Agricultural Marketing Service
Industry and Security Bureau
International Trade Administration
National Oceanic and Atmospheric Administration
Federal Energy Regulatory Commission
National Nuclear Security Administration
Agency for Healthcare Research and Quality
Children and Families Administration
Food and Drug Administration
National Institutes of Health
Coast Guard
Fish and Wildlife Service
Land Management Bureau
Employment and Training Administration
Copyright Royalty Board
Comptroller of the Currency
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
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Agricultural Marketing Service, USDA.
Direct final rule.
The Agricultural Marketing Service (AMS) is amending the Beef Promotion and Research Order (Order) by updating the Harmonized Tariff Schedule (HTS) codes for imported cattle, beef, veal, and beef product to conform with recent updates by the U.S. International Trade Commission (USITC) and used by the U.S. Customs and Border Protection to assist in the collection of beef checkoff assessments.
This direct final rule is effective February 7, 2020, without further action or notice, unless significant adverse comment is received by January 23, 2020. If significant adverse comment is received, AMS will publish a timely withdrawal of the amendment in the
Comments should be posted online at
Kahl Sesker, Agricultural Marketing Specialist; Research and Promotion Division, Livestock and Poultry Program; AMS, U.S. Department of Agriculture (USDA); Room 2610-S, STOP 0251, 1400 Independence Avenue SW, Washington, DC 20250-0251; fax (202) 720-1125; telephone (202) 253-8253; or email
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health, and safety effects; distributive impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. This rule does not meet the definition of a significant regulatory action contained in section 3(f) of Executive Order 12866 and therefore, the Office of Management and Budget (OMB) has waived review of this action. Additionally, because this rule does not meet the definition of a significant regulatory action, it does not trigger the requirements contained in Executive Order 13771. See OMB's Memorandum titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, titled `Reducing Regulation and Controlling Regulatory Costs'” (February 2, 2017).
This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have a retroactive effect.
Section 11 of the Beef Promotion and Research Act of 1985 (Act) (7 U.S.C. 2910) provides that nothing in the Act may be construed to preempt or supersede any other program relating to beef promotion organized and operated under the laws of the U.S. or any State. There are no administrative proceedings that must be exhausted prior to any judicial challenge to the provisions of this rule.
This action has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that is regulation would not have substantial and direct effects on Tribal governments or significant Tribal implications.
In accordance with OMB regulations (5 CFR part 1320) that implement the Paperwork Reduction Act of 1995 (44 U.S.C. part 35), the information collection and recordkeeping requirements contained in the Order and accompanying Rules and Regulations have previously been approved by OMB and were assigned OMB control number 0581-0093.
The Act authorized the establishment of a national beef promotion and research program. Title 7 CFR part 1260, the Beef Promotion and Research Order (the Order), was published in the
Importers pay assessments on imported cattle, beef, veal, and beef products. U.S. Customs and Border Protection collects and remits these assessments to the Board. The term “importer” is defined as “any person who imports cattle, beef, or beef products from outside the United States” (7 CFR 1260.117). Imported beef or beef products is defined as “products which are imported into the United States which the Secretary determines contain a substantial amount of beef, including those products which have been assigned one or more of the following numbers in the Tariff Schedule of the United States” (7 CFR 1260.121).
The Act requires that assessments on imported beef and beef products and
USITC periodically updates HTS codes. Since USITC updates HTS on a regular basis, AMS routinely amends 7 CFR 1260.172(b) to incorporate the updated HTS codes for imported cattle, beef, veal, and beef product into the Order so that importers know what beef products are assessed and their respective assessment rates. Consistent with USITC's recent updates to HTS codes, AMS is updating the HTS codes in the Order through this direct final rule.
The purpose of RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly burdened. Pursuant to the requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
Effective August 19, 2019, the SBA published an interim final rule (RIN 3245-AH17) that adjusts the monetary-based size standards for inflation. As a result of this rule, the size classification for small beef, veal, and cattle importing firms changed from sales of $750,000 or less to sales of $1,000,000 or less. As a result, a supplemental analysis was conducted to determine whether the change in the size standard would lead to a significant change in the number of firms affected by this rule.
According to the U.S. Department of Agriculture's (USDA) National Agricultural Statistics Service's (NASS) 2017 Census of Agriculture, the number of operations in the United States with cattle totaled 882,692.
Cattle, beef, and veal importers are directly impacted by the proposed rule. The original number of importing firms was determined in consultation with the Meat Import Council of America (MICA). AMS estimates that approximately 270 firms that import beef or beef products, and veal and veal products into the United States, and about 198 firms that import live cattle into the United States. The 2012 Economic Census, produced by the U.S. Commerce Department, and accessible through the American Fact Finder website, provides the most recent data on firm size by sales revenue.
The 2012 Economic Census does have information on the broader marketing chain, specifically the size distribution of meat and meat product wholesalers (NAICS 42447).
Recent import trade data was also considered for understanding the overall dynamics of this industry segment. The Foreign Agricultural Service reports monthly trade data for traded agricultural products by product type. An analysis of these data over a five-year period show only minor changes in the annual import values for both beef and veal importers and cattle importers, suggesting little change in the sector overall.
This direct final rule imposes no significant burden on the industry. Importers are already required to pay assessments. This action merely updates HTS codes in the Order that USITC has changed for imported cattle, beef, veal, and beef products. Accordingly, AMS has determined that this action does not have a significant impact on a substantial number of small entities.
USITC periodically updates HTS codes. Since USITC updates HTS on a regular basis, AMS routinely amends 7 CFR 1260.172(b) to incorporate the updated HTS codes for imported cattle, beef, veal, and beef product into the Order so that importers know what beef products are assessed and their respective assessment rates.
Administrative practice and procedure, Advertising, Agricultural research, Imports, Marketing agreement, Meat and meat products, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, AMS amends 7 CFR part 1260 as follows:
7 U.S.C. 2901-2911 and 7 U.S.C. 7401.
(b) * * *
(2) The assessment rates for imported cattle, beef, veal, beef products, are as follows:
Office of the General Counsel, U.S. Department of Energy.
Final rule.
The Department of Energy (“DOE”) publishes this final rule to adjust DOE's civil monetary penalties (“CMPs”) for inflation as mandated by the Federal Civil Penalties Inflation Adjustment Act of 1990, as further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (collectively referred to herein as “the Act”). This rule adjusts CMPs within the jurisdiction of DOE to the maximum amount required by the Act.
This rule is effective on January 8, 2020.
Preeti Chaudhari, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585, (202) 586-8078,
In order to improve the effectiveness of CMPs and to maintain their deterrent effect, the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461 note (“the Inflation Adjustment Act”), as further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 114-74) (“the 2015 Act”), requires Federal agencies to adjust each CMP provided by law within the jurisdiction of the agency. The 2015 Act requires agencies to adjust the level of CMPs with an initial “catch-up” adjustment through an interim final rulemaking and to make subsequent annual adjustments for inflation, notwithstanding 5 U.S.C. 553. DOE's initial catch-up adjustment interim final rule was published June 28, 2016 (81 FR 41790) and adopted as final without amendment on December 30, 2016 (81 FR 96349). The 2015 Act also provides that any increase in a CMP shall apply only to CMPs, including those whose associated violation predated such increase, which are assessed after the date the increase takes effect.
In accordance with the 2015 Act, the Office of Management and Budget (OMB) must issue annually guidance on adjustments to civil monetary penalties. This final rule to adjust civil monetary penalties for 2020 is issued in accordance with applicable law and OMB's guidance memorandum on implementation of the 2020 annual adjustment.
The method of calculating CMP adjustments applied in this final rule is required by the 2015 Act. Under the 2015 Act, annual inflation adjustments subsequent to the initial catch-up adjustment are to be based on the percent change between the October Consumer Price Index for all Urban Consumers (CPI-U) preceding the date of the adjustment, and the prior year's October CPI-U. Pursuant to the aforementioned OMB guidance memorandum, the adjustment multiplier for 2020 is 1.01764. In order to complete the 2020 annual adjustment, each CMP is multiplied by the 2020 adjustment multiplier. Under the 2015 Act, any increase in CMP must be rounded to the nearest multiple of $1.
The following list summarizes DOE authorities containing CMPs, and the penalties before and after adjustment.
The 2015 Act
This rule has been determined not to be a significant regulatory action under Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (October 4, 1993). Accordingly, this action was not subject to review under that Executive order by the Office of Information and Regulatory Affairs of the Office of Management and Budget.
DOE has determined that this final rule is covered under the Categorical Exclusion found in DOE's National Environmental Policy Act regulations at paragraph A5 of appendix A to subpart D, 10 CFR part 1021, which applies to a rulemaking that amends an existing rule or regulation and that does not change the environmental effect of the rule or regulation being amended. Accordingly, neither an environmental assessment nor an environmental impact statement is required.
The Regulatory Flexibility Act (5 U.S.C. 601
This final rule imposes no new information collection requirements subject to the Paperwork Reduction Act.
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) generally requires Federal agencies to examine closely the impacts of regulatory actions on State, local, and tribal governments. Section 201 excepts agencies from assessing effects on State, local or tribal governments or the private sector of rules that incorporate requirements specifically set forth in law. Because this rule incorporates requirements specifically set forth in 28 U.S.C. 2461 note, DOE is not required to assess its regulatory effects under section 201. Unfunded Mandates Reform Act sections 202 and 205 do not apply to this action because they apply only to rules for which a general notice of proposed rulemaking is published. Nevertheless, DOE has determined that this regulatory action does not impose a Federal mandate on State, local, or tribal governments or on the public sector.
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any proposed rule that may affect family well-being. This rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and carefully assess the necessity for such actions. DOE has examined this rule and has determined that it would not preempt State law and would not have a substantial direct effect on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. No further action is required by Executive Order 13132.
With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Executive agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; and (3) provide a clear legal standard for affected conduct rather than a general standard and promote simplification
The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed this rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001) requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. This regulatory action would not have a significant adverse effect on the supply, distribution, or use of energy and is therefore not a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects.
As required by 5 U.S.C. 801, DOE will submit to Congress a report regarding the issuance of this final rule prior to the effective date set forth at the outset of this rulemaking. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 801(2).
The Secretary of Energy has approved publication of this final rule.
Administrative practice and procedure, Energy, Penalties.
Administrative practice and procedure, Penalties, Petroleum allocation.
Confidential business information, Energy conservation, Household appliances, Imports, Incorporation by reference, Reporting and recordkeeping requirements.
Administrative practices and procedure, Confidential business information, Energy conservation, Incorporation by reference, Reporting and recordkeeping requirements.
Administrative practice and procedure, Energy conservation, Penalties.
Administrative practice and procedure, Electric power plants, Energy conservation, Natural gas, Petroleum.
Government contracts, Grant programs, Loan programs, Penalties.
Administrative practice and procedure, Government contracts, Penalties, Radiation protection.
Government contracts, Nuclear materials, Penalties, Security measures.
Civil penalty, Hazardous substances, Occupational safety and health, Safety, Reporting and recordkeeping requirements.
Administrative practice and procedure, Claims, Fraud, Penalties.
Administrative practice and procedure, Government contracts, National Defense, Nuclear Energy, Penalties, Security measures.
Decorations, medals, awards, Foreign relations, Government employees, Government property, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, DOE amends chapters II, III, and X of title 10 of the Code of Federal Regulations as set forth below.
15 U.S.C. 787
(c) * * * (1) Any person who violates any provision of this subpart or any order issued pursuant thereto shall be subject to a civil penalty of not more than $10,821 for each violation. * * *
15 U.S.C. 751
(b) * * * (1) Any person who violates any provision of this part or any order issued pursuant thereto shall be subject to a civil penalty of not more than $23,437 for each violation.
42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.
Any person who knowingly violates any provision of § 429.102(a) may be subject to assessment of a civil penalty of no more than $468 for each violation. * * *
42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.
(b) In accordance with sections 333 and 345 of the Act, any person who knowingly violates any provision of paragraph (a) of this section may be subject to assessment of a civil penalty of no more than $468 for each violation.
42 U.S.C. 7191
(a)
42 U.S.C. 7101
(c) * * * (1) Any person who violates any provisions of the Act (other than section 402) or any rule or order thereunder will be subject to the following civil penalty, which may not exceed $95,881 for each violation: Any person who operates a powerplant or major fuel burning installation under an exemption, during any 12-calendar-month period, in excess of that authorized in such exemption will be assessed a civil penalty of up to $8 for each MCF of natural gas or up to $39 for each barrel of oil used in excess of that authorized in the exemption.
31 U.S.C. 1352; 42 U.S.C. 7254 and 7256; 31 U.S.C. 6301-6308; 28 U.S.C. 2461 note.
(a) Any person who makes an expenditure prohibited by this part shall be subject to a civil penalty of not less than $20,489 and not more than $204,892 for each such expenditure.
(b) Any person who fails to file or amend the disclosure form (see appendix B to this part) to be filed or amended if required by this part, shall be subject to a civil penalty of not less than $20,489 and not more than $204,892 for each such failure.
(e) First offenders under paragraph (a) or (b) of this section shall be subject to a civil penalty of $20,489, absent aggravating circumstances. Second and subsequent offenses by persons shall be subject to an appropriate civil penalty between $20,489 and $204,892, as determined by the agency head or his or her designee.
42 U.S.C. 2201; 2282(a); 7191; 28 U.S.C. 2461 note; 50 U.S.C. 2410.
Any person subject to a penalty under 42 U.S.C. 2282a shall be subject to a civil penalty in an amount not to exceed $214,097 for each such violation. * * *
42 U.S.C. 2201, 2282b, 7101
* * * Subsection a. provides that any person who has entered into a contract or agreement with the Department of Energy, or a subcontract or subagreement thereto, and who violates (or whose employee violates) any applicable rule, regulation or order under the Act relating to the security or safeguarding of Restricted Data or other classified information, shall be subject to a civil penalty not to exceed $152,998 for each violation. * * *
(c) The Director may propose imposition of a civil penalty for
42 U.S.C. 2201(i)(3), (p); 42 U.S.C. 2282c; 42 U.S.C. 5801
(a) A contractor that is indemnified under section 170d. of the AEA (or any subcontractor or supplier thereto) and that violates (or whose employee violates) any requirement of this part shall be subject to a civil penalty of up to $99,361 for each such violation. * * *
The revisions read as follows:
(b) * * *
(1) * * * A Severity Level I violation would be subject to a base civil penalty of up to 100% of the maximum base civil penalty of $99,361.
(2) * * * A Severity Level II violation would be subject to a base civil penalty up to 50% of the maximum base civil penalty ($49,680).
(e) * * *
(1) DOE may assess civil penalties of up to $99,361 per violation per day on contractors (and their subcontractors and suppliers) that are indemnified by the Price-Anderson Act, 42 U.S.C. 2210(d).
31 U.S.C. 3801-3812; 28 U.S.C. 2461 note.
(a) * * *
(1) * * *
(iv) Is for payment for the provision of property or services which the person has not provided as claimed, shall be subject, in addition to any other remedy that may be prescribed by law, to a civil penalty of not more than $11,665 for each such claim.
(b) * * *
(1) * * *
(ii) Contains or is accompanied by an express certification or affirmation of the truthfulness and accuracy of the contents of the statement, shall be subject, in addition to any other remedy that may be prescribed by law, to a civil penalty of not more than $11,665 for each such statement.
42 U.S.C. 7101
(c)
The Constitution of the United States, Article I, Section 9; 5 U.S.C. 7342; 22 U.S.C. 2694; 42 U.S.C. 7254 and 7262; 28 U.S.C. 2461 note.
(d) * * * The court in which such action is brought may assess a civil penalty against such employee in any amount not to exceed the retail value of the gift improperly solicited or received plus $20,888.
Copyright Royalty Board, Library of Congress.
Final rule.
The Copyright Royalty Judges publish final regulations that set the amount and allocation of the Initial Administrative Assessment to fund the Mechanical Licensing Collective.
Anita Blaine, Program Specialist, by telephone at (202) 707-7658 or by email at
On July 8, 2019, the Copyright Royalty Board initiated the proceeding titled
On November 14, 2019, the Mechanical Licensing Collective and the Digital Licensee Coordinator filed with the Copyright Royalty Judges (“Judges”) a Joint Notice of Settlement and Motion to Suspend Case Schedule informing the Judges that they had reached a full settlement of all terms in the proceeding and describing in detail those terms. The Judges granted that motion and directed the participants to file proposed regulations.
Section 115(d)(7)(D)(v) of the Copyright Act authorizes the Judges to approve and adopt a negotiated agreement that has been agreed to by the Mechanical Licensing Collective and the Digital Licensee Coordinator in lieu of a determination of the administrative assessment. An administrative assessment adopted under sec. 115(d)(7)(D)(v) “shall apply to all digital music providers and significant nonblanket licensees engaged in covered activities during the period the administrative assessment is in effect.”
However, the Judges, in their discretion, may reject a proposed settlement for good cause shown. Section 355.4(c)(4) of 37 CFR establishes a process for non-settling participants to comment on a proposed settlement and for the settling participants to respond. Because there were no non-settling participants in the instant proceeding, the proposed settlement was unopposed.
Copyright, Licensing and registration, Music, Phonorecords, Recordings, Royalties.
For the reasons set forth in the preamble, the Copyright Royalty Judges add part 390 to chapter III of title 37 of the Code of Federal Regulations as follows:
17 U.S.C. 115, 801(b).
(1) A digital music provider that is engaged, in all or in part, in covered activities pursuant to a blanket license; or
(2) A significant nonblanket licensee, as those terms are defined under 17 U.S.C. 115(e).
(a)
(b)
(c)
(i) 3 percent; and
(ii) The percentage change in the ECI.
(2) The MLC shall publish notice on its website of each year's automatic adjustment to the Annual Assessment. The Annual Assessment shall continue from year to year unless and until the Copyright Royalty Judges cause to be published an adjusted administrative assessment pursuant to 17 U.S.C. 115(d)(7)(D)(iv) or (v).
(a)
(1) For Licensees that have a Unique Sound Recordings Count of less than 5,000 during the relevant Annual Calculation Period, the annual minimum fee shall be $5,000.
(2) For Licensees that have a Unique Sound Recordings Count of 5,000 or more during the relevant Annual Calculation Period, the annual minimum fee shall be $60,000.
(b)
(c)
(2)
(d)
(i) 30 days from receipt of the invoice from the MLC; or
(ii) January 15th of the respective Annual Assessment year.
(2) Each Licensee in operation during any portion of an annual minimum fee calculation period shall pay the full amount of the respective annual minimum fee.
(a)
(1)
(2)
(b)
(c)
(A) 30 days from receipt of the invoice from the MLC; or
(B) The first day of the next calendar quarter.
(ii) Invoices from the MLC to Licensees shall be deemed received on the business day after electronic transmission.
(2)
(A) Invoice issuance date;
(B) Invoice payment due date;
(C) Amount owed, by share of All Licensee Assessment Pool and Threshold Licensee Assessment Pool;
(D) Allocation of Startup Assessment;
(E) Offset of minimum fee payment against quarterly assessment; and
(F) Amount of credit for un-recouped minimum fee.
(ii) Invoices issued as a result of an allocation adjustment shall include all of the information set forth in paragraphs (c)(2)(i)(A) through (F) of this section that may be relevant, as well as an explanation of the change from the prior invoices that are affected, and the reason(s) for the adjustment.
(d)
(e)
(f)
(g)
(h)
Environmental Protection Agency (EPA).
Final rule.
