeye tuna may be retained on board, transshipped, and landed if either of these conditions is met:

(1) The fish are caught by a vessel with a valid American Samoa longline permit; or

(2) The fish are landed in the territories.

In either case, the following conditions must be met:

(1) The fish are not caught in the U.S. Exclusive Economic Zone (EEZ) around Hawaii;

(2) Other applicable laws and regulations are followed; and

(3) The vessel has a valid permit issued under 50 CFR 660.707 or 665.801.

Bigeye tuna caught by longline gear during the closure may also be retained on board, transshipped, and/or landed if they are caught by a vessel that is included in a valid specified fishing agreement under 50 CFR 665.819(c), in accordance with 50 CFR 300.224(f)(1)(iv). Bigeye tuna caught under a specified fishing agreement shall be attributed to the territory that is party to that agreement.

During the closure, a U.S. vessel is also prohibited from transshipping bigeye tuna caught in the Convention Area by longline gear to any vessel other than a U.S. fishing vessel with a valid permit issued under 50 CFR 660.707 or 665.801.

The catch limit and this closure do not apply to bigeye tuna caught by longline gear outside the Convention Area, such as in the eastern Pacific Ocean. To ensure compliance with the restrictions related to bigeye tuna caught by longline gear in the Convention Area, however, the following requirements apply during the closure period (see 50 CFR 300.224):

(1) Longline fishing both inside and outside the Convention Area is not allowed during the same fishing trip. An exception would be a fishing trip that is in progress on July 27, 2019. In that case, the catch of bigeye tuna must be landed by August 10, 2019; and

(2) If a longline vessel fishes outside the Convention Area and the vessel then enters the Convention Area during the same fishing trip, the fishing gear must be stowed and not readily available for fishing in the Convention Area. Specifically, hooks, branch lines, and floats must be stowed and the mainline hauler must be covered.

The above two additional prohibitions do not apply to vessels operating in the longline fisheries of the territories. This includes vessels included in a valid specified fishing agreement under 50 CFR 665.819(c), in accordance with 50 CFR 300.224(f)(1)(iv). This group also includes vessels with valid American Samoa longline permits and vessels landing bigeye tuna in one of the territories, as long as the bigeye tuna were not caught in the EEZ around Hawaii, the fishing was compliant with all applicable laws, and the vessel has a valid permit issued under 50 CFR 660.707 or 665.801.

There is good cause under 5 U.S.C. 553(b)(B) to waive prior notice and the opportunity for public comment on this action, because it would be unnecessary and contrary to the public interest. This rule closes the U.S. longline fishery for bigeye tuna in the Convention Area as a result of reaching the applicable bigeye tuna catch limit. The limit was established after opportunity for public comment (83 FR 33851, July 18, 2018), and is codified in Federal regulations based on agreed limits established by the Western and Central Pacific Fisheries Commission. 50 CFR 300.224(e) notifies the public that fishing prohibitions will be placed in effect when the limit is reached. NMFS forecasts that the fishery will reach the 2019 limit by July 27, 2019. Longline fishermen have been subject to longline bigeye tuna limits in the western and central Pacific since 2009. They have received ongoing, updated information about the 2019 catch and progress of the fishery in reaching the Convention Area limit via the NMFS website, social media, and other means. This constitutes adequate advance notice of this fishery closure. Additionally, the publication timing of this rule provides longline fishermen with seven days advance notice of the closure date, and allows two weeks to return to port and land their catch of bigeye tuna.

For the reasons stated above, there is also good cause under 5 U.S.C. 553(d)(3) to waive the 30-day delay in effectiveness for this temporary rule. NMFS must close the fishery as soon as possible to ensure that fishery does not exceed the catch limit. NMFS implemented the catch limit to satisfy the obligations of the United States under the Convention on the Conservation and Management of Highly Migratory Fish stocks in the Western and Central Pacific Ocean, to which it is a contracting party. Failure to close the fishery immediately would result in violation of regulations that implement WCPFC decisions.

This action is required by 50 CFR 300.224 and is exempt from review under Executive Order 12866.