The EPA is delaying the start date for the revised Photochemical Assessment Monitoring Stations (PAMS) monitoring site network established in EPA regulations. This final action extends the start date from June 1, 2019, to June 1, 2021. The revision gives states two additional years to acquire the necessary equipment and expertise needed to successfully make the required PAMS measurements by the start of the 2021 PAMS season.
This final rule is effective on February 7, 2020.
The EPA has established a docket for this action under Docket ID No. EPA-HQ-OAR-2019-0137. All documents in the docket are listed on the
For questions about this final action, contact Kevin Cavender, Air Quality Analysis Division (C304-06), Office of Air Quality Planning and Standards, U.S. Environmental Protection Agency, Research Triangle Park, North Carolina 27711; telephone number: (919) 541-2364; fax number: (919) 541-1903; and email address:
Table 1 of this preamble identifies the entities potentially affected by this action. This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This table lists the types of entities that EPA is now aware could potentially be regulated by this action. Other types of entities not listed in the table could also be regulated. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the
In addition to being available in the docket, an electronic copy of this final action, along with key technical documents, is available on the internet at
Under Clean Air Act (CAA) section 307(b)(1), judicial review of this final action is available only by filing a petition for review in the United States Court of Appeals for the District of Columbia Circuit by March 9, 2020. Under CAA section 307(b)(2), the requirements established by this final rule may not be challenged separately in any civil or criminal proceedings brought by the EPA to enforce the requirements.
The EPA PAMS program was promulgated in the early 1990s to meet the requirements of Section 182(c)(1) of the Clean Air Act (CAA) and in response to the recommendations of the National Academy of Sciences (NAS) report required by CAA Section 185B.
The revised PAMS requirements reduced the number of required PAMS sites (from 75 to 43) while improving spatial distribution. Of the 43 required PAMS sites, 16 were existing PAMS sites and 27 are new PAMS sites. While the new PAMS requirements leverage the existing NCore network and infrastructure providing significant long-term cost savings, many states (including those with existing PAMS sites due to the age of the existing equipment) need to install new equipment to comply with the revised PAMS requirements (
In revising the PAMS requirements, the EPA “recognize[d] that the changes to the PAMS requirements will require resources and a reasonable timeline in order to be successfully implemented.” 80 FR 65428. “The PAMS program,” the EPA explained, “is funded, in part, as part of the EPA's section 105 grants.”
Prior to this final action, the revised PAMS requirements required states to start making PAMS measurements by June 1, 2019. To assist states in acquiring the necessary equipment, the EPA has been working on national contracts
In light of the delays in acquiring necessary equipment and the need for a reasonable training period to become proficient with new equipment, the EPA proposed (84 FR 25221) to extend the start date for required PAMS monitoring until the beginning of the PAMS season in 2021 (
In the proposal, the EPA also took comment on whether the start date should be extended only for sites that have not received the necessary equipment and considered two alternative options. Under the first alternative, the EPA would require each remaining site to begin measurements once
The EPA received seven comments on the proposed extension. Six comments were from state or local monitoring agencies affected by the PAMS requirements. The seventh comment was from a trade organization for state and local monitoring agencies. All commenters supported extending the PAMS start date to June 1, 2021, and no comments were received in support of the alternative options the EPA requested comment on. One commenter stated that “the start date for the PAMS network was unattainable because of a lack of funding for equipment and the national contract equipment delays” and urged the EPA to “maintain the uniform start-up extension date of June 1, 2021 for all PAMS sites.” Another commenter stated that “due to the lack of critical funding, equipment procurement, and training, the two-year timeline extension proposed in this rule makes sense and should be finalized uniformly nationwide.” Another commenter stated, “a blanket extension is the most straightforward way to address the problem and would provide the most certainty for state and local agencies.”
For the reasons discussed in this preamble and in consideration of the comments received, the EPA is extending the PAMS start date by two years to June 1, 2021, as proposed. Many of the states relying on the EPA's assistance in acquiring equipment for the required PAMS sites did not have all the necessary equipment by June 1, 2019. In addition, many states are new to making PAMS measurements and will need time to become proficient with the equipment after it has been delivered. For these reasons, EPA has concluded that it is appropriate to extend the start date for required PAMS monitoring for all sites until the start of the PAMS season following the delivery of the remaining PAMS equipment. Based on current expectations, the last equipment will be delivered in the summer of 2020. Accordingly, the EPA is extending the start date for required PAMS monitoring to June 1, 2021.
This extension will provide state and local monitoring agencies the necessary time to acquire, install, and become proficient with the necessary equipment to make PAMS measurements. The EPA agrees with the commenters that a blanket two-year extension provides more clarity and certainty for the monitoring agencies and will reduce confusion as compared to the options on which EPA sought comment. The agencies cannot be certain when they will receive the necessary equipment and it would be difficult for agencies to plan for and coordinate the start of sampling with staggered start dates that are not yet known. EPA thus decided to finalize the blanket two-year extension as proposed instead of the alternatives that would have created staggered start dates based on when equipment is delivered.
As stated above, the main objective of the PAMS program is to develop a database of ozone precursors and meteorological measurements to support ozone model development and track the trends of important ozone precursor concentrations. The EPA and other scientists use the data collected from the PAMS network to develop, evaluate, and improve ozone models. The delay in PAMS implementation will reduce the amount of precursor and meteorological data available from the PAMS season in 2019 and 2020. Nevertheless, sites which have already received the necessary equipment will likely begin making PAMS measurements as soon as possible, and as such, about two thirds of the required PAMS sites may begin making speciated VOC measurements in 2019, with the remaining third beginning to make speciated VOC measurements in 2020. One-third of the sites will have the ceilometer and true NO
Additional information about these statutes and Executive orders can be found at
This action is not a significant regulatory action and was, therefore, not submitted to the Office of Management and Budget (OMB) for review.
This action is considered an Executive Order 13771 deregulatory action. This final rule provides meaningful burden reduction by giving states 2 additional years to begin PAMS monitoring. A 2-year delay in the required PAMS site start date will result in cost savings for the network due to a savings in operating costs for those measurements not being made during the delay.
This action does not impose any new information collection burden under the PRA. OMB has previously approved the information collection activities contained in the existing regulations and has assigned OMB control number 2060-0084. The burden associated with conducting and reporting PAMS monitoring data has been fully incorporated into the Ambient Air Quality Surveillance Information Collection Request.
I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. In making this determination, the impact of concern is any significant adverse economic impact on small entities. An agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, has no net burden or otherwise has a positive economic effect on the small entities subject to the rule. This final action would reduce burden on the affected state and local monitoring agencies by delaying implementation and the associated costs of PAMS monitoring by 2 years. We have, therefore, concluded that this action will relieve regulatory burden for all directly regulated small entities.
This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments. The action imposes no enforceable duty on any state, local or tribal governments or the private sector.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the National Government and the states, or on the distribution of power and responsibilities among the various levels of government.
This action does not have tribal implications, as specified in Executive Order 13175. This action only applies to state and local monitoring agencies operating NCore monitoring sites in Core Based Statistical Areas of 1,000,000 people or more. No tribal governments will be subject to the PAMS monitoring requirements. Thus, Executive Order 13175 does not apply to this action.
The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive order. This action is not subject to Executive Order 13045 because it does not concern an environmental health risk or safety risk.
This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.
This rulemaking does not involve technical standards.
The EPA believes that this action is not subject to Executive Order 12898 (59 FR 7629, February 16, 1994) because it does not establish an environmental health or safety standard.
This action is subject to the CRA, and the EPA will submit a rule report to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).
Ambient air monitoring, Ozone, Photochemical assessment monitoring stations, Precursor monitoring.
For the reasons stated in the preamble, the Environmental Protection Agency is amending part 58 of title 40, chapter I, of the Code of Federal Regulations as follows:
42 U.S.C. 7403, 7405, 7410, 7414, 7601, 7611, 7614, and 7619.
(h) The Photochemical Assessment Monitoring sites required under appendix D of this part, section 5(a), must be physically established and operating under all of the requirements of this part, including the requirements of appendix A, C, D, and E of this part, no later than June 1, 2021.
Federal Communications Commission.
Technical amendments.
In this document, the Federal Communications Commission (Commission), Managing Director, adopted an Order implementing non-substantive revisions of the Commission's rules to eliminate a redundant provision and modify related rules for consistency with the amendments that the Commission adopted in a Report and Order published in the
Effective on January 8, 2020.
Daniel Daly, Office of Managing Director at (202) 418-1832.
This is a summary of the Commission's Order, DA 19-1240, released December 6, 2016. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street SW, Washington, DC 20554 or at the following internet address:
In the Report and Order, FCC 19-79, 84 FR 43705, August 22, 2019, the Commission revised 47 CFR parts 1, 20, and 43 of the Commission's rules to create a new Digital Opportunity Data Collection program and to modify its existing FCC Form 477 Data Program. This Order implements related revisions to eliminate redundancy and conform other rules to the amendments adopted in the Report and Order.
Specifically, both §§ 1.7002 and 43.01(d) of the Commission's rules (47 CFR 1.7002, 43.01(d)) establish requirements regarding the frequency and content of FCC Form 477 filings. This Order eliminates this potentially confusing redundancy by deleting § 43.01(d). In turn, the deletion of
Administrative practice and procedure, Broadband, Reporting and recordkeeping requirements, Telecommunications.
Commercial mobile services, Reporting and recordkeeping requirements.
Communications common carriers, Reporting and recordkeeping requirements.
Accordingly, 47 CFR parts 1, 20, and 43 are revised by making the following correcting amendments:
47 U.S.C. chs. 2, 5, 9, 13; 28 U.S.C. 2461 note, unless otherwise noted.
47 U.S.C. 151, 152(a) 154(i), 157, 160, 201, 214, 222, 251(e), 301, 302, 303, 303(b), 303(r), 307, 307(a), 309, 309(j)(3), 316, 316(a), 332, 610, 615, 615a, 615b, 615c, unless otherwise noted.
(b) * * *
(1) File with the Commission copies of contracts entered into with other carriers or comply with other reporting requirements, or with §§ 1.781 through 1.814 and 43.21 of this chapter; except that commercial radio service providers that are facilities-based providers of broadband service or facilities-based providers of mobile telephony service, as described in § 1.7001(b)(1) and (3) of this chapter, are required to file reports pursuant to §§ 1.7000-1.7002 of this chapter. * * *
47 U.S.C. 35-39, 154, 211, 219, 220; sec. 402(b)(2)(B), (c), Pub. L. 104-104, 110 Stat. 129.
(b) Except as provided in paragraph (c) of this section, carriers becoming subject to the provisions of the several sections of this part for the first time, shall, within thirty (30) days of becoming subject, file the required data as set forth in the various sections of this part.
Federal Communications Commission.
Final rule, correction.
This document corrects errors in the
Effective January 8, 2020.
Suzanne Yelen, Wireline Competition Bureau, (202) 418-7400.
This summary contains corrections to the
In Final rule FR Doc. 2019-26448, published December 9, 2019 (84 FR 67220), make the following correction:
Surface Transportation Board.
Final rule.
The Surface Transportation Board (Board) is issuing a final rule to implement the annual inflationary adjustment to its civil monetary penalties, pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.
This final rule is effective January 8, 2020.
Nathaniel Bawcombe at (202) 245-0376. Assistance for the hearing impaired is available through the Federal Relay Service at (800) 877-8339.
The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act), enacted as part of the Bipartisan Budget Act of 2015, Public Law 114-74, section 701, 129 Stat. 584, 599-601, requires agencies to adjust their civil penalties for inflation annually, beginning on July 1, 2016, and no later than January 15 of every year thereafter. In accordance with the 2015 Act, annual inflation adjustments are to be based on the percent change between the Consumer Price Index for all Urban Consumers (CPI-U) for October of the previous year and the October CPI-U of the year before that. Penalty level adjustments should be rounded to the nearest dollar.
The statutory definition of civil monetary penalty covers various civil penalty provisions under the Rail (Part A); Motor Carriers, Water Carriers, Brokers, and Freight Forwarders (Part B); and Pipeline Carriers (Part C) provisions of the Interstate Commerce Act, as amended. The Board's civil (and criminal) penalty authority related to rail transportation appears at 49 U.S.C. 11901-11908. The Board's penalty authority related to motor carriers, water carriers, brokers, and freight forwarders appears at 49 U.S.C. 14901-14916. The Board's penalty authority related to pipeline carriers appears at 49 U.S.C. 16101-16106.
As set forth in this final rule, the Board is amending 49 CFR part 1022 to make an annual inflation adjustment to the civil monetary penalties in conformance with the requirements of the 2015 Act. The adjusted penalties set forth in the rule will apply only to violations that occur after the effective date of this regulation.
In accordance with the 2015 Act, the annual adjustment adopted here is calculated by multiplying each current penalty by the cost-of-living adjustment factor of 1.01764, which reflects the percentage change between the October 2019 CPI-U (257.346) and the October 2018 CPI-U (252.885). The table at the end of this decision shows the statutory citation for each civil penalty, a description of the provision, the adjusted statutory civil penalty level for 2019, and the adjusted statutory civil penalty level for 2020.
The final rule set forth at the end of this decision is being issued without notice and comment pursuant to the rulemaking provision of the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(B), which does not require that process “when the agency for good cause finds” that public notice and comment are “unnecessary.” Here, Congress has mandated that the agency make an annual inflation adjustment to its civil monetary penalties. The Board has no discretion to set alternative levels of adjusted civil monetary penalties, because the amount of the inflation adjustment must be calculated in accordance with the statutory formula. Given the absence of discretion, the Board has determined that there is good cause to promulgate this rule without soliciting public comment and to make this regulation effective immediately upon publication.
The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 601-612, generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Because the Board has determined that notice and comment are not required under the APA for this rulemaking, the requirements of the RFA do not apply.
Pursuant to the Congressional Review Act, 5 U.S.C. 801-808, the Office of Information and Regulatory Affairs has designated this rule as a non-major rule, as defined by 5 U.S.C. 804(2).
This final rule does not contain a new or amended information collection requirement subject to the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3521.
Administrative practice and procedures, Brokers, Civil penalties, Freight forwarders, Motor carriers, Pipeline carriers, Rail carriers, Water carriers.
1. The Board amends its rules as set forth in this decision. Notice of the final rule will be published in the
2. This decision is effective on its date of publication in the
By the Board, Board Members Begeman, Fuchs, and Oberman.
For the reasons set forth in the preamble, part 1022 of title 49, chapter X, of the Code of Federal Regulations is amended as follows:
5 U.S.C. 551-557; 28 U.S.C. 2461 note; 49 U.S.C. 11901, 14901, 14903, 14904, 14905, 14906, 14907, 14908, 14910, 14915, 14916, 16101, 16103.
(b) The cost-of-living adjustment required by the statute results in the following adjustments to the civil monetary penalties within the jurisdiction of the Board:
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule.
NMFS issues a final rule that implements Amendment 118 to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (BSAI FMP) and a regulatory amendment that revises regulations on Vessel Monitoring System (VMS) requirements in the Bering Sea and Aleutian Islands (BSAI) and Gulf of Alaska (GOA). This final rule is necessary to improve efficiency and provide economic benefits for the Individual Fishing Quota (IFQ) and Community Development Quota (CDQ) fleets, minimize whale depredation and seabird interactions in the IFQ and CDQ fisheries, and reduce the risk of exceeding an overfishing limit for any species. This final rule is intended to promote the goals and objectives of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), the Northern Pacific Halibut Act of 1982 (Halibut Act), the BSAI FMP, and other applicable laws.
This rule is effective on February 7, 2020.
Electronic copies of the Environmental Assessment and the Regulatory Impact Review (collectively referred to as the “Analysis”) and the Finding of No Significant Impact prepared for this final rule may be obtained from
Stephanie Warpinski, 907-586-7228.
NMFS published the Notice of Availability for Amendment 118 in the
The following summarizes the IFQ Program, the CDQ Program, the need for this final rule, and the anticipated effects of the final rule. Additional detail about this rule is provided in the preamble of the proposed rule and in the Analysis.
The North Pacific Fishery Management Council (Council) recommended Amendment 118 to the BSAI FMP (Amendment 118) to require the retention of halibut by vessels using pot gear in the IFQ and CDQ fisheries in the BSAI, to prohibit the use of pot gear in the Pribilof Island Habitat Conservation Zone (PIHCZ), to require vessels using pot gear to fish IFQ and CDQ to use logbooks and VMS, and to develop regulations that allow NMFS to limit or close IFQ or CDQ fishing for halibut if a groundfish or shellfish overfishing level (OFL) is approached, consistent with existing regulations for groundfish. In recommending Amendment 118, the Council intended to address whale depredation in the IFQ and CDQ fisheries and to improve harvest efficiency of halibut. The following sections summarize the IFQ and CDQ Program, the retention of halibut, limitations on the use of pot gear, and whale depredation in the BSAI. Additional detail is provided in the preamble to the proposed rule (84 FR 52852, October 3, 2019).
The International Pacific Halibut Commission (IPHC) and NMFS manage fishing for Pacific halibut through regulations established under the authority of the Halibut Act. The IPHC develops regulations governing the halibut fishery under the Convention between the United States and Canada for the Preservation of the Halibut Fishery of the Northern Pacific Ocean and Bering Sea. The IPHC's regulations are subject to approval by the Secretary of State with the concurrence of the Secretary of Commerce (Secretary). NMFS promulgates the IPHC's regulations as annual management measures pursuant to 50 CFR 300.62. The final rule implementing the 2019 annual management measures published March 14, 2019 (84 FR 9243).
The commercial halibut and sablefish fisheries in the GOA and the BSAI management areas are managed under the IFQ Program that was implemented in 1995 (58 FR 59375, November 9, 1993). Section 4.5 of the Analysis (see
The Western Alaska Community Development Program (CDQ Program) was implemented in 1992 (57 FR 54936, November 23, 1992). Section 4.5.2 of the Analysis provides additional detail on the history of the CDQ halibut fishery.
The IFQ and CDQ fisheries are prosecuted in accordance with catch limits established by regulatory areas. The sablefish IFQ regulatory areas defined for sablefish in the BSAI are the Bering Sea (BS) and the Aleutian Islands (AI). The sablefish regulatory areas are shown in Figure 14 to 50 CFR part 679.
This rule implements provisions that affect IFQ halibut and CDQ halibut fisheries in the BSAI. The IPHC defines halibut regulatory areas (Areas). The Areas are defined in 50 CFR part 679 and described in Figure 15 to 50 CFR part 679 and Section 1.3 of the Analysis. Action 1 under this final rule is described below and applies within Areas 4B, 4C, 4D, 4E, and that portion of Area 4A that occurs in the Bering Sea and Aleutian Islands Management Area defined in the BSAI FMP.
In the BSAI, IFQ sablefish fishermen who also hold halibut IFQ are required to retain halibut of legal-size. Many IFQ fishermen hold both sablefish and halibut IFQ, and the species can overlap in some fishing areas (see Section 4.5.2 of the Analysis).
In 2018, the IPHC recommended, and the U.S. approved, regulations to authorize the retention of halibut by vessels using pot gear throughout Alaska (83 FR 10390, March 9, 2018). Section 20(1) of the IPHC's 2019 annual management measures authorizes a person to retain and possess IFQ halibut or CDQ halibut taken with hook-and-line or pot gear in the IFQ or CDQ fisheries provided retention and possession is authorized by NMFS regulations published at 50 CFR part 679. If the Secretary approves a final rule to implement Amendment 118, these new regulatory requirements would ensure consistency with the regulations promulgated under the Halibut Act (16 U.S.C. 773c(c)).
Pribilof Islands Blue King Crab (PIBKC) occurs in the BSAI and is overfished and experienced overfishing most recently in 2016. Bycatch of PIBKC in pot gear is a concern in the BSAI, particularly in areas where PIBKC are concentrated. The greatest concentration of PIBKC is within the PIHCZ, a portion of the BSAI that overlaps with IFQ and CDQ halibut and sablefish fisheries. Section 3.6 of the Analysis provides more information about PIBKC and the PIHCZ.
In addition to the current closure of the PIHCZ to all trawl gear and Pacific cod pot gear, regulations in § 679.25 provide NMFS with inseason management authority to issue precise closures to BSAI groundfish and shellfish fisheries if a stock, in this case PIBKC, is approaching the OFL and if the closure is necessary to prevent overfishing.
Participants in the BSAI IFQ fisheries indicated to the Council and NMFS that authorizing the use of pot gear for IFQ halibut fishing could reduce the adverse impacts of depredation for those vessel operators who choose to switch from hook-and-line to pot gear. Section 1.2 of the Analysis provides additional information on the Council's development and recommendation of Amendment 118 and this final rule.
This section describes the changes to current regulations. This final rule includes two actions that revise 50 CFR part 300, 50 CFR part 600, and 50 CFR part 679. The primary action, Action 1, implements management measures that authorize retention of legal-size halibut in pot gear in the BSAI. The scope of this action does not authorize the retention of IFQ or CDQ halibut in other directed pot fisheries, including crab fisheries and Pacific cod fisheries. Action 2 modifies regulations to provide clarity and to remove from regulation two VMS requirements that are no longer necessary.
Action 1 includes the following five elements: (1) Authorizes retention of
Action 1 does not authorize the retention of IFQ halibut or CDQ halibut in other directed pot fisheries, other than IFQ or CDQ sablefish or IFQ or CDQ halibut. An IFQ permit holder or a vessel fishing on behalf of a CDQ group is not permitted, nor required, to retain halibut on a pot fishing trip while directed fishing in other pot fisheries (
The first element of Action 1 authorizes the harvest of IFQ halibut or CDQ halibut with pot gear and provides halibut quota holders the opportunity to use pot gear on a trip solely intended to harvest halibut, or on a mixed trip in which both halibut and sablefish are the intended target, provided the vessel has quota for the appropriate areas for both species. Section 679.7(f)(11) prohibits IFQ permit holders from discarding halibut or sablefish caught with fixed gear for which they hold unused halibut or sablefish IFQ for that vessel and IFQ regulatory area. Consistent with that regulatory requirement and with § 679.42(m)(2) and (3), Action 1 prohibits IFQ and CDQ permit holders fishing in the BSAI with pot gear from discarding legal-size halibut for which they have the necessary quota. IFQ and CDQ participants that hold both sablefish and halibut quota will have more flexibility to use their quota opportunistically and minimize variable costs.
This final rule revises the definition of “Fishing” at § 300.61 to include the deployment of pot gear in the BSAI halibut IFQ or CDQ fishery.
This final rule revises § 679.2 to include pot gear as authorized fishing gear in the BSAI IFQ and CDQ fisheries. Specifically, this final rule revises the definition of “Fixed gear” under the definition of “Authorized fishing gear” at § 679.2(4)(v) to include pot gear as an authorized gear in the BSAI IFQ halibut or CDQ halibut fishery. The regulations currently define fixed gear for sablefish harvested in the BSAI to include hook-and-line gear and pot gear (§ 679.2(4)(ii)). Fixed gear is a general term that describes multiple gear types allowed to fish sablefish and halibut under the IFQ and CDQ Programs and is referred to throughout 50 CFR part 679. This final rule revises § 679.24 (and § 679.42, discussed later) to require retention of halibut in pot gear in the BSAI IFQ and CDQ fisheries. Specifically, this final rule revises § 679.24(b) to require retention of groundfish for any person using longline pot gear while fishing for halibut in the BSAI. As revised, § 679.24(b) now requires retention of groundfish for any person using longline pot gear while fishing for both sablefish and halibut in the BSAI.
This final rule revises § 679.42(b)(1)(i) to specify that IFQ halibut may be harvested using pot gear, but the final rule will not change the existing prohibition on the use of trawl gear to harvest IFQ halibut in any IFQ regulatory area.
The second element of Action 1 closes the PIHCZ to all directed fishing for groundfish and halibut with pot gear. This final rule revises § 679.22(a)(6) to implement that closure. Regulations at § 679.22 already prohibit the use of pot gear to harvest Pacific cod in the PIHCZ. The Pacific cod pot fishery is the largest groundfish pot fishery in the BSAI. Closing the PIHCZ to all pot gear is necessary to avoid groundfish fishery and area closures that could be triggered by approaching an OFL for the PIBKC. Section 3.6 of the Analysis provides additional details on the distribution of halibut and potential overlap with PIBKC in the PIHCZ.
The third element of Action 1 amends regulations at § 679.2(15) that describe the definition of “Authorized Fishing Gear” to exempt vessel operators fishing halibut or sablefish IFQ or CDQ with pot gear from the requirement to have a tunnel opening no wider and no taller than 9 inches when the vessel operator is required to retain halibut. If the tunnel opening requirement remained in effect, the extent to which halibut quota holders in the BSAI could target halibut with pot gear would be greatly reduced, contrary to the intent of Amendment 118. Section 4.7.4.2 of the Analysis describes this element in more detail.
The fourth element of Action 1 specifies the management measures, and required determinations, that NMFS will use to limit or close IFQ or CDQ fishing for halibut in the BSAI and GOA if an OFL for groundfish or shellfish is approached, consistent with regulations in place for directed fishing for groundfish. Under existing regulations at § 679.25, NMFS has the authority to limit or close groundfish fisheries, including the IFQ or CDQ sablefish fishery, to prevent overfishing of groundfish and shellfish species. However, these regulations do not apply to the IFQ or CDQ halibut fishery to prevent overfishing of groundfish or shellfish. While NMFS has authority under section 305(c) of the Magnuson-Stevens Act (16 U.S.C. 1855(c)) to enact emergency regulations to limit fishing to avoid exceeding an OFL and authority under the Halibut Act to implement measures that are in addition to and not in conflict with those adopted by the IPHC (16 U.S.C. 773c(c)), the specific regulatory measures that NMFS could use to limit or close halibut fishing to prevent overfishing are not described in regulation. This final rule revises § 679.25 to specify the management measures NMFS can use, and the determinations required, to limit or close halibut fisheries in the BSAI and GOA in the event an OFL is approached for a groundfish or shellfish species, consistent with regulations in place for directed fishing for groundfish. These changes provide the public with a clear understanding of NMFS's regulatory authority to limit or close halibut directed fishing in the event that the OFL for PIBKC, or other groundfish or shellfish species, is approached. Section 4.7.6 of the Analysis further describes this element in greater detail.
The fifth element of Action 1 requires all vessels fishing IFQ or CDQ sablefish or halibut with pot gear to complete the Daily Fishing Logbook (DFL), to use VMS, and to provide additional pot gear information on the PNOL. A vessel operator records where and when fishing activity occurs and the number of sets and hauls in the DFL. There are several types of logbooks, including a DFL required by NMFS (§ 679.5) and an IPHC logbook. The Council's intent for this element is to require all vessels fishing IFQ or CDQ sablefish or halibut with pot gear to complete the DFL, and the final rule revises regulations at § 679.5 accordingly. In addition, this final rule requires vessels to report specific information on the use of pot gear in the BSAI on the PNOL under § 679.5, including adding the requirement to report the number of
Due to concern over additional pot fishing in the PIHCZ and within the PIBKC stock boundary area, this final rule revises § 679.7(f)(26) to prohibit vessels using pot gear to fish for IFQ or CDQ sablefish or halibut in the BSAI without functioning VMS equipment as required under § 679.42(m).
All vessels that participated in the BSAI IFQ or CDQ sablefish pot fishery have VMS and maintain a DFL already. However, additional vessels may use pot gear to harvest IFQ or CDQ halibut or sablefish in the future. Any additional vessels will be required to install VMS and begin maintaining a DFL, as well as report pot gear information on the PNOL, under this final rule. Section 4.7.5 of the Analysis provides more information supporting these monitoring and reporting provisions.
To effectuate each of the five elements described above, the final rule revises § 679.42 to specify at § 679.42(m) the requirements for any vessel operator who fishes for IFQ or CDQ halibut or IFQ or CDQ sablefish in the BSAI using pot gear. This includes the requirements that all vessel operators must retain legal-sized halibut provided the operator has sufficient IFQ or CDQ for the retained halibut; that all vessel operators must comply with the VMS requirements; that all vessel operators must complete a DFL; and that all vessels operators must report pot gear set, lost, and left deployed on the fishing grounds when they submit a PNOL.
Finally, to promote consistency and clarity with the provisions of this rule, this final rule makes editorial revisions throughout regulations at 50 CFR part 679. Existing regulations implementing the Observer Program state the gear type (hook-and-line) used to harvest halibut in the applicability paragraph for which vessels are in partial coverage or full coverage. Regulations at § 679.51(a)(1)(i) are modified to remove the language describing the specific gear type used to fish for halibut, which is in accordance with this action that authorizes another specific gear type (pot) in addition to hook-and-line gear. This is an editorial change that does not modify existing observer coverage requirements for vessels participating in the IFQ or CDQ halibut or sablefish fisheries.
Action 2 modifies regulations to remove certain provisions that are no longer required for management and enforcement purposes and makes other minor revisions to the regulations governing VMS. However, Action 2 does not materially change existing VMS coverage, requirements, or equipment.
First, this final rule removes from § 679.28 a check-in requirement for vessel owners activating VMS for the first time. Currently, vessel owners are required to check in by fax to register a new unit with the NMFS Office of Law Enforcement (OLE) (§ 679.28(f)(4)(ii)). This faxed check-in is no longer necessary because the information OLE needs about a new VMS unit is provided automatically by the VMS unit when the new unit is activated.
Second, this action removes from § 679.42 a requirement for vessel operators in the IFQ sablefish fisheries in BSAI and GOA to contact NMFS by phone and receive confirmation that their VMS unit is operating. Currently, vessel operators are required to call OLE at least 72 hours prior to fishing for IFQ sablefish in the BSAI and prior to using longline pot gear to fish for IFQ sablefish in the GOA (§ 679.42(k)). These vessel clearance requirements are no longer needed because the VMS unit provides the information needed by OLE to monitor these fisheries.
This action also modifies in § 679.28(f)(6) the list of circumstances in which a VMS unit must be transmitting to include reference to all of the VMS requirements elsewhere in 50 CFR part 679 and 50 CFR part 680. The current list is only a partial list of the VMS requirements in Federally-managed fisheries off Alaska. Completion of the list will reduce confusion about the VMS requirements under § 679.28(f), but it will not alter existing VMS requirements at § 679.28(f) when a VMS transmitter must be transmitting. The action also revises two cross references to the VMS requirements in § 679.7(a)(21) and (22) to more accurately refer to the VMS regulations in § 679.28(f). This revision will provide greater clarity and specificity in the VMS regulations without changing existing VMS requirements.
This section describes the final rule implementing Amendment 118 and the anticipated effects on fishery participants and the environment.
This final rule authorizes the use of pot gear in the IFQ and CDQ halibut fisheries and requires retention of legal-sized halibut in pot gear used in the existing IFQ and CDQ sablefish pot gear fisheries and in the new IFQ and CDQ halibut pot gear fisheries if the operator has sufficient IFQ or CDQ for the retained halibut. Pot gear includes pot-and-line gear and longline pot gear. For additional information on longline gear, pot-and-line gear, and longline pot gear, see the definition of “Authorized Fishing Gear” in § 679.2. This final rule could improve operational efficiency of vessels participating in the IFQ or CDQ halibut or sablefish pot fisheries by reducing the discard mortality associated with halibut discard in the existing sablefish pot fisheries and reducing whale depredation for vessels that choose to switch to pot gear instead of hook-and-line gear. Reducing bycatch and discard mortality of halibut in the sablefish pot fishery and reducing whale depredation of halibut and sablefish caught with pot gear will provide conservation benefits to these fishery resources (halibut and sablefish).
Based on the analysis in Section 4.7.2 of the Analysis, the overall impact of this final rule on the hook-and-line IFQ or CDQ halibut fishery is likely to be small. As explained in Section 4.5.2 of the Analysis, vessel operators who switch to pot gear to harvest halibut could benefit from this final rule from reduced whale depredation, reduced operating costs, and reduced fishing time. The Analysis (see Section 4.7.2.1) recognizes that it is not possible to estimate how many hook-and-line vessel operators will switch to pot gear to harvest halibut under this final rule. The total number of vessels using pot gear will be limited by the costs of pot gear and vessel reconfiguration. For some vessel operators, reconfiguration costs will be prohibitive.
To implement the Council's recommendation to close the PIHCZ to all fishing with pot gear, the final rule requires that all vessels retaining IFQ or CDQ halibut or sablefish in pot gear use logbooks and VMS to ensure consistency in monitoring fishery behavior.
Section 304(d)(2)(A) of the Magnuson-Stevens Act obligates NMFS to recover the actual costs of management, data collection, and enforcement (direct program cost) of catch share programs, such as the IFQ fisheries (16 U.S.C. 1854(d)(2)(A)). Therefore, NMFS implemented a cost recovery fee program for the IFQ fisheries in 2000 (65 FR 14919, March 20, 2000). The cost to implement and manage the IFQ sablefish and halibut pot gear fishery are included in the annual calculation of NMFS's recoverable costs, and this final
If some portion of the IFQ and CDQ halibut fleet switches to pot gear, interactions between whales and the halibut fishery could decrease. Unaccounted halibut mortality due to depredation is expected to decline as IFQ and CDQ halibut fishermen voluntarily switch from hook-and-line gear to pot gear. Because the amount of depredation is not known with certainty, the potential effects of reduced depredation from this final rule cannot be quantified. Section 3.5 of the Analysis and the preamble of the proposed rule provides available information on the interactions of the IFQ fishery with killer whales and sperm whales. Section 3.5.3.2 of the Analysis and the preamble of the proposed rule describes whale entanglement with vertical gear lines in the water.
This final rule will likely reduce the incidental catch of seabirds in the IFQ and CDQ halibut fisheries because it provides vessel operators with the opportunity to use pot gear, which has a lower incidental catch rate of seabirds than hook-and-line gear. In Section 3.9 of the Analysis, NMFS compared the number of seabird mortalities by hook-and-line and pot gear and determined that a higher level of seabird mortality occurred with hook-and-line gear than pot gear.
NMFS received 6 comment letters on the proposed rule. NMFS has summarized and responded to the 11 unique comments below. The comments were from individuals and industry representatives representing IFQ fishermen, CDQ communities, and crab fishermen.
As described in the proposed rule and Section 3.1.1.2 of the Analysis, under Amendment 118 and this final rule, catches of IFQ sablefish or halibut will be authorized only during the IFQ fishing period specified at § 679.23(f)(1) and (g)(1) and established by the Council and NMFS through the annual harvest specifications for sablefish (84 FR 9000, March 13, 2019) and the annual management measures for halibut (84 FR 9243, March 14, 2019).
In addition, the final rule provides greater flexibility for participants in the BSAI by allowing them options to fish their quota opportunistically with either hook-and-line or pot gear. Section 4.7.2 of the Analysis provides more detail; in summary, this may increase their economic efficiency and reduce opportunity costs that are incurred from avoiding whales. Another potential benefit occurs from increased efficiency in the use of the resource and possibly better accounting for unobserved mortality due to whale depredation.
The final rule also provides a conservation benefit for seabirds. Section 3.9.2.2 states that pot gear has the lowest seabird bycatch rates and it is assumed that the impact to seabirds is insignificant. The use of pot gear, rather than hook-and-line gear, is therefore expected to reduce the incidental catch of seabirds in the IFQ and CDQ fisheries. The final rule also addresses conservation concerns in the PIHCZ and for PIBKC. The final rule closes the PIHCZ to all fishing with pot gear for groundfish and halibut, in addition to the existing prohibition on the use of trawl gear and pot gear for Pacific cod. Section 3.6.3.2 of the Analysis and the proposed rule preamble describe that closing the PIHCZ is in response to conservation concerns over any additional pot gear activity and associated shellfish bycatch.
There were no changes from the proposed to final rule.
The Administrator, Alaska Region, NMFS, determined that Amendment 118 to the BSAI FMP and this final rule are necessary for the conservation and management of the groundfish and halibut fishery and are consistent with the Magnuson-Stevens Act and other applicable laws.
Regulations governing the U.S. fisheries for Pacific halibut are developed by the IPHC, the Pacific Fishery Management Council, the Council, and the Secretary. Section 5(c) of the Halibut Act allows the Regional Council having authority for a particular geographical area to develop regulations governing the allocation and catch of halibut in U.S. Convention waters as long as those regulations do not conflict with IPHC regulations (16 U.S.C. 773c(c)). This final rule is consistent with the Council's authority to allocate halibut catches among fishery participants in the waters in and off Alaska. The Halibut Act provides the Secretary with the general responsibility to carry out the Convention with the authority, in consultation with the Secretary of the department in which the U.S. Coast Guard is operating, to adopt such regulations as may be necessary to carry out the purposes and objectives of the Convention and the Halibut Act (16 U.S.C. 773c(a) & (b)). This final rule is consistent with the Halibut Act and other applicable laws.
This final rule has been determined to be not significant for the purposes of Executive Order 12866.
This final rule is considered an Executive Order 13771 deregulatory action.
Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a final regulatory flexibility analysis, the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall explain the actions a small entity is required to take to comply with a rule or group of rules. The preambles to the proposed rule and this final rule include a detailed description of the actions necessary to comply with this rule and as part of this rulemaking process, NMFS included on its website a summary of compliance requirements that serves as the small entity compliance guide:
This final regulatory flexibility analysis (FRFA) incorporates the Initial Regulatory Flexibility Analysis (IRFA), a summary of the significant issues raised by the public comments in response to the IRFA, NMFS's responses to those comments, and a summary of the analyses completed to support the final rule.
Section 604 of the Regulatory Flexibility Act (RFA) requires that, when an agency promulgates a final rule under section 553 of Title 5 of the U.S. Code (5 U.S.C. 553), after being required by that section or any other law to publish a general notice of proposed
A description of this final rule and the need for and objectives of this rule are contained in the preamble to this final rule and the preambles to the proposed rule (84 FR 52852, October 3, 2019) and the proposed rule correction (84 FR 57687, October 28, 2019), and are not repeated here.
An IRFA was prepared in the Classification section of the preamble to the proposed rule. The Chief Counsel for Advocacy of the SBA did not file any comments on the proposed rule. NMFS received no comments specifically on the IRFA.
NMFS estimates that, between the BSAI and the GOA, 815 vessels participated in the IFQ or CDQ commercial halibut fisheries in 2018; 802 of which are considered small entities based on the $11.0 million threshold. All of these small entities in the BSAI or GOA could be directly regulated by that aspect of the final rule that specify NMFS's regulatory authority to limit or close IFQ or CDQ halibut fishing if NMFS determined it was necessary in the event of a conservation concern for groundfish or shellfish. In addition, vessels that currently participate in the GOA fisheries will be directly regulated by the final rule if they choose to participate in the IFQ or CDQ halibut or sablefish fisheries in the BSAI. NMFS estimates that, in the BSAI, 152 vessels participated in the IFQ or CDQ halibut or sablefish fisheries in 2018. Of those vessels, 125 are considered small entities. In the BSAI sablefish pot fishery, 5 of the 9 vessels that participated in 2018 are considered small entities. Therefore, NMFS estimates a total of 130 small entities that could be directly regulated by this final rule if they decide to use pot gear to harvest IFQ or CDQ halibut or IFQ or CDQ sablefish. In addition, a portion of these small entities engaged in the IFQ or CDQ halibut or sablefish fisheries are subject to the requirements for using pot gear if they choose to use pot gear in the BSAI IFQ or CDQ halibut or sablefish fisheries. In addition, this final rule closes the PIHCZ to all fishing with pot gear. No entities are currently using pot gear to fish within the PIHCZ. Therefore, no additional entities other than the 130 entities engaged in the IFQ or CDQ fisheries are affected by this provision. Those entities engaged in the IFQ or CDQ fisheries with pot gear in the BSAI are required to use logbooks and VMS and submit additional pot gear information on the PNOL while IFQ or CDQ fishing with pot gear in the BSAI.
The recordkeeping, reporting, and other compliance requirements of some vessels affected by this final rule will be increased slightly. This final rule contains new requirements for vessels participating in the IFQ and CDQ halibut pot fishery in the BSAI. This final rule removes two unnecessary VMS check-in requirements in the BSAI and GOA.
NMFS currently requires catcher vessels 60 feet (ft) or greater length overall (LOA), using fixed gear, setline, or pot gear to harvest IFQ sablefish or IFQ halibut to maintain a longline and pot gear Federal DFL. Catcher/processors currently must also maintain a daily catcher/processor logbook (DCPL). All vessels participating in the BSAI sablefish IFQ or CDQ pot fishery maintain a longline and pot gear DFL. This final rule revises regulations to also require all vessels using pot gear to harvest IFQ or CDQ halibut in the BSAI to maintain a longline and pot gear DFL.
NMFS currently requires vessels in the BSAI to have an operating VMS on board while participating in the IFQ or CDQ sablefish pot fishery. This final rule revises regulations to extend this requirement to vessels using pot gear in the BSAI IFQ or CDQ halibut fishery.
NMFS currently requires all vessels in the IFQ sablefish and halibut fisheries to submit a PNOL to NMFS. This final rule revises regulations to require vessels using pot gear in the BSAI IFQ or CDQ halibut fishery to report the number of pots set, the number of pots lost, and the number of pots left deployed on the fishing grounds in addition to the information they currently submit in the PNOL.
Two regulations are removed because they are no longer necessary, but these removals do not materially change existing VMS coverage, requirements, or equipment. This final rule removes a check-in requirement for vessel operators activating VMS for the first time and removes a requirement for vessel operators to contact NMFS and receive a VMS confirmation number at least 72 hours prior to fishing for IFQ sablefish in the BSAI or using longline pot gear to fish for IFQ sablefish in the GOA.
Several aspects of this rule directly regulate small entities. BSAI halibut harvesters that are directly regulated by this final rule are expected to benefit from the additional flexibility to use a new gear type in order to minimize the costs of whale depredation that occurs on hook-and-line gear. Additional impacts may be expected for small directly regulated IFQ or CDQ halibut and sablefish harvesters in terms of potential additional costs for daily fishing logbooks, reporting on the PNOLs, or VMS requirements. Small entities will be required to comply with the requirements for using pot gear in the BSAI IFQ and CDQ halibut and sablefish fisheries. Authorizing halibut retention in pot gear in this final rule provides an opportunity for small entities to choose whether to use hook-and-line or pot gear to increase harvesting efficiencies and reduce operating costs in the IFQ and CDQ halibut and sablefish fisheries. Because NMFS currently has statutory authority under section 305(c) of the Magnuson-
As noted in Section 4.7.12 of the Analysis, the requirements for using pot gear are not expected to adversely impact small entities because such entities can voluntarily choose to use pot gear or continue to use hook-and-line gear. In addition, the requirements for using pot gear will not be expected to restrict existing sablefish harvesting operations. The Council and NMFS considered requirements that would have imposed larger costs on directly regulated small entities. These included requiring all vessels to remove gear from the fishing grounds each time the vessel made a landing and requiring gear modifications, such as escape mechanisms for bycatch. The Council and NMFS determined that the costs of additional requirements on the existing fleet outweighed the benefits of increased regulations because, while the preferred specifications for gear modifications to reduce bycatch are unknown at this time, industry could develop them in the future if allowed the flexibility to innovate. This final rule therefore meets the objectives of the final rule while minimizing adverse impacts on fishery participants.
Small entities are required to comply with additional recordkeeping and reporting requirements under this final rule if they choose to use pot gear in the BSAI IFQ or CDQ halibut fishery. Directly regulated small entities using pot gear are required to maintain and submit logbooks to NMFS, report specific information on the PNOL, and have an operating VMS on board the vessel. These additional recordkeeping and reporting requirements are not expected to adversely impact directly regulated small entities because the costs of complying with these requirements is
The Council and NMFS considered alternatives to implement additional requirements to report locations of deployed and lost gear in an electronic database. The Council and NMFS determined that these additional requirements were not necessary to meet the objectives of the rule; could undermine other aspects of the Magnuson-Stevens Act because coordinates of lost pot gear are confidential under section 402(b) of the MSA (16 U.S.C. 1881a(b)); and were not practicable at this time because NMFS cannot enforce a location reporting requirement because it is not currently possible to verify the location of lost fishing gear. In addition, this final rule eliminates the requirement for a one-time report that must be faxed into NMFS OLE, which results in an estimated savings of $1,340 a year in personnel and miscellaneous costs to the industry. This final rule also eliminates the requirements for vessels using pot gear to harvest IFQ sablefish to check-in when using VMS, which results in estimated annual savings of $268 for all vessel operators in the BSAI and GOA. Accordingly, this final rule meets the objectives of the action while minimizing the reporting burden for fishery participants.
There are no significant alternatives to this final rule that accomplish the objectives to authorize retention of halibut in pot gear in the BSAI IFQ or CDQ halibut or sablefish fisheries and that minimize adverse economic impacts on small entities.
This final rule contains collection-of-information requirements subject to review and approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). NMFS has submitted requirements under Control Numbers 0648-0213 and 0648-0445 to OMB for approval. A collection-of-information requirement under Control Number 0648-0272 has been approved by OMB.
Public reporting burden is estimated to average 35 minutes per individual response for the Catcher Vessel Longline and Pot Gear Daily Fishing Logbook.
Public reporting burden is estimated to average 15 minutes per individual response for the Prior Notice of Landing.
While the number of participants who will use VMS transmissions will increase, such transmissions are not assigned a reporting burden because the transmissions are automatic. Public reporting burden is expected to decrease because the requirements for the VMS check-in report (estimated average of 12 minutes per individual response) and the sablefish call-in (estimated average of 12 minutes) are being removed because they are no longer necessary.
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to penalty for failure to comply with, a collection of information subject to the requirement of the PRA, unless that collection of information displays a currently valid OMB control number. All currently approved NOAA collections of information may be viewed at:
Administrative practice and procedure, Fisheries, Fishing, Reporting and recordkeeping requirements.
Administrative practice and procedure, Confidential business information, Fish, Fisheries, Fishing, Fishing regulations, Fishing vessels, Foreign relations, Intergovernmental relations, Penalties, Reporting and recordkeeping requirements, Statistics.
Alaska, Fisheries, Reporting and recordkeeping requirements.
For the reasons set out in the preamble, 50 CFR parts 300, 600, and 679 are amended as follows:
16 U.S.C. 773-773k.
The addition reads as follows:
(3) The deployment of pot gear as defined in § 679.2 of this title in Commission regulatory areas 4B, 4C, 4D, and 4E and the portion of Area 4A in the Bering Sea Aleutian Islands west of 170°00′ W long.
5 U.S.C. 561 and 16 U.S.C. 1801
(v) * * *
16 U.S.C. 773
(4) * * *
(v) For halibut harvested from any IFQ regulatory area in the BSAI, all pot gear, if the vessel operator is fishing for IFQ or CDQ halibut in accordance with § 679.42.
(15) * * *
(iii)
(a) * * *
(4) * * *
(i)
(c) * * *
(3) * * *
(i) * * *
(B)
(
(l) * * *
(1) * * *
(iii) * * *
(I) If using longline pot gear in the GOA or pot gear in the BSAI, report the number of pots set, the number of pots lost, and the number of pots left deployed on the fishing grounds.
The revisions and additions read as follows:
(f) * * *
(26) Operate a catcher vessel or a catcher/processor using pot gear to fish for IFQ or CDQ halibut or IFQ or CDQ sablefish in the BSAI and fail to use functioning VMS equipment as required in § 679.42(m).
(a) * * *
(6)
(b) * * *
(1) * * *
(iv) While fishing for IFQ or CDQ halibut in the BSAI.
The additions and revisions read as follows:
(a) * * *
(1)
(v) Inseason closures of an area, district, or portions thereof, of harvest of specified halibut fisheries.
(2) * * *
(i) Any inseason adjustment taken under paragraph (a)(1)(i), (ii), (iii), or (iv) of this section must be based on a determination that such adjustments are necessary to prevent:
(iii) * * *
(C) Closure of a management area or portion thereof, or gear type, or season to all groundfish or halibut fishing; or
The revisions read as follows:
(f) * * *
(6) * * *
(vi) You operate an Amendment 80 catcher/processor (see § 679.5(s));
(vii) You are fishing for IFQ sablefish in the Bering Sea or Aleutian Islands (see § 679.42(k));
(viii) You are fishing for IFQ sablefish in the GOA using longline pot gear (see § 679.42(l)) or fishing for IFQ or CDQ halibut or CDQ sablefish in the BSAI using pot gear (see § 679.42(m)); or
(ix) You are required under the Crab Rationalization Program regulations at 50 CFR 680.23(d).
(b) * * *
(1) * * *
(i)
(k) * * *
(1)
(2)
(m)
(1)
(2)
(i) Retain IFQ or CDQ halibut caught in pot gear if sufficient halibut IFQ or CDQ is held by persons on board the vessel as specified in paragraph (m)(3) of this section; and
(ii) Comply with other requirements as specified in paragraph (m)(4) of this section.
(3)
(i) The IFQ or CDQ halibut is caught in any IFQ regulatory area in the BSAI in accordance with paragraph (m) of this section; and
(ii) An IFQ or CDQ permit holder on board the vessel has unused halibut IFQ or CDQ for the IFQ regulatory area fished and IFQ vessel category.
(4)
(i) Complete a longline and pot gear Daily Fishing Logbook (DFL) or Daily Cumulative Production Logbook (DCPL) as specified in § 679.5(c); and
(ii) Possess a transmitting VMS transmitter and comply with the VMS requirements at § 679.28(f)(3) through (5).
(iii) Report pot gear information required when submitting a PNOL as described in § 679.5.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Temporary rule; reallocation.
NMFS is reallocating the projected unused amount of Pacific cod total allowable catch (TAC) from trawl catcher vessels and American Fisheries Act (AFA) trawl catcher/processors to catcher vessels less than 60 feet (18.3 meters) length overall (LOA) using hook-and-line or pot gear in the Bering Sea and Aleutian Islands management
Effective January 7, 2020, through 2400 hours, Alaska local time (A.l.t.), December 31, 2020.
Josh Keaton, 907-586-7228.
NMFS manages the groundfish fishery in the Bering Sea and Aleutian Islands (BSAI) according to the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.
The 2019 Pacific cod TAC specified for catcher vessels using trawl gear in the BSAI is 32,160 metric tons (mt) as established by the final 2019 and 2020 harvest specifications for groundfish in the BSAI (84 FR 9000, March 13, 2019), and two reallocations (84 FR 43727, August 21, 2019 and 84 FR 59968, November 7, 2019).
The 2019 Pacific cod TAC specified for AFA trawl catcher/processors in the BSAI is 3,711 mt as established by the final 2019 and 2020 harvest specifications for groundfish in the BSAI (84 FR 9000, March 13, 2019).
The 2019 Pacific cod TAC allocated to catcher vessels less than 60 feet (18.3 meters (m)) length overall (LOA) using hook-and-line or pot gear in the BSAI is 8,800 mt as established by the final 2019 and 2020 harvest specifications for groundfish in the BSAI (84 FR 9000, March 13, 2019) and three reallocations (84 FR 2068, February 6, 2019, 84 FR 43727, August 21, 2019, and 84 FR 59968, November 7, 2019).
The Administrator, Alaska Region, NMFS, (Regional Administrator) has determined that catcher vessels using trawl gear will not be able to harvest 470 mt of the 2019 Pacific cod TAC allocated to those vessels under § 679.20(a)(7)(ii)(A)(
Therefore, in accordance with § 679.20(a)(7)(iii)(A), NMFS reallocates 470 mt from the trawl catcher vessel apportionment and 530 mt from AFA trawl catcher/processor allocation to the annual amount specified for catcher vessels less than 60 feet (18.3 m) LOA using hook-and-line or pot gear.
The harvest specifications for Pacific cod included in final 2019 and 2020 harvest specifications for groundfish in the BSAI (84 FR 9000, March 13, 2019) and three reallocations (84 FR 2068, February 6, 2019, 84 FR 43727, August 21, 2019, 84 FR 59968, and November 7, 2019) are revised as follows: 31,690 mt to catcher vessels using trawl gear, 3,181 mt to AFA trawl catcher/processors, and 9,800 mt to catcher vessels less than 60 feet (18.3 m) LOA using hook-and-line or pot gear.
This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the reallocations of Pacific cod to catcher vessels less than 60 feet (18.3 m) LOA using hook-and-line or pot gear. Since the fishery is currently open, it is important to immediately inform the industry as to the revised allocations. Immediate notification is necessary to allow for the orderly conduct and efficient operation of this fishery, to allow the industry to plan for the fishing season, and to avoid potential disruption to the fishing fleet as well as processors. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of December 17, 2019.
The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.
This action is required by § 679.20 and is exempt from review under Executive Order 12866.
16 U.S.C. 1801
Nuclear Regulatory Commission.
Discontinuation of rulemaking activity; denial of petition for rulemaking.
The U.S. Nuclear Regulatory Commission (NRC) is discontinuing the rulemaking activity, “Modifications to Pressure-Temperature Limits,” and denying the associated petition for rulemaking, (PRM)-50-69. The NRC determined that its relevant past decisions and current policies are sufficient to protect the public health and safety in this area and that the potential benefits of proceeding with a rulemaking do not outweigh the associated costs. The rulemaking activity will no longer be reported in the NRC's portion of the Unified Agenda of Regulatory and Deregulatory Actions (the Unified Agenda).
Effective January 8, 2020, the rulemaking activity discussed in this document is discontinued and PRM-50-69 is denied.
Please refer to Docket IDs NRC-2008-0582 (rulemaking activity) and NRC-2000-0019 (petition for rulemaking) when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
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Ilka T. Berrios, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-2404; email:
Title 10 of the
In SECY-16-0009, “Recommendations Resulting from the Integrated Prioritization and Re-Baselining of Agency Activities” (January 31, 2016) (ADAMS Accession No. ML16028A189), the staff requested Commission approval of work to be shed, deprioritized, or performed with fewer resources. One of the items identified to be shed (
During the development of the regulatory basis for a rulemaking to amend appendix G to 10 CFR part 50, the staff determined that discontinuation of this rulemaking would have a minimal adverse impact on the NRC's mission, principles, or values. In addition, the research did not establish any information that would serve as the technical basis to revise appendix G to 10 CFR part 50.
The Commission approved the discontinuation of this rulemaking effort in staff requirements memorandum (SRM)-SECY-16-0009, “Staff Requirements—SECY-16-0009—Recommendations Resulting from the Integrated Prioritization and Re-Baselining of Agency Activities” (April 13, 2016) (ADAMS Accession No. ML16104A158).
Prior to the discontinuation of the rulemaking effort, the NRC staff evaluated the technical merits of the petition and concluded that the technical basis for the proposal, as described in the petition, was insufficient to serve as the technical basis for an appendix G rulemaking.
Under 10 CFR 2.803(i)(2), if the NRC decides not to complete a rulemaking, any associated petition for rulemaking is documented as denied. In SRM-SECY-16-0009, the Commission approved discontinuation of the appendix G rulemaking, as discussed above, which was the rulemaking identified to address PRM-50-69. Therefore, the staff is denying the associated petition, PRM-50-69, for the same reasons that the appendix G rulemaking was discontinued.
The NRC previously terminated the appendix G rulemaking and is denying associated PRM-50-69 for the reasons discussed in this document. The NRC has determined that there was insufficient new information to warrant the requested changes in light of the NRC's relevant past decisions and current policies. In the next edition of the Unified Agenda, the NRC will update the entry for the rulemaking activity and reference this document to indicate that the rulemaking is no longer being pursued. The rulemaking activity will appear in the completed actions section of that edition of the Unified Agenda (
For the Nuclear Regulatory Commission.
Office of Elementary and Secondary Education, Department of Education.
Proposed priorities.
The Assistant Secretary for Elementary and Secondary Education proposes priorities under the Competitive Grants for State Assessments (CGSA) program. The Assistant Secretary may use one or more of these priorities for competitions in fiscal year (FY) 2020 and later years. We take this action to focus Federal financial assistance related to student assessments on innovative assessments. We intend the priorities to increase the number of States using flexibility under the Innovative Assessment Demonstration Authority (IADA) and to support high-quality work among those States that do so.
We must receive your comments on or before February 7, 2020.
Submit your comments through the Federal eRulemaking Portal or via postal mail, commercial delivery, or hand delivery. We will not accept comments submitted by fax or by email or those submitted after the comment period. To ensure that we do not receive duplicate copies, please submit your comments only once. In addition, please include the Docket ID and the term “Competitive Grants for State Assessments—Comments” at the top of your comments.
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Donald Peasley, U.S. Department of Education, 400 Maryland Avenue, SW, Room 3W106, Washington, DC 20202. Telephone: (202) 453-7982. Email:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339.
We invite you to assist us in complying with the specific requirements of Executive Orders 12866, 13563, and 13771 and their overall requirement of reducing regulatory burden that might result from these proposed priorities. Please let us know of any further ways we could reduce potential costs or increase potential benefits while preserving the effective and efficient administration of the program.
During and after the comment period, you may inspect all public comments about the proposed priorities by accessing
The Department is proposing these priorities to encourage State educational agencies (SEAs) to consider new approaches to their State assessment systems. These priorities would build
In 2018 and 2019, the Department published notices inviting applications (NIAs) for IADA and approved four SEAs through this authority. During the initial demonstration period (as defined in ESEA section 1204(b)(3) and 34 CFR 200.104(d)), up to seven SEAs may be approved for IADA. After the initial demonstration period, and upon meeting the requirements in ESEA section 1204(d), the Secretary may grant IADA flexibility to additional SEAs. The Department is proposing these priorities for the CGSA program to support SEAs planning to apply for the authority to implement IADA or SEAs currently implementing an approved IADA plan. Approval for a CGSA grant for those SEAs planning to apply for IADA does not imply or infer that the Department will approve that SEA to implement its IADA proposal. However, the Department believes that the work to plan for IADA will strengthen the State's assessment system, even if the SEA is not ultimately granted IADA flexibility.
To the extent the Department uses the proposed priorities in this notice, the Department anticipates establishing project periods and budget ranges that may differ for applicants seeking CGSA funds to implement an IADA proposal as compared with those seeking CGSA funds to plan for an IADA proposal. The Department will establish specific project periods and budget ranges in a notice inviting applications. In particular, the Department anticipates that a planning grant might be available for a period of 12-18 months while an implementation grant might be available for 36-48 months. Since a planning grant is intended to provide support only during the preparation of an IADA proposal, this would give an SEA or consortium sufficient time to prepare an application for submission. Similarly, the Department anticipates that the budget request for a planning grant would be substantially lower than for an implementation grant, both because the project period would be shorter and because the work would be more targeted, preliminary, and smaller in scope.
Each SEA seeking IADA approval must submit a separate IADA application consistent with 34 CFR 200.104 through 200.108 and the applicable IADA NIA announcing the availability of IADA to additional SEAs, and successfully complete the Department's separate review process for IADA applications. Currently, in addition to the four SEAs approved for IADA, SEAs have been invited to seek approval through a notice published in the
Section 1203(b)(1)(A) of the ESEA identifies the six allowable uses of funds under CGSA. In brief, these uses include developing or improving assessments for English learners; developing or improving models to measure and assess student progress or student growth on assessments; developing or improving assessments for children with disabilities; allowing for collaboration with institutions of higher education or other organizations to improve the quality, validity, and reliability of State academic assessments; measuring student academic achievement using multiple measures of student academic achievement from multiple sources; and evaluating student academic achievement using comprehensive academic assessment instruments (such as performance and technology-based academic assessments, computer adaptive assessments, projects, or extended performance task assessments) that emphasize the mastery of standards and aligned competencies in a competency-based education model. An SEA, or consortium of SEAs, applying for funds under CGSA must describe in its application how it is meeting one or more of these six allowable uses of funds. Since an SEA has flexibility to request IADA with regard to any of the assessments required under ESEA section 1111(b)(2)(B)(v), including alternate assessments aligned with alternate academic achievement standards, and must ensure the inclusion of all students who take that assessment, including English learners and children with disabilities, an SEA could potentially use CGSA funds under any or all of the CGSA uses of funds in service of an IADA assessment. Further, the CGSA uses of funds related to using multiple measures of student academic achievement from multiple sources and evaluating student academic achievement through comprehensive academic assessments that emphasize a competency-based education model (section 1201(a)(2)(K) and (L) of the ESEA, as incorporated into CGSA by ESEA section 1203(b)(1)(A)) are particularly aligned with the flexibility envisioned in IADA.
Since all SEAs may apply for a CGSA grant, in any competition in which we use one or both of these priorities, we will also make funding opportunities available to an SEA that is not planning for or implementing IADA. For example, the Department may choose to use a priority from among the priorities established in the Department's Notice of Final Priorities—Enhanced Assessment Instruments published in the
(a) Under this priority an SEA, or consortium of SEAs, must—
(1) Be approved for IADA as of the date of its CGSA application. If applying as part of a consortium (or in partnership with other SEAs), each SEA must be approved for IADA as of the date of its CGSA application;
(2) Be implementing IADA, consistent with all requirements of section 1204 of the ESEA and applicable regulations as of the date of its CGSA application. If applying for CGSA as part of a consortium (or in partnership with other SEAs), each SEA must individually meet this requirement;
(3) Describe how the SEA will use CGSA funds to implement its approved IADA plan; and
(4) Describe how the proposed project aligns with one or more of the CGSA statutory uses of funds in section 1201(a)(2)(C), (H), (I), (J), (K), or (L) of the ESEA and as required under section 1203(b)(1)(A) of the ESEA.
(b) Any competition that uses this priority must also include another priority under which any SEA may apply.
(a) Under this priority, an SEA, or consortium of SEAs, must—
(1) Provide an assurance by an authorized representative that the SEA(s) intends to apply for flexibility under the IADA, when made available by the Department. If applying for CGSA as part of a consortium (or in partnership with other SEAs), each SEA must provide an assurance that it intends to apply for flexibility under the IADA;
(2) If applying as a consortium of SEAs during the initial demonstration authority for IADA, not include more than four SEAs;
(3) Describe its approach to innovative assessments in terms of the subjects and grades it anticipates addressing, the proposed assessment design, proposed item types (
(4) Describe how the proposed projects align with one or more of the CGSA statutory uses of funds in section 1201(a)(2)(C), (H), (I), (J), (K), or (L) of the ESEA.
(b) Any competition that uses this priority must also include another priority under which any SEA may apply.
Under Executive Order 12866, the Office of Management and Budget (OMB) determines whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by OMB. Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action likely to result in a rule that may—
(1) Have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities in a material way (also referred to as an “economically significant” rule);
(2) Create serious inconsistency or otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive order.
This proposed regulatory action is not a significant regulatory action subject to review by OMB under section 3(f) of Executive Order 12866.
Under Executive Order 13771, for each new regulation that the Department proposes for notice and comment or otherwise promulgates that is a significant regulatory action under Executive Order 12866, and that imposes total costs greater than zero, it must identify two deregulatory actions. For FY 2020, any new incremental costs associated with a new regulation must be fully offset by the elimination of existing costs through deregulatory actions. However, Executive Order 13771 does not apply to “transfer rules” that cause only income transfers between taxpayers and program beneficiaries, such as those regarding discretionary grant programs. Because the proposed priorities would be used in connection with one or more discretionary grant programs, Executive Order 13771 does not apply.
We have also reviewed these proposed regulations under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—
(1) Propose or adopt regulations only on a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;
(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and
(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.
Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”
We issue these proposed priorities only on a reasoned determination that their benefits would justify their costs. In choosing among alternative regulatory approaches, we selected those approaches that would maximize net benefits. Based on an analysis of anticipated costs and benefits, we believe that these proposed regulations are consistent with the principles in Executive Order 13563.
We also have determined that this regulatory action would not unduly interfere with State, local, and Tribal governments in the exercise of their governmental functions.
We have reviewed the proposed priorities in accordance with Executive Order 12866 and do not believe that these priorities would generate a considerable increase in burden. We believe any additional costs imposed by the proposed priorities would be negligible, primarily because they would create new opportunities to prioritize applicants that may have submitted applications regardless of these changes, changes that do not impose additional burden. Moreover, we believe any costs will be significantly outweighed by the potential benefits of making funding opportunities available that leverage maximum flexibility under ESEA and allow for State and local innovation. In addition, generally, participation in a discretionary grant program is entirely voluntary; as a result, these proposed priorities would not impose any particular burden except when an entity voluntarily elects to apply for a grant.
Proposed Priority 1 would give the Department the opportunity to prioritize an applicant to the CGSA program that already has approval for IADA. We believe that this proposed priority could result in changes in the behavior of CGSA applicants. First, while SEAs with IADA approval could previously apply for CGSA (and one of the two SEAs then approved for IADA did apply for CGSA in 2019), we believe that SEAs that have IADA flexibility would be more likely to apply for CGSA if the Department includes Proposed Priority 1 since use of the priority would demonstrate particular Department interest in such projects. Second, we believe that the proposed priority would shift at least some of the Department's grants and prioritize a portion of CGSA funds for those SEAs with IADA approval. However, because this proposed priority would be used in concert with another priority or priorities such that all SEAs could apply for and receive CGSA funds, it would neither expand nor restrict the universe of eligible entities for any Department grant program. Since application submission and participation in our discretionary grant programs is voluntary, we do not think that it would be appropriate to characterize any increased participation in our grant competitions or differences in which entities receive awards as costs associated with this priority.
Proposed Priority 2, which would give the Department the opportunity to prioritize an applicant to the CGSA program that plans to apply for IADA flexibility, would similarly not create costs or benefits, but may have the result of shifting at least some of the Department's grants among eligible entities. We believe that this proposed priority could result in changes in the behavior of applicants. First, while SEAs that may seek future IADA approval could previously have applied for CGSA in 2019, we believe that SEAs that are interested in IADA flexibility would be more likely to apply for CGSA under Proposed Priority 2 since use of the priority would demonstrate particular Department interest in such projects. Second, we believe that the proposed priority could shift at least some of the Department's grants among eligible entities. However, as with Proposed Priority 1, because this proposed priority would be used in concert with another priority or priorities such that all SEAs could apply for and receive CGSA funds, it would neither expand nor restrict the universe of eligible entities for any Department grant program. Again, since application submission and participation in our discretionary grant programs is voluntary, we do not think that it would be appropriate to characterize any increased participation or differences in which entities receive awards as costs associated with this priority.
Both Proposed Priority 1 and Proposed Priority 2 may result in benefits in the form of increased innovation in State assessment.
The Secretary certifies that this proposed regulatory action would not have a significant economic impact on a substantial number of small entities. The U.S. Small Business Administration Size Standards define proprietary institutions as small businesses if they are independently owned and operated, are not dominant in their field of operation, and have total annual revenue below $7,000,000. Nonprofit institutions are defined as small entities if they are independently owned and operated and not dominant in their field of operation. Public institutions are defined as small organizations if they are operated by a government overseeing a population below 50,000.
Of the impacts we estimate accruing to grantees or eligible entities, all are voluntary and related mostly to an increase in the available support for meeting existing obligations to provide statewide student assessment. Therefore, we do not believe that the proposed priorities would significantly impact small entities beyond the potential for receiving additional support from their SEA should the SEA receive a competitive grant from the Department.
The proposed priorities contain information collection requirements approved under OMB 1894-0006.
This document provides early notification of our specific plans and actions for this program.
You may also access documents of the Department published in the
Postal Service
Proposed rule.
The Postal Service is proposing to revise
Submit comments on or before February 7, 2020.
Mail or deliver written comments to the Manager, Product Classification, U.S. Postal Service, 475 L'Enfant Plaza SW, Room 4446, Washington, DC 20260-5015. If sending comments by email, include the name and address of the commenter and send to
All submitted comments and attachments are part of the public record and subject to disclosure. Do not enclose any material in your comments that you consider to be confidential or inappropriate for public disclosure.
You may inspect and photocopy all written comments, by appointment only, at USPS® Headquarters Library, 475 L'Enfant Plaza SW, 11th Floor North, Washington, DC 20260. These records are available for review on Monday through Friday, 9 a.m.-4 p.m., by calling 202-268-2906.
Lance Bell at (407) 782-2972, or Jacqueline Erwin at (202) 268-2158.
Seamless Acceptance leverages electronic documentation (eDoc) and the Intelligent Mail barcodes (IMbs) on containers, handling units, and mailpieces required under full-service. Mailpiece scans collected from mail processing equipment (MPE) and samples from hand-held scanning devices are reconciled to the mailer eDoc to confirm proper mail preparation for the discounts claimed and postage paid. This capability avoids the need for verification of mail at acceptance.
For purposes of clarification, the Postal Service provides the following definitions of key terms/concepts used in this document:
The Postal Service proposes to require:
1. Participation in Seamless Acceptance for all mailers with an authorized Detached Mail Unit (DMU) by February 1, 2021.
• Mailers with an authorized DMU consistently submitting at least 90 percent full-service eligible volume for First-Class Mail, Periodicals, USPS Marketing Mail letters and flats, and Bound Printed Matter (BPM) barcoded flats will have their mailings verified under the Seamless Acceptance Program on February 1, 2021.
2. Performance of Seamless Acceptance verifications on all BMEU entered mailings that claim the full-service discount by July 1, 2021.
• While BMEU mailers will not be required to enroll in Seamless Acceptance, all full-service mailings will be verified using the automated verification processes utilized by the Seamless Acceptance program. Current manual verification processes will be retired for full-service mailings of First-Class Mail, Periodicals, USPS Marketing Mail letters and flats, and BPM barcoded flats and replaced with the automated processes beginning July 1, 2021.
DMU and BMEU mailers will be required to:
• Meet all content and price eligibility standards for the price claimed.
• Participate in eInduction for DMU-verified origin entry and destination entry drop-shipments (would be applicable to DMUs only).
• Participate in Seamless Parallel by March 1, 2020.
Any DMU mailer that anticipates they will be unable to comply with Seamless Acceptance requirements by February 1, 2021 must request an extension by November 1, 2020. Extension requests must be sent to the Mail Entry and Payment Technology (MEPT) mailbox at
Beginning July 1, 2021, manual verifications will be retired for all BMEU-entered full-service mailings. The Postal Service will begin utilizing automated census and sampling verifications for all mailings claiming the full-service discount. Postage assessments will be based on the data received through census and sampling verifications for each calendar month. Verification results will be documented on the Mailer Scorecard for each mailer Customer Registration ID (CRID). Non-full-service mailings will continue to be accepted and will be verified using traditional manual verifications.
Information regarding verification and associated assessments for the eInduction and Seamless Acceptance Programs, is available in Publication 685,
Although exempt from the notice and comment requirements of the Administrative Procedure Act (5 U.S.C. 553(b), (c)) regarding proposed rulemaking by 39 U.S.C. 410(a), the Postal Service invites public comments on the following proposed revisions to
We will publish an appropriate amendment to 39 CFR part 111 to reflect these changes if our proposal is adopted.
Administrative practice and procedure, Postal Service.
Accordingly, 39 CFR part 111 is proposed to be amended as follows:
5 U.S.C. 552(a); 13 U.S.C. 301-307; 18 U.S.C. 1692-1737; 39 U.S.C. 101, 401, 403, 404, 414, 416, 3001-3011, 3201-3219, 3403-3406, 3621, 3622, 3626, 3632, 3633, and 5001.
Seamless Acceptance leverages electronic documentation (eDoc) and Intelligent Mail barcodes (IMbs) on containers, handling units and mailpieces that full-service provides. Mailpiece scans collected from USPS mail processing equipment (MPE) and samples from hand held scanning devices are reconciled to the mailer eDoc to confirm proper mail preparation for the discounts claimed and postage paid. Seamless Acceptance is available for First-Class Mail cards, letters, and flats, Periodicals, USPS Marketing Mail letters and flats, and Bound Printed Matter flats.* * *
Mailers may initiate participation in the Seamless Acceptance Program by contacting a local BMEU or the
Detached Mail Unit (DMU) mailers and mailers that enter full-service mailings at a Business Mail Entry Unit (BMEU) must participate in the Seamless Parallel Program. Additional information on the Seamless Parallel Program is available in Publication 685,
c. * * * (
1. The annual mailing fee will be due and the mailing verification date will become the renewal or anniversary date of the permit fees. The full-service percentage will automatically set to 0 percent on each subsequent anniversary date. The first mailing presented after the anniversary date begins the cumulative process for the full-service percentage calculation. If the first mailing presented after the anniversary date is below 90 percent, the annual fee will need to be paid prior to the mail being finalized. Once the annual fees are paid, the next validation date will be the next anniversary date.
We will publish an appropriate amendment to 39 CFR part 111 to reflect these changes.
Corporation for National and Community Service.
Proposed rule with request for comments.
The Corporation for National and Community Service (CNCS) proposes changes to existing National Service Criminal History Check (NSCHC) regulations under the National and Community Service Act of 1990, as amended. These amendments will simplify the NSCHC requirements.
Comments must reach CNCS on or before March 9, 2020.
You may submit comments, identified by the title of the information collection activity, by any of the following methods:
(1) Electronically through
(2) By mail sent to: Corporation for National and Community Service; Attention Amy Borgstrom; 250 E Street SW, Washington, DC 20525.
(3) By hand delivery or by courier to the CNCS mailroom at the address above between 9:00 a.m. and 4:00 p.m. Eastern Time, Monday through Friday, except federal holidays.
Comments submitted in response to this Notice will be made available to the public through
Amy Borgstrom at the Corporation for National and Community Service, 250 E Street SW, Washington, DC 20525,
CNCS proposes updating its current National Service Criminal History Check (NSCHC) regulations. CNCS first established its NSCHC regulation in 2007. In 2009, Congress codified NSCHC requirements in Section 189D of the National and Community Service Act of 1990 (NCSA), as amended by the Serve America Act. CNCS issued regulations in 2009 and 2012 implementing the Serve America Act NSCHC provisions.
Grant recipient and subrecipient compliance with the NSCHC requirements has been an ongoing challenge. Successful implementation of the NSCHC process by grant recipients has been frustrated, in part, by access to state sources of criminal history record information, requirements of state law, and restrictions on sharing information. As such, Congressional hearings and CNCS Office of the Inspector General (OIG) reports have highlighted grantee noncompliance with this important statutory requirement.
Improving CNCS core functions—including eliminating barriers to compliance—is a primary goal of the CNCS Transformation and Sustainability Plan. In pursuit of that goal, CNCS has approved vendors for grant recipients to use to obtain the required NSCHC components. Since November 2018, CNCS grant recipients and subrecipients have had the ability to establish accounts and obtain the required National Sex Offender Public website (NSOPW), state, and FBI components of the NSCHC, through the approved vendors. Additionally, to help ensure grantee compliance with NSCHC requirements, CNCS made grant funds available for the purpose of rechecking individuals who needed to have an NSCHC conducted. And for those grant recipients who took the opportunity to ensure compliance by rechecking individuals in covered positions, CNCS announced that it would not, except in limited circumstances, take enforcement action for past noncompliance. As of September 25, 2019, 1,942 accounts were established with the new vendor resulting in 93,993 checks.
CNCS grant recipients must ensure that they identify individuals who need an NSCHC and ensure that it is done on time. The NSCHC must be conducted as a matter of law, and as a condition of receiving grant funds for individuals in covered positions working or serving under: Operational grants provided by AmeriCorps State and National, Foster Grandparent Program Grants, Retired Senior Volunteer Program Grants, Senior Companion Program Grants, Senior Corps Demonstration Program Grants that receive funding from CNCS, Martin Luther King, Jr. Day of Service Grants, September 11th Day of Service Grants, Social Innovation Fund Grants, Volunteer Generation Fund Grants, AmeriCorps VISTA Program Grants, or AmeriCorps VISTA Support Grants. Section 189D of the NCSA and these regulations do not apply to AmeriCorps NCCC and or AmeriCorps VISTA members, who serve in Federally-operated programs that have separate criminal history check requirements. For the purpose of NSCHC, individuals in covered positions are: The staff working under these grants, AmeriCorps State and National members, Foster Grandparents, and Senior Companion Volunteers.
In addition to the steps already taken to ensure that grantees have a clear path to obtaining the required NSCHC components, CNCS proposes this revision to its regulations. The intent of this revision is to recognize the impact of the availability of vendors and to reduce the complexity of the requirements. The proposed rule requires that grant recipients establish accounts, and conduct checks, through the CNCS-approved vendors. By establishing one path for obtaining compliant checks, CNCS will simplify the process and make use of technological innovations that will help CNCS and its grantees monitor and improve NSCHC compliance. A preliminary analysis of the agency's FY 2019 IPERIA test transactions shows that use of the vendor by CNCS grantees resolved the NSCHC component of the improper payment transactions in 88% of the transactions for which the NSCHC component rendered the payment improper.
Further, the proposed rule eliminates a distinction between the checks required for those serving vulnerable populations and those not serving vulnerable populations. All individuals in covered positions will require an NSCHC comprised of NSOPW, state, and FBI criminal history components available through the CNCS-approved vendors. In addition, the proposed rule requires that the NSCHC be completed before an individual works or serves in a covered position—including any
CNCS welcomes public comment on the proposed regulations, particularly on the scope of the proposed rule and its applicability to staff, volunteers, and members. CNCS's intent is to establish systems and requirements that allow grant recipients to effectively demonstrate compliance.
CNCS expects to make the final rule effective no earlier than 30 days after publication of the final rule.
CNCS has determined that the rule is not an “economically significant” rule within the meaning of E.O. 12866 because it is not likely to result in: (1) An annual effect on the economy of $100 million or more, or an adverse and material effect on a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal government or communities; (2) the creation of a serious inconsistency or interference with an action taken or planned by another agency; (3) a material alteration in the budgetary impacts of entitlement, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) the raising of novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in E.O. 12866.
As required by the Regulatory Flexibility Act of 1980 (5 U.S.C. 605 (b)), CNCS certifies that this rule, if adopted, will not have a significant economic impact on a substantial number of small entities. This regulatory action will not result in (1) an annual effect on the economy of $100 million or more; (2) a major increase in costs or prices for consumers, individual industries, Federal, state, or local government agencies, or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets. Therefore, CNCS has not performed the initial regulatory flexibility analysis that is required under the Regulatory Flexibility Act (5 U.S.C. 601
For purposes of Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, as well as Executive Order 12875, this regulatory action does not contain any Federal mandate that may result in increased expenditures in either Federal, state, local, or tribal governments in the aggregate, or impose an annual burden exceeding $100 million on the private sector.
The rule specifies that specific pieces of information must be obtained and maintained in order to demonstrate compliance with the regulatory procedures.
This requirement constitutes one set of information under the Paperwork Reduction Act (PRA), 44 U.S.C. 507
Under the PRA, an agency may not conduct or sponsor a collection of information unless the collections of information display valid control numbers. This rule's collections of information are contained in 45 CFR 2540.204 and .206.
This information is necessary to ensure that only eligible individuals serve in covered positions under CNCS grants.
The likely respondents to these collections of information are entities interested in or seeking to serve in covered positions and grant recipients.
Executive Order 13132, Federalism, prohibits an agency from publishing any rule that has Federalism implications if the rule imposes substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule does not have any Federalism implications, as described above.
Grant programs-social programs.
Reporting and recordkeeping requirements.
Volunteers.
Administrative practice and procedure.
Grant programs-social programs.
Reporting and recordkeeping requirements.
Volunteers.
For the reasons discussed in the preamble, under the authority of 42 U.S.C. 12651c(c), the Corporation for National and Community Service proposes to amend chapter XXV, title 45 of the Code of Federal Regulations as follows:
42 U.S.C. 12571-12595; 12651b-12651d; E.O. 13331, 69 FR 9911.
You must apply eligibility criteria relating to criminal history to individuals specified in 45 CFR 2540.201.
E.O. 13331, 69 FR 9911; 18 U.S.C. 506, 701, 1017; 42 U.S.C. 12653, 12631-12637; 42 U.S.C. 5065.
The National Service Criminal History Check is a requirement for entities that are recipients or subrecipients of the following grants:
(a) Operational grants provided by AmeriCorps State and National;
(b) Foster Grandparent Program Grants
(c) Retired Senior Volunteer Program Grants
(d) Senior Companion Program Grants
(e) Senior Corps Demonstration Program Grants that receive funding from CNCS
(f) Martin Luther King, Jr. Day of Service Grants
(g) September 11th Day of Service Grants
(h) Social Innovation Fund Grants
(i) Volunteer Generation Fund Grants
(j) AmeriCorps VISTA Program Grants
(k) AmeriCorps VISTA Support Grants
(a) A National Service Criminal History Check must be conducted for individuals in covered positions. Individuals in covered positions are individuals selected, under a CNCS grant specified in 2540.200, by the recipient, subrecipient, or service site to work or serve in a position under a CNCS grant specified in § 2540.200:
(1) As an AmeriCorps State and National member, as described in 42 U.S.C. 12511 (30)(A)(i);
(2) As a Foster Grandparent who receives a stipend;
(3) As a Senior Companion who receives a stipend; or
(4) In a position in which they will receive a salary, and will be listed on the grant budget, under a cost reimbursement grant.
(b) A National Service Criminal History Check is not required for those individuals in (a) who are under the age of 18 on the first day of work or service in a covered position.
(c) A National Service Criminal History Check is not required for individuals whose activity is entirely included in the grant recipient's indirect cost rate.
An individual shall be ineligible to work or serve in a position specified in § 2540.201(a) if the individual—
(a) Refuses to consent to a criminal history check described in § 2540.204;
(b) Makes a false statement in connection with a criminal history check described in § 2540.204 of this chapter;
(c) Is registered, or is required to be registered, on a state sex offender registry or the National Sex Offender Registry; or
(d) Has been convicted of murder, as defined in 18 U.S.C. 1111.
Grant recipients and subrecipients, or service sites, may establish suitability criteria, consistent with state and federal Civil Rights and nondiscrimination laws, for individuals working or serving in a position specified in § 2540.201(a). While members may be eligible to work or serve in a position specified in § 2540.201(a) based on the eligibility requirements of § 2540.202, a grant recipient, subrecipient, or service site may determine that an individual is not suitable to work or serve in such a position based on criteria that the grant recipient or subrecipient or service site establishes.
(a) Unless CNCS approves a waiver under § 2540.207, grant recipients or subrecipients must conduct and document a National Service Criminal History Check through CNCS-approved vendors. For each individual in a position specified in § 2540.201, grantees or subgrantees must, through the CNCS-approved vendors, obtain a nationwide check of the National Sex Offender Public website, a check of the state criminal history record repository or designated alternative for the individual's state of residence and state of service, and a fingerprint-based check of the FBI criminal history record database.
(b) In the case that a CNCS-approved vendor is not available to provide one or more of the National Service Criminal History Check components or if CNCS discontinues use of an approved vendor, CNCS will provide notice of such unavailability or discontinuation, and grant recipients or subrecipients must obtain, as appropriate, a nationwide check of the National Sex Offender Public website through NSOPW.gov, a check of the state criminal history record repository or designated alternative for the individual's state of residence and state of service, and a fingerprint-based check of the FBI criminal history record database through the state criminal history record repository.
(a) The National Service Criminal History Check must be conducted, reviewed, and an eligibility determination made by the grant recipient or subrecipient based on the results of the National Service Criminal History Check
(b) If a person serves consecutive terms of service with the same organization in a position specified in § 2540.201(a) and does not have a break in service longer than 180 days, then no additional National Service Criminal History Check is required, as long as the original check complied with the requirements of § 2540.204.
(c) Persons working or serving in positions specified in § 2540.201(a) who continue working or serving in a position specified in § 2540.201(a) more than 180 days after the effective date of this rule must have a National Service Criminal History Check conducted, reviewed, and an eligibility determination made by the grant recipient or subrecipient based on the results of the National Service Criminal History Check completed in accordance with this part. For these people, the National Service Criminal History Check must be completed no later than 180 days following the effective date of this rule.
(a) Grant recipients or subrecipients must:
(1) Obtain a person's consent before conducting the state and FBI components of the National Service Criminal History Check;
(2) Provide notice that selection for work or service specified in § 2540.201(a) is contingent upon the organization's review of the National Service Criminal History Check component results;
(3) Provide a reasonable opportunity for the person to review and challenge the factual accuracy of a result before action is taken to exclude the person from the position;
(4) Take reasonable steps to protect the confidentiality of any information relating to the criminal history check, consistent with authorization provided by the applicant;
(5) Maintain the results of the National Service Criminal History Check components as grant records; and
(6) Pay for the cost of the NSCHC. Unless specifically approved by CNCS under 2540.207, the person who is serving in the covered position may not be charged for the cost of any component of a National Service Criminal History Check.
(b) CNCS-approved vendors may facilitate obtaining and documenting the requirements of paragraphs (a)(1) through (5) of this section.
CNCS may waive provisions of sections 2540.200-.206 for good cause, or for any other lawful basis. To request a waiver, submit a written request to NSCHC Waiver Requests, 250 E Street SW, Washington, DC 20525, or send your request to
Fish and Wildlife Service, Interior.
Proposed rule.
We, the U.S. Fish and Wildlife Service (Service), propose to list the Sierra Nevada Distinct Population Segment (DPS) of the Sierra Nevada red fox (
We will accept comments received or postmarked on or before March 9, 2020. Comments submitted electronically using the Federal eRulemaking Portal (see
You may submit comments by one of the following methods:
(1)
(2)
We request that you send comments only by the methods described above. We will post all comments on
Jennifer Norris, Field Supervisor, U.S. Fish and Wildlife Service, Sacramento Fish and Wildlife Office, 2800 Cottage Way, Room W-2605, Sacramento, California 95825; telephone 916-414-6700. If you use a telecommunications device for the deaf (TDD), call the Federal Relay Service at 800-877-8339.
We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from other concerned governmental agencies, Native American tribes, the scientific community, industry, or any other interested parties concerning this proposed rule. Because we will consider all comments and information we receive during the comment period, our final determinations may differ from this proposal. We particularly seek comments concerning:
(1) The Sierra Nevada red fox's biology, range, and population trends, including:
(a) Biological or ecological requirements of the species, including habitat requirements for feeding, breeding, and sheltering;
(b) Genetics and taxonomy;
(c) Historical and current range, including distribution patterns;
(d) Historical and current population levels, and current and projected trends; and
(e) Past and ongoing conservation measures for the species, its habitat, or both.
(2) Factors that may affect the continued existence of the species, which may include habitat modification or destruction, overutilization, disease, predation, the inadequacy of existing regulatory mechanisms, or other natural or manmade factors.
(3) Biological, commercial trade, or other relevant data concerning any threats (or lack thereof) to this DPS and existing regulations that may be addressing those threats.
(4) Additional information concerning the historical and current status, range, distribution, and population size of this DPS, including the locations of any additional populations of the Sierra Nevada red fox.
Please note that submissions merely stating support for or opposition to the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is an endangered or threatened species must be made “solely on the basis of the best scientific and commercial data available.”
You may submit your comments and materials concerning this proposed rule by one of the methods listed in
Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include. All comments submitted electronically via
Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on
Section 4(b)(5) of the Act provides for one or more public hearings on this proposal, if requested. Requests for public hearings must be received by the date specified in
A team of biologists prepared an SSA report for the Sierra Nevada red fox. The SSA team was composed of Service biologists, in consultation with other species experts, including coordination with the California Department of Fish and Wildlife (CDFW). The SSA report represents a compilation of the best scientific and commercial data available concerning the status of the Sierra Nevada red fox, including the impacts of past, present, and future factors (both negative and beneficial) affecting the species. The SSA report underwent independent peer review by scientists with expertise in red fox biology, habitat management, and stressors (factors negatively affecting the DPS) to the species. The SSA report and other materials relating to this proposal can be found at
On April 27, 2011, we received a petition dated April 27, 2011, from the Center for Biological Diversity, requesting that Sierra Nevada red fox be listed as an endangered or threatened species, and that critical habitat be designated under the Act. The petition also requested that we evaluate populations in the Cascade and Sierra Nevada mountain ranges as potential DPSs. On January 3, 2012, we published a positive 90-day finding (77 FR 45) that the petition presented substantial information indicating that listing may be warranted.
Following a stipulated settlement agreement requiring our completion of a status review of the species by September 30, 2015, we issued a 12-month finding (80 FR 60990) on October 8, 2015. We concluded at that time that there were two valid DPSs for the Sierra Nevada red fox: The Southern Cascades DPS and the Sierra Nevada DPS. We determined and reaffirm here that both the Southern Cascades and Sierra Nevada segments of the Sierra Nevada red fox's range are both discrete and significant based on marked physical separation (discreteness) and genetic variation/characteristics (discreteness and significance). Please see the 12-month finding (80 FR 60990) for a complete discussion of our DPS Policy and rationale for meeting the discreteness and significance criteria. Additionally, our September 30, 2015, 12-month finding concluded that: (1) Listing the Sierra Nevada red fox across its entire range was not warranted; (2) listing the Southern Cascades DPS was not warranted; and (3) listing the Sierra Nevada DPS was warranted, but temporarily precluded by higher priority listing actions.
A thorough review of the taxonomy, life history, ecology, and overall viability of the Sierra Nevada red fox is presented in the SSA report (Service 2018; available at
Red foxes (
Sierra Nevada red foxes average about 4.2 kilograms (kg) (9.3 pounds (lb)) for males and 3.3 kg (7.3 lb) for females, as compared to the general North American red fox average of about 5 kg (11 lb) for males and 4.3 kg (9.5 lb) for females (Perrine
The Sierra Nevada red fox is characterized by what appears to be specialized adaptations to cold areas (Sacks
Genetic analyses indicate that red foxes living near Sonora Pass, California, as of 2010 are descendants of the Sierra Nevada red fox population that was historically resident in the area (Statham
The current range, which is significantly contracted from the historical range, runs near the Sierra crest from about Arnot Peak and California State Highway 4 south to Yosemite National Park (Cleve
Sierra Nevada red fox sightings have consistently occurred in subalpine habitat at elevations ranging from 2,656 to 3,538 meters (m) (8,714 to 11,608 feet (ft)) (based on average elevation reported, plus or minus three standard deviations) (Sacks
Individuals of the Sierra Nevada red fox are opportunistic predators of small mammals such as rodents (Perrine
Little information exists regarding Sierra Nevada red fox reproductive biology; it is likely similar to other North American red fox subspecies (Aubry 1997, p. 57). Other subspecies are predominantly monogamous and mate over several weeks in the late winter and early spring (Aubry 1997, p. 57). The gestation period for red fox is 51 to 53 days, with birth occurring from March through May in sheltered dens (Perrine
The population size of the Sierra Nevada red fox is estimated between 10 to 50 adults, including some young adults forgoing potential breeding to help their parents raise their siblings (Sacks 2015, p. 1; Sacks
The average lifespan, age-specific mortality rates, sex ratios, and demographic structure of Sierra Nevada red fox populations are not known, and are not easily extrapolated from other red fox subspecies because heavy hunting and trapping pressure on those other subspecies likely skew the results (Perrine
The Act directs us to determine whether any species is an endangered species or a threatened species because of any factors affecting its continued existence. We completed a comprehensive analysis of the biological status of the Sierra Nevada red fox, and prepared an SSA report, which provides a thorough assessment of the potential threats that may affect the species' viability both currently and into the future. We define viability here as the ability of the species to persist over the long term and, conversely, to avoid extinction. In this section, we summarize that assessment, which can be accessed on the internet under Docket FWS-R8-ES-2019-0006 on
To assess Sierra Nevada red fox viability, we used the three conservation biology principles of resiliency, representation, and redundancy (Shaffer and Stein 2000, pp. 306-310). Briefly, resiliency supports the ability of the species to withstand stochastic events—for example, significant variations to normal demographic or environmental conditions (
Resiliency describes the ability of a species (or DPS) to withstand stochastic disturbance. For the Sierra Nevada red fox to maintain viability, its population(s) or some portion thereof must be resilient. Environmental stochastic disturbances that affect the overall reproductive output of the population are reasonably likely to occur infrequently, but if they do, they would likely be of a magnitude that can drastically alter the ecosystem where they happen. Classic examples of environmental stochastic events include drought, major storms (
Given the lack of information on adequate population size for subalpine red fox, an example of a resilient population size for an island fox subspecies—Santa Catalina Island fox (
Redundancy describes the ability of a species (or DPS) to withstand catastrophic events. Currently, there is only one small, isolated population of Sierra Nevada red fox known within the Sierra Nevada mountain range. In
Representation describes the ability of a species (or DPS) to adapt to changing environmental conditions over time. It is characterized by the breadth of genetic and environmental diversity within and among populations. The Sierra Nevada red fox historically occurred throughout the high elevations of the Sierra Nevada. The current, small population has been experiencing genetic challenges, including inbreeding depression, as well as hybridization with non-Sierra Nevada red fox individuals, which can lower survivorship or reproductive success by interfering with adaptive native genes or gene complexes (Allendorf
The U.S. Forest Service (USFS) identifies the Sierra Nevada red fox as a sensitive species and has done so since 1998. Sensitive species receive special consideration during land use planning and activity implementation to ensure species viability and to preclude population declines (USFS 2005, section 2670.22). The USFS included Sierra Nevada red fox-specific protection measures in the
The National Park Service prohibits hunting and trapping in Yosemite National Park and manages natural resources to “preserve fundamental physical and biological processes, as well as individual species, features, and plant and animal communities” (NPS 2006, p. 26). The land management plan for Yosemite National Park (as well as Sequoia National Park, which is not known to currently contain Sierra Nevada red fox individuals but does occur within the DPS's historical range) does not contain specific measures to protect the Sierra Nevada red fox or the subspecies' habitat. However, areas not developed specifically for recreation and camping are managed toward natural processes and species composition, and the best available information indicates that the National Park Service would maintain the subspecies' habitat.
The Department of Defense recently completed an Integrated Natural Resources Management Plan (INRMP) for the U.S. Marine Corps Mountain Warfare Training Center (MWTC), which is a facility and training area that falls within the Sierra Nevada red fox range, including overlap with some known sightings. The INRMP includes provisions prohibiting disturbance within 330 ft (100.6 m) of Sierra Nevada red fox den sites from January 1 to June 30 (MWTC 2018, p. 3-26). Additionally, the INRMP states that the MWTC must implement “measures to prevent habituation to human food, an education program on these measures, and avoid activities from January 1 to June 27 within 0.25 mi (0.4 km) of den sites” (MWTC 2018, p. 3-67).
On October 2, 1980, the State of California listed the Sierra Nevada red fox as a threatened species. The designation prohibits possession, purchase, or “take” of threatened or endangered species without an incidental take permit, issued by the California Department of Fish and Wildlife (CDFW; formerly California Department of Fish and Game). Additionally, red foxes in general are protected by the State from hunting and trapping (14 C.C.R. 460).
A conservation effort currently is underway by the Sierra Nevada Red Fox Working Group (SNRFWG). This working group was formed in 2015 by representatives of Federal and State wildlife agencies, state universities, and nongovernmental conservation organizations (SNRFWG 2015, p. 1; SNRFWG 2016, p. 1). In addition to continued monitoring of the Sierra Nevada red fox, the SNRFWG proposes to develop a conservation strategy, which would include a genetic management plan and a feasibility assessment. This conservation strategy would assist in addressing possible translocations of Sierra Nevada red fox from area(s) within the Southern Cascades DPS to the Sierra Nevada (SNRFWG 2016, pp. 2-6). Managed Sierra Nevada red fox translocations would reduce impacts associated with inbreeding depression and counter introgression of nonnative alleles by introducing, in a controlled and monitored manner, new (
Our SSA considered a variety of environmental and demographic characteristics important to the viability of the Sierra Nevada red fox, taking into consideration both current and potential future conditions that may impact the DPS. The environmental characteristics we considered were: (1) Extent of subalpine habitat (with low temperatures and short growing seasons), (2) deep winter snow cover, (3) rodent and leporid (rabbits and hare) populations, and (4) presence of whitebark pine. The best available information suggests that the first two characteristics are likely important because the Sierra Nevada red fox appears adapted to them. Fox develop dense, fur-covered toe pads during the winter (Grinnell
Risk factors affecting the environmental characteristics that the subspecies relies on include changing climate conditions (
Over the past 100 years, average temperatures in alpine regions have increased by 0.3 to 0.6 °C (Perrine
Increasing average temperatures and periodic drier conditions during drought years may have increased the productivity of high-elevation areas, thus likely supporting higher prey abundance levels that (at least in some years) in turn could support more coyotes in spring and summer months. The best available information suggests that coyotes are present in the Sonora Pass area at the same elevations as the Sierra Nevada red fox during summer months, also outnumbering the Sierra Nevada red fox individuals in that area (Quinn and Sacks 2014, pp. 2, 11, 12, 35). Additionally, several coyotes were found to be related, suggesting they were establishing territories and raising pups (Quinn and Sacks 2014, p. 12). As a result of this information, coyote densities appear to have increased in this area relative to historical levels, thus resulting in increased coyote competition with the Sierra Nevada red fox. This increased coyote presence (and potentially density) on a given landscape can lead to decreased density of Sierra Nevada red foxes (Sargeant
In the central portion of the Sierra Nevada mountain range, average current April 1 snowpack levels in Yosemite National Park (which overlaps a portion of the known Sierra Nevada red fox sightings) have been just above 23.6 in (60 cm) (Curtis
While snowpack conditions vary by year and location, the best available information suggests that the areas where Sierra Nevada red fox occur have been maintaining high snowpack during winter and spring most years, regardless that snowpack appears to be decreasing in some areas across the mountain range (see section 4.1 of the SSA report (Service 2018, pp. 22-23)). Therefore, the current condition for deep winter snow appears adequate, noting some years have and will continue to result in drought conditions and thus lower snowpack levels.
Rodent population numbers in subalpine areas have likely increased due to an increase in primary productivity (Service 2018, pp. 21, 24). Despite several factors that may limit their availability (
Adequate leporid population numbers may be of concern given that both white-tailed jackrabbits and snowshoe hares are considered species of special concern across the Sierra Nevada by CDFW (CDFW 2017, p. 51), a designation meaning they are potentially vulnerable to extirpation in California (CDFW 2017, p. 10). Regardless of rangewide leporid abundance, the best available information does not suggest that leporid abundance is inadequate in the vicinity of the majority of known Sierra Nevada red fox sighting locations (
Within the DPS area, the Sierra Nevada red fox is currently known from
Prior to spring of 2013, no reproduction between native individuals of the Sierra Nevada red fox and nonnative immigrant red fox was known to have occurred (Sacks
Overall, the current small population size is a direct result of decades of heavy hunting and trapping pressure across its range prior to the State of California's prohibition of “take” and designation of the Sierra Nevada red fox as a threatened species in 1980. Since that time, the remaining small population has experienced pressures from competition for prey resources by coyotes, deleterious impacts associated with small population size, including inbreeding depression (as a consequence of population reduction and a lack of other populations) and reduced genomic integrity, and levels of hybridization with nonnative red foxes. At this time, the best available scientific and commercial information suggest that the most significant threats to the Sierra Nevada red fox within this DPS are those Factor E stressors that directly affect the few individuals on the landscape (
We evaluated three future scenarios over a 50-year timeframe. This time period was chosen because it is within the range of the available hydrological and climate change model forecast information (IPCC 2014, pp. 10, 13), and coincidentally encompasses roughly 25 generations of the subspecies (Perrine
Risks to the future viability of the Sierra Nevada red fox appear high given the small size and limited distribution of the current population and the factors that are negatively influencing the subspecies currently and into the future, which include deleterious effects associated with small population size (genomic integrity and inbreeding depression), hybridization with nonnative red fox, and possibly reduced prey availability (given observations of scarce leporid observations in some subalpine areas) and competition with coyotes for both leporid and rodent prey due to reduced snowpack levels. Redundancy is likely to remain poor into the future until such time as the current, isolated small population increases in size or an additional population provides protection against a catastrophic event eradicating the whole subspecies. Resiliency will likely remain low given continued periodic drought conditions and temperature increases that reduce snow depth and consequently may cause increased competition with coyotes. Rodent population sizes will likely increase if primary productivity of the subalpine habitat increases in the future; however, red fox access to rodents could be limited due to coyote competition. Leporid and whitebark pine populations may decrease or become less dependable.
The recent increase in pup production is encouraging (although minimizing future hybridization would be preferable); however, representation is low and likely to remain so due to the small size and genetic integrity of the population, which would likely remain susceptible to inbreeding depression if the population(s) fails to increase sufficiently. Additionally, the geographic range of the population(s) is limited (even though suitable habitat is not) especially when compared to the historical extent within the Sierra Nevada. In total, these threats (
Section 4 of the Act (16 U.S.C. 1533), and its implementing regulations at 50 CFR part 424, set forth the procedures for adding species to the Federal Lists of Endangered and Threatened Wildlife and Plants. Under section 4(a)(1) of the Act, we may list a species based on: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; or (E)
We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats to the Sierra Nevada DPS of the Sierra Nevada red fox. The Act defines an endangered species as any species that is “in danger of extinction throughout all or a significant portion of its range” and a threatened species as any species “that is likely to become endangered throughout all or a significant portion of its range within the foreseeable future.”
We considered whether the DPS is presently in danger of extinction and determined that proposing endangered status is appropriate. We have shown that there are negative influences on the DPS, including deleterious impacts associated with small population size, including (but not limited to) inbreeding depression. Since 2015, the best available information indicates that additional nonnative red fox hybridization has occurred, which has resulted in documented hybrid red fox pups. Although this hybridization may adversely affect the genetic integrity of the DPS, it likely has prevented further decreases in the size of the Sierra Nevada red fox population. Regardless, the DPS' size and distribution remain critically low such that resiliency, redundancy, and representation are insufficient and place the DPS in danger of extinction throughout all of its range.
Although production of pups in monitored areas appears to have increased in 2013 and 2014 due to hybridization as compared to previous years (Sacks
The primary threats to the DPS, described above, are likely to become exacerbated in the future. Given current and future decreases in resiliency, the population has become more vulnerable to extirpation from stochastic events, and subsequent loss of representation and redundancy. The range of future scenarios of the DPS's environmental and demographic conditions suggest current danger of extirpation throughout the Sierra Nevada mountain range. Under the current condition analysis as well as the potential future scenarios presented in the SSA report, the best available information suggests that the Sierra Nevada red fox has such low resiliency, redundancy, and representation that it is in danger of extinction currently.
Our analysis of the DPS's current and future environmental and demographic conditions, as well as consideration of existing regulatory mechanisms and initiation of conservation efforts with partners (as discussed under “Available Conservation Measures,” above), show that the factors used to determine the resiliency, representation, and redundancy for the Sierra Nevada red fox will likely continue to decline. Therefore, the Sierra Nevada DPS of the Sierra Nevada red fox is likely in danger of extinction currently throughout all of its range.
Under the Act and our implementing regulations, a species may warrant listing if it is in danger of extinction or likely to become so in the foreseeable future throughout all or a significant portion of its range. Because we have determined that the Sierra Nevada DPS of the Sierra Nevada red fox is in danger of extinction throughout all of its range, we find it unnecessary to proceed to an evaluation of potentially significant portions of the range. Where the best available information allows the Services to determine a status for the species rangewide, that determination should be given conclusive weight because a rangewide determination of status more accurately reflects the species' degree of imperilment and better promotes the purposes of the Act. Under this reading, we should first consider whether the species warrants listing “throughout all” of its range and proceed to conduct a “significant portion of its range” analysis if, and only if, a species does not qualify for listing as either an endangered or a threatened species according to the “throughout all” language. We note that the court in
Therefore, on the basis of the best available scientific and commercial information, we propose to list the Sierra Nevada DPS of the Sierra Nevada red fox as an endangered species throughout all of its range in accordance with sections 3(20) and 4(a)(1) of the Act.
Conservation measures provided to species listed as endangered or threatened species under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition through listing results in public awareness and conservation by Federal, State, Tribal, and local agencies; private organizations; and individuals. The Act encourages cooperation with the States and other countries and calls for recovery actions to be carried out for listed species. The protection required by Federal agencies and the prohibitions against certain activities are discussed, in part, below.
The primary purpose of the Act is the conservation of endangered and threatened species and the ecosystems upon which they depend. The ultimate goal of such conservation efforts is the recovery of these listed species, so that they no longer need the protective measures of the Act. Subsection 4(f) of the Act calls for the Service to develop and implement recovery plans for the conservation of endangered and threatened species. The recovery planning process involves the identification of actions that are necessary to halt or reverse the species' decline by addressing the threats to its survival and recovery. The goal of this process is to restore listed species to a point where they are secure, self-sustaining, and functioning components of their ecosystems.
Recovery planning includes the development of a recovery outline shortly after a species is listed and preparation of a draft and final recovery plan. The recovery outline guides the immediate implementation of urgent recovery actions and describes the process to be used to develop a recovery plan. Revisions of the plan may be done to address continuing or new threats to the species, as new substantive information becomes available. The recovery plan also identifies recovery
Implementation of recovery actions generally requires the participation of a broad range of partners, including other Federal agencies, States, Tribes, nongovernmental organizations, businesses, and private landowners. Examples of recovery actions include habitat restoration (
Although the Sierra Nevada red fox is only proposed for listing under the Act at this time, please let us know if you are interested in participating in recovery efforts for this species. Additionally, we invite you to submit any new information on this species whenever it becomes available and any information you may have for recovery planning purposes (see
Critical habitat is defined in section 3 of the Act as:
(1) The specific areas within the geographical area occupied by the species, at the time it is listed in accordance with the Act, on which are found those physical or biological features
(a) Essential to the conservation of the species, and
(b) Which may require special management considerations or protection; and
(2) Specific areas outside the geographical area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species.
Conservation, as defined under section 3 of the Act, means to use and the use of all methods and procedures that are necessary to bring an endangered or threatened species to the point at which the measures provided pursuant to the Act are no longer necessary. Such methods and procedures include, but are not limited to, all activities associated with scientific resources management such as research, census, law enforcement, habitat acquisition and maintenance, propagation, live trapping, and transplantation, and, in the extraordinary case where population pressures within a given ecosystem cannot be otherwise relieved, may include regulated taking.
Critical habitat receives protection under section 7 of the Act through the requirement that Federal agencies ensure, in consultation with the Service, that any action they authorize, fund, or carry out is not likely to result in the destruction or adverse modification of critical habitat. The designation of critical habitat does not affect land ownership or establish a refuge, wilderness, reserve, preserve, or other conservation area. Such designation does not allow the government or public to access private lands. Such designation does not require implementation of restoration, recovery, or enhancement measures by non-Federal landowners. Where a landowner requests Federal agency funding or authorization for an action that may affect a listed species or critical habitat, the consultation requirements of section 7(a)(2) of the Act would apply, but even in the event of a destruction or adverse modification finding, the obligation of the Federal action agency and the landowner is not to restore or recover the species, but to implement reasonable and prudent alternatives to avoid destruction or adverse modification of critical habitat.
Section 4 of the Act requires that we designate critical habitat on the basis of the best scientific data available. Further, our Policy on Information Standards Under the Endangered Species Act (published in the
Section 4(a)(3) of the Act, as amended, and implementing regulations (50 CFR 424.12), require that, to the maximum extent prudent and determinable, the Secretary shall designate critical habitat at the time the species is determined to be an endangered or threatened species. The regulations at 50 CFR 424.12(a)(1) state that the Secretary may, but is not required to, determine that a designation would not be prudent in the following circumstances:
(i) The species is threatened by taking or other human activity and identification of critical habitat can be expected to increase the degree of such threat to the species;
(ii) The present or threatened destruction, modification, or curtailment of a species' habitat or range is not a threat to the species, or threats to the species' habitat stem solely from causes that cannot be addressed through management actions resulting from consultations under section 7(a)(2) of the Act;
(iii) Areas within the jurisdiction of the United States provide no more than negligible conservation value, if any, for a species occurring primarily outside the jurisdiction of the United States;
(iv) No areas meet the definition of critical habitat; or
(v) The Secretary otherwise determines that designation of critical habitat would not be prudent based on the best scientific data available
The best available scientific and commercial information suggests that designating critical habitat is not
In addition, for those potential habitat-based stressors we evaluated (see Current and Future Conditions sections of the SSA report for additional discussion), the best available information indicates some changes to high elevation, subalpine areas may be occurring both currently and in the future with continued changing climate conditions (
Because we assessed that the present or threatened destruction, modification, or curtailment of the Sierra Nevada red fox's habitat is not a significant threat to the species, we have determined that designating critical habitat is not prudent at this time.
We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:
(1) Be logically organized;
(2) Use the active voice to address readers directly;
(3) Use clear language rather than jargon;
(4) Be divided into short sections and sentences; and
(5) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us comments by one of the methods listed in the
We have determined that environmental assessments and environmental impacts statements, as defined under the authority of the National Environmental Policy Act, need not be prepared in connection with listing a species as an endangered or threatened species under the Endangered Species Act. We published a notice outlining our reasons for this determination in the
A complete list of references cited in this rulemaking is available on the internet at
The primary authors of this proposed rulemaking are the staff members of the U.S. Fish and Wildlife Service Species Assessment Team and Sacramento Fish and Wildlife Office.
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361-1407; 1531-1544; 4201-4245, unless otherwise noted.
(h) * * *
On June 19, 2019, in the U.S. District Court for the Southern District of Texas, Edgar Sanchez-Muro (“Sanchez-Muro”) was convicted of violating 18 U.S.C. 554(a). Sanchez-Muro was convicted of knowingly attempting to export and exporting approximately 980 rounds of 7.62 x 39 mm caliber ammunition from the United States to Mexico, contrary to Section 38 of the Arms Export Control Act, 22 U.S.C. 2778 (2012). Sanchez-Muro was sentenced to 12 months and one day in prison and a $100 special assessment.
Pursuant to Section 1760(e) of the Export Control Reform Act (“ECRA”),
BIS has received notice of Sanchez-Muro's conviction for violating 18 U.S.C. 554(a), and has provided notice and an opportunity for Sanchez-Muro to make a written submission to BIS, as provided in Section 766.25 of the Export Administration Regulations (“EAR” or the “Regulations”). 15 CFR 766.25.
Based upon my review of the record and consultations with BIS's Office of Export Enforcement, including its Director, and the facts available to BIS, I have decided to deny Sanchez-Muro's export privileges pursuant to ECRA for a period of five (5) years from the date of Sanchez-Muro's conviction. I have also decided to revoke any BIS license issued under ECRA in which Sanchez-Muro had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export or reexport to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
On August 29, 2019, in the U.S. District Court for the Eastern District of Wisconsin, Resit Tavan (“Tavan”) was convicted of violating 18 U.S.C. 371. Specifically, Tavan was convicted of knowingly and intentionally conspiring to violate U.S. sanctions by exporting specialized marine equipment from the United States to Iran, without the required U.S. Government authorization. Tavan was sentenced to 28 months in prison, with credit for time served, and a $100 special assessment.
Pursuant to Section 1760(e) of the Export Control Reform Act (“ECRA”),
BIS has received notice of Tavan's conviction for violating 18 U.S.C. 371, and has provided notice and an opportunity for Tavan to make a written submission to BIS, as provided in Section 766.25 of the Export Administration Regulations (“EAR” or the “Regulations”). 15 CFR 766.25.
Based upon my review of the record, including Tavan's written submission, and consultations with BIS's Office of Export Enforcement, including its Director, and the facts available to BIS, I have decided to deny Tavan's export privileges pursuant to ECRA for a period of 10 years from the date of Tavan's conviction. I have also decided to revoke any BIS license issued under ECRA in which Tavan had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export or reexport to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
Bureau of Industry and Security.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
To ensure consideration, written comments must be submitted on or before March 9, 2020.
Direct all written comments to Mark Crace, IC Liaison, Bureau of Industry and Security, 1401 Constitution Avenue, Suite 2099B, Washington, DC 20233 (or via the internet at
This collection of information is needed to detect violations of the Export Administration Regulations (EAR) and determine if an investigation or prosecution is necessary and to reach a settlement with violators. Voluntary self-disclosure of EAR violations strengthens BIS's enforcement efforts by allowing BIS to conduct investigations of the disclosed incidents faster than would be the case if BIS had to detect the violations without such disclosures. BIS evaluates the seriousness of the violation and either (1) Informs the person making the disclosure that no action is warranted; (2) issues a warning letter; (3) issues a proposed charging letter and attempts to settle the matter; (4) issues a charging letter if settlement is not reached; and/or (5) refers the matter to the U.S. Department of Justice for criminal prosecution.
Submitted on paper.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
On November 20, 2018, in the U.S. District Court for the Southern District of Texas, Ruben Beltran-Ramos a/k/a Ruben Ramos-Beltran (“Beltran-Ramos”) was convicted of violating 18 U.S.C. 554(a). Specifically, Beltran-Ramos was convicted of knowingly exporting and attempting to export five thousand cartridges of 7.62 x 39 mm caliber ammunition from the United States to Mexico, contrary to Section 38 of the Arms Export Control Act, 22 U.S.C. 2778 (2012). Beltran-Ramos was sentenced to 26 months in prison and a $100 special assessment.
Pursuant to Section 1760(e) of the Export Control Reform Act (“ECRA”),
BIS has received notice of Beltran-Ramos's conviction for violating 18 U.S.C. 554(a), and has provided notice and an opportunity for Beltran-Ramos to make a written submission to BIS, as provided in Section 766.25 of the Export Administration Regulations (“EAR” or the “Regulations”). 15 CFR 766.25.
Based upon my review of the record and consultations with BIS's Office of Export Enforcement, including its Director, and the facts available to BIS, I have decided to deny Beltran-Ramos's export privileges pursuant to ECRA for a period of 10 years from the date of Beltran-Ramos's conviction. I have also decided to revoke any BIS license issued under ECRA in which Beltran-Ramos had an interest at the time of his conviction.
Accordingly, it is hereby
A. Applying for, obtaining, or using any license, license exception, or export control document;
B. Carrying on negotiations concerning, or ordering, buying, receiving, using, selling, delivering, storing, disposing of, forwarding, transporting, financing, or otherwise servicing in any way, any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or engaging in any other activity subject to the Regulations; or
C. Benefitting in any way from any transaction involving any item exported or to be exported from the United States that is subject to the Regulations, or from any other activity subject to the Regulations.
A. Export or reexport to or on behalf of the Denied Person any item subject to the Regulations;
B. Take any action that facilitates the acquisition or attempted acquisition by the Denied Person of the ownership, possession, or control of any item subject to the Regulations that has been or will be exported from the United States, including financing or other support activities related to a transaction whereby the Denied Person acquires or attempts to acquire such ownership, possession or control;
C. Take any action to acquire from or to facilitate the acquisition or attempted acquisition from the Denied Person of any item subject to the Regulations that has been exported from the United States;
D. Obtain from the Denied Person in the United States any item subject to the Regulations with knowledge or reason to know that the item will be, or is intended to be, exported from the United States; or
E. Engage in any transaction to service any item subject to the Regulations that has been or will be exported from the United States and which is owned, possessed or controlled by the Denied Person, or service any item, of whatever origin, that is owned, possessed or controlled by the Denied Person if such service involves the use of any item subject to the Regulations that has been or will be exported from the United States. For purposes of this paragraph, servicing means installation, maintenance, repair, modification or testing.
Bureau of Industry and Security.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
To ensure consideration, written comments must be submitted on or before March 9, 2020.
Direct all written comments to Mark Crace, IC Liaison, Bureau of Industry and Security, 1401 Constitution Avenue, Suite 2099B, Washington, DC 20233 (or via the internet at
This collection of information supports enforcement of the Antiboycott provisions of the Export Administration Regulations
(EAR) by providing a method for industry to voluntarily self-disclose Antiboycott violations.
Submitted on paper or electronically.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
On December 18, 2019, the United States Court of International Trade (CIT) sustained the Department of Commerce's (Commerce) remand redetermination pertaining to the less-than-fair-value (LTFV) investigation of certain corrosion-resistant steel products (corrosion-resistant steel) from India. Commerce is notifying the public that the final judgment in this case is not in harmony with Commerce's amended final determination in the LTFV investigation of corrosion-resistant steel from India. Pursuant to the CIT's final judgment, Uttam Galva Steels Ltd. (Uttam Galva) is being excluded from the order.
Applicable December 28, 2019.
Kabir Archuletta, AD/CVD Operations, Office V, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-2593.
The litigation in
On August 16, 2018, Commerce filed Remand Results with the CIT, recalculating Uttam Galva's duty drawback adjustment.
In its decision in
Because there is now a final court decision, Commerce is amending the
Pursuant to section 735(a)(4) of the Act, Commerce “shall disregard any weighted average dumping margin that is
However, pursuant to
At this time, Commerce remains enjoined by CIT order from liquidating entries that: (1) Were produced and exported by Uttam Galva Steels Limited, and were entered, or withdrawn from warehouse, for consumption on or after July 1, 2017, up to and including June 30, 2018; and (2) were produced and/or exported by Uttam Value Steels Limited, and were entered, or withdrawn from warehouse, for consumption on or after July 1, 2017, up to and including June 30, 2018. These entries will remain enjoined pursuant to the terms of the injunction during the pendency of any appeals process.
This notice is issued and published in accordance with sections 516A(c)(1) and (e) of the Act.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is rescinding the administrative review of the antidumping duty order on certain cold-drawn mechanical tubing of carbon and alloy steel (cold-drawn mechanical tubing) from the People's Republic of China (China) for the period November 22, 2017 through May 31, 2019.
Applicable January 8, 2020.
Charles Doss, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-4474.
On June 3, 2019, Commerce published a notice of opportunity to request an administrative review of the antidumping duty order on cold-drawn mechanical tubing from China for the period November 22, 2017, through May
On July 31, 2019, Howmet submitted a timely request to withdraw its request for administrative review.
Pursuant to 19 CFR 351.213(d)(1), Commerce will rescind an administrative review, in whole or in part, if the parties that requested the review withdraw the request within 90 days of the date of publication of the notice of initiation of the requested review. As noted above, the petitioners, Howmet, and Huacheng fully withdrew their respective review requests by the 90-day deadline. As such, Commerce is in receipt of timely requests for withdrawal of the instant administrative review with respect to all companies listed in the
Commerce will instruct U.S. Customs and Border Protection (CBP) to assess antidumping duties on all appropriate entries of cold-drawn mechanical tubing from China at rates equal to the cash deposit of estimated antidumping duties required at the time of entry, or withdrawal from warehouse, for consumption, in accordance with 19 CFR 351.212(c)(1)(i). Commerce intends to issue appropriate assessment instructions to CBP 15 days after the publication of this notice in the
This notice serves as a final reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping and/or countervailing duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in Commerce's presumption that reimbursement of the antidumping and/or countervailing duties occurred and the subsequent assessment of doubled antidumping duties.
This notice serves as a final reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the return or destruction of proprietary information disclosed under an APO in accordance with 19 CFR 351.305, which continues to govern business proprietary information in this segment of the proceeding. Timely written notification of the return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a violation which is subject to sanction.
This notice is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.213(d)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is conducting the administrative review of the antidumping duty order on magnesium metal from the People's Republic of China (China), covering the period April 1, 2018 through March 31, 2019. Commerce preliminarily determines that Tianjin Magnesium International, Co., Ltd. (TMI) and Tianjin Magnesium Metal, Co., Ltd. (TMM) did not have reviewable entries during the period of review (POR). We invite interested parties to comment on these preliminary results.
Applicable January 8, 2020.
Kyle Clahane, AD/CVD Operations, Office III, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington DC 20230; telephone: (202) 482-5449.
On April 1, 2019, Commerce published a notice of opportunity to request an administrative review of the antidumping duty order on magnesium metal from China for the POR.
The product covered by this antidumping duty order is magnesium metal from China, which includes primary and secondary alloy magnesium metal, regardless of chemistry, raw material source, form, shape, or size. Magnesium is a metal or alloy containing by weight primarily the element magnesium. Primary magnesium is produced by decomposing raw materials into magnesium metal. Secondary magnesium is produced by recycling magnesium-based scrap into magnesium metal. The magnesium covered by this order includes blends of primary and secondary magnesium.
The subject merchandise includes the following alloy magnesium metal products made from primary and/or secondary magnesium including, without limitation, magnesium cast into ingots, slabs, rounds, billets, and other shapes; magnesium ground, chipped, crushed, or machined into rasping, granules, turnings, chips, powder, briquettes, and other shapes; and products that contain 50 percent or greater, but less than 99.8 percent, magnesium, by weight, and that have been entered into the United States as conforming to an “ASTM Specification for Magnesium Alloy”
The scope of this order excludes: (1) All forms of pure magnesium, including chemical combinations of magnesium and other material(s) in which the pure magnesium content is 50 percent or greater, but less than 99.8 percent, by weight, that do not conform to an “ASTM Specification for Magnesium Alloy”;
We received timely submissions from TMI and TMM certifying that they did not have sales, shipments, or exports of subject merchandise to the United States during the POR.
Accordingly, and consistent with our practice, we preliminarily determine that TMI and TMM had no shipments and, therefore, no reviewable entries during the POR. In addition, we find it is not appropriate to rescind the review with respect to these companies, but rather to complete the review with respect to TMI and TMM and issue appropriate instructions to CBP based on the final results of the review, consistent with our practice in non-market economy (NME) cases.
Interested parties may submit case briefs no later than 30 days after the date of publication of this notice in the
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce within 30 days of the date of publication of this notice. Hearing requests should contain the following information: (1) The party's name, address, and telephone number; (2) the number of participants; and (3) a list of the issues parties intend to discuss. Issues raised in the hearing will be
Unless extended, we intend to issue the final results of this administrative review, including our analysis of all issues raised in any written brief, within 120 days of publication of this notice in the
Upon issuance of the final results, Commerce will determine, and CBP shall assess, antidumping duties on all appropriate entries covered by this review.
The following cash deposit requirements will be effective upon publication of the final results of this administrative review for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of review, as provided for by section 751(a)(2)(C) of the Act: (1) For TMI, which claimed no shipments, the cash deposit rate will remain unchanged from the rate assigned to TMI in the most recently completed review of the company; (2) for previously investigated or reviewed Chinese and non-Chinese exporters who are not under review in this segment of the proceeding but who have separate rates, the cash deposit rate will continue to be the exporter-specific rate published for the most recent period; (3) for all Chinese exporters of subject merchandise that have not been found to be entitled to a separate rate (including TMM, which claimed no shipments, but has not been found to be separate from China-wide entity), the cash deposit rate will be China-wide rate of 141.49 percent; and (4) for all non-Chinese exporters of subject merchandise which have not received their own rate, the cash deposit rate will be the rate applicable to Chinese exporter(s) that supplied that non-Chinese exporter. These deposit requirements, when imposed, shall remain in effect until further notice.
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this period. Failure to comply with this requirement may result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
This notice is issued in accordance with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Commerce finds that Wor-Biz Industrial Product Co., Ltd. (Anhui) (Wor-Biz Industrial) is the successor-in-interest to Wor-Biz Trading Co., Ltd. (Anhui) (Wor-Biz Trading), and therefore is entitled to Wor-Biz Trading's antidumping duty (AD) and countervailing duty (CVD) cash deposit rates with respect to entries of subject merchandise.
Applicable January 8, 2020.
Michael Bowen at (202) 482-0768 (AD) or Dennis McClure at (202) 482-5973 (CVD), Office VIII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230.
On August 31, 2018, Commerce published the AD and CVD orders on imports of cast iron soil pipe fittings from China.
The merchandise covered by the scope of these orders is cast iron soil pipe fittings, finished and unfinished, regardless of industry or proprietary specifications, and regardless of size. Cast iron soil pipe fittings are nonmalleable iron castings of various designs and sizes, including, but not limited to, bends, tees, wyes, traps, drains (other than drain bodies), and other common or special fittings, with or without side inlets.
Cast iron soil pipe fittings are classified into two major types—hubless and hub and spigot. Hubless cast iron soil pipe fittings are manufactured without a hub, generally in compliance with Cast Iron Soil Pipe Institute (CISPI) specification 301 and/or American Society for Testing and Materials (ASTM) specification A888. Hub and spigot pipe fittings have hubs into which the spigot (plain end) of the pipe or fitting is inserted. Cast iron soil pipe fittings are generally distinguished from other types of nonmalleable cast iron fittings by the manner in which they are connected to cast iron soil pipe and other fittings.
Excluded from the scope are all drain bodies. Drain bodies are normally classified in subheading 7326.90.86.88 of the Harmonized Tariff Schedule of the United States (HTSUS).
The cast iron soil pipe fittings subject to the scope of these orders are normally classified in subheading 7307.11.0045 of the HTSUS: Cast fittings of nonmalleable cast iron for cast iron soil
Because the record contains no information or evidence that calls into question the
Based on these final results, we will instruct U.S. Customs and Border Protection to collect estimated AD and CVD duties for all shipments of subject merchandise exported by Wor-Biz Industrial and entered, or withdrawn from warehouse, for consumption on or after the publication date of this notice in the
This notice serves as a final reminder to parties subject to administrative protective order (“APO”) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return/destruction of APO materials or conversion to judicial protective order is hereby requested. Failure to comply with the regulations and terms of an APO is a sanctionable violation.
We are issuing and publishing these final results notice in accordance with sections 751(b) and 777(i) of the Tariff Act of 1930, as amended, and 19 CFR 351.216 and 351.221(c)(3).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) is correcting the final determinations of anti-circumvention inquiries on the antidumping and countervailing duty orders on certain corrosion-resistant steel products (CORE) from the Republic of Korea (Korea).
Applicable January 8, 2020.
Chien-Min Yang, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-5484.
On December 26, 2019, Commerce published in the
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (Commerce) preliminarily determines that certain collated steel staples (collated staples) from the People's Republic of China (China) are being, or are likely to be, sold in the United States at less than fair value (LTFV). The
Applicable January 8, 2020.
Sergio Balbontin or William Horn, AD/CVD Operations, Office VIII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-6478, or (202) 482-4868, respectively.
This preliminary determination is made in accordance with section 733(b) of the Tariff Act of 1930, as amended (the Act). Commerce published the notice of initiation of this investigation on July 3, 2019.
The product covered by this investigation is collated staples from China. For a complete description of the scope of this investigation,
In accordance with the preamble to Commerce's regulations,
Commerce is conducting this investigation in accordance with section 731 of the Act. Commerce has calculated export prices in accordance with section 772(a) of the Act. Because China is a non-market economy, within the meaning of section 771(18) of the Act, Commerce has calculated normal value (NV) in accordance with section 773(c) of the Act. In addition, pursuant to section 776(a) and (b) of the Act, Commerce preliminarily has relied on facts otherwise available, with adverse inferences, for Tianjin Jinxinshenglong Metal Products Co., Ltd. (Tianjin JXSL) and the China-wide entity. For a full description of the methodology underlying Commerce's preliminary determination,
In the
In the
In this proceeding, Commerce calculated an above-
In accordance with section 733(d)(2) of the Act, Commerce will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of entries of subject merchandise as described in Appendix I that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Further, pursuant to section 733(d)(1)(B) of the Act and 19 CFR 351.205(d), Commerce will instruct CBP to require a cash deposit equal to the estimated weighted-average amount by which NV exceeds U.S. price, as indicated in the chart above, as follows: (1) For the producer/exporter combinations listed in the table above, the cash deposit rate is equal to the estimated weighted-average dumping margin listed for that combination in the table; (2) for all combinations of Chinese producers/exporters of merchandise under consideration that have not established eligibility for their own separate rates, the cash deposit rate will be equal to the estimated weighted-average dumping margin established for the China-wide entity; and (3) for all third-county exporters of merchandise under consideration not listed in the table above, the cash deposit rate is the cash deposit rate applicable to the Chinese producer/exporter combination (or the China-wide entity) that supplied that third-country exporter.
Section 733(e)(2) of the Act provides that, given an affirmative determination of critical circumstances, any suspension of liquidation shall apply to unliquidated entries of merchandise entered, or withdrawn from warehouse, for consumption on or after the later of (a) the date which is 90 days before the date on which the suspension of liquidation was first ordered, or (b) the date on which the notice of initiation of the investigation was published. Commerce preliminarily finds that critical circumstances exist for all imports of subject merchandise from China. In accordance with section 733(e)(2)(A) of the Act, the suspension of liquidation shall apply to unliquidated entries from all exporters and producers of the subject merchandise from China that were entered, or withdrawn from warehouse, for consumption on or after the date which is 90 days before the publication of this notice.
To determine the cash deposit rate, Commerce normally adjusts the estimated weighted-average dumping margin by the amount of domestic subsidy pass-through and export subsidies determined in a companion countervailing duty (CVD) proceeding when CVD provisional measures are in effect. Accordingly, Commerce has made a preliminary affirmative determination for an export subsidy adjustment. However, Commerce has not made a preliminary affirmative determination for a domestic subsidy pass-through adjustment in this investigation.
Should provisional measures in the companion CVD investigation expire prior to the expiration of provisional measures in this LTFV investigation, Commerce will direct CBP to begin collecting cash deposits at a rate equal to the estimated weighted-average dumping margins calculated in this preliminary determination unadjusted for export subsidies at the time the CVD provisional measures expire.
These suspension of liquidation instructions will remain in effect until further notice.
Commerce intends to disclose to interested parties the calculations performed in connection with this preliminary determination within five days of its public announcement or, if there is no public announcement, within five days of the date of publication of this notice in the
As provided in section 782(i)(1) of the Act, Commerce intends to verify information relied upon in making its final determination.
Case briefs, or other written comments not pertaining to scope issues, may be submitted to the Assistant Secretary for Enforcement and Compliance no later than seven days after the date on which the last final verification report is issued in this investigation. Rebuttal briefs, limited to issues raised in case briefs, may be submitted no later than five days after
Additionally, case briefs regarding scope issues may be submitted within ten days after the date of publication of this notice in the
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing, limited to issues raised in the case and rebuttal briefs, must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, whether any participant is a foreign national, and a list of the issues to be discussed. If a request for a hearing is made, Commerce intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230, at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioners. Pursuant to 19 CFR 351.210(e)(2), Commerce requires that requests by respondents for postponement of a final antidumping determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
Pursuant to 19 CFR 351.210(e), Tianjin JXSL, Kyocera Senco Industrial Tools, Inc. (the petitioner), and Tianjin Hweschun requested that Commerce postpone the final determination. Additionally, Tianjin JXSL and Tianjin Hweschun requested that provisional measures be extended to a period not to exceed six months.
In accordance with section 733(f) of the Act, Commerce will notify the International Trade Commission (ITC) of its preliminary determination of sales at LTFV. If the final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after the final determination whether these imports of the subject merchandise are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The merchandise covered by the scope of this investigation is certain collated steel staples. Certain collated steel staples subject to this investigation are made from steel wire having a nominal diameter from 0.0355 inch to 0.0830 inch, inclusive, and have a nominal leg length from 0.25 inch to 3.0 inches, inclusive, and a nominal crown width from 0.187 inch to 1.125 inch, inclusive. Certain collated steel staples may be manufactured from any type of steel, and are included in the scope of this investigation regardless of whether they are uncoated or coated, and regardless of the type or number of coatings, including but not limited to coatings to inhibit corrosion.
Certain collated steel staples may be collated using any material or combination of materials, including but not limited to adhesive, glue, and adhesive film or adhesive or paper tape.
Certain collated steel staples are generally made to American Society for Testing and Materials (ASTM) specification ASTM F1667-18a, but can also be made to other specifications.
Excluded from the scope of this investigation are any carton-closing staples covered by the scope of the existing antidumping duty order on Carton-Closing Staples from the People's Republic of China.
National Marine Fisheries Service (NMFS), National Oceanic and
Meetings of the North Pacific Fishery Management Council and its advisory committees.
The North Pacific Fishery Management Council (Council) and its advisory committees will meet January 27, 2020 to February 2, 2020.
The Council will begin its plenary session at 8 a.m. in the South Room on Wednesday, January 29 continuing through Sunday, February 2, 2020. The Council's Scientific and Statistical Committee (SSC) will begin at 8 a.m. in the East Room on Monday, January 27 and continue through Wednesday, January 29, 2020. The Council's Advisory Panel (AP) will begin at 8 a.m. in the North/West Room on Tuesday, January 28 and continue through Friday, January 31, 2020. The Ecosystem Committee will meet on Tuesday, January 28, 2020, from 8 a.m. to 5 p.m. (room TBD). The Partial Coverage Fishery Monitoring Advisory Committee will meet Tuesday, January 28, 2020, from 1 p.m. to 5 p.m. (room TBD).
The meeting will be held at the Renaissance Hotel, 515 Madison St., Seattle, WA 98104.
Diana Evans, Council staff; telephone: (907) 271-2809.
The Advisory Panel will address the same agenda issues as the Council with the exception of the B reports (issues 1-7).
The SSC's agenda will include:
Additionally, the SSC will be holding a Research Priorities Planning Workshop at 1 p.m. on Wednesday, January 29, 2020 in the East Room. In addition to providing ongoing scientific advice for fishery management decisions, the SSC functions as the Council's primary peer review panel for scientific information, as described by the Magnuson-Stevens Act section 302(g)(1)(e), and the National Standard 2 guidelines (78 FR 43066). The peer review process is also deemed to satisfy the requirements of the Information Quality Act, including the OMB Peer Review Bulletin guidelines.
The agenda for the Partial Coverage Fishery Monitoring Advisory Committee includes the opportunity to review, give staff feedback, and make recommendations to the Council on a draft workplan that establishes different elements and options for a cost efficient monitoring program that can be supported by industry fees. The agenda for the Ecosystem Committee includes fur seal updates from NOAA and St. Paul, skate nursery research update, deep sea coral research update, and FEP action module updates.
The Agenda is subject to change, and the latest version will be posted at
Public comment letters will be accepted and should be submitted either electronically at
These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Shannon Gleason at (907) 271-2809 at least 7 working days prior to the meeting date.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The New England Fishery Management Council (Council) is scheduling a public meeting of its Groundfish Committee to consider actions affecting New England fisheries in the exclusive economic zone (EEZ). Recommendations from this group will be brought to the full Council for formal consideration and action, if appropriate.
This meeting will be held on Thursday, January 23, 2020 at 9 a.m.
The meeting will be held at the Four Points Sheraton, One Audubon Road, Wakefield, MA 01880; Phone: (781) 245-9300.
Thomas A. Nies, Executive Director, New England Fishery Management Council; telephone: (978) 465-0492.
The committee will meet to discuss recreational measures for fishing year 2020 and provide recommendations to the Groundfish Committee on
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during these meetings. Action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Act, provided the public has been notified of the Council's intent to take final action to address the emergency.
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Thomas A. Nies, Executive Director, at (978) 465-0492, at least 5 days prior to the meeting date.
This meeting will be recorded. Consistent with 16 U.S.C. 1852, a copy of the recording is available upon request.
16 U.S.C. 1801
National Nuclear Security Administration, Department of Energy.
Notice of availability.
The National Nuclear Security Administration (NNSA), a semi-autonomous agency within the United States (U.S.) Department of Energy (DOE), announces the availability of a
This notice will be published on January 8, 2020.
The Final SA, which includes an Appendix which contains NNSA's responses to comments received on the Draft SA, is available on the internet at
For further information about this Notice, please contact Mr. James R. Sanderson, Office of NEPA Policy and Compliance, U.S. Department of Energy, 1000 Independence Avenue SW, Washington, DC 20585-0119; phone: 202-586-1402; email to:
NNSA prepared the Final SA to determine whether, prior to implementing a Modified Distributed Center of Excellence (DCE) Alternative for plutonium operations to enable producing plutonium pits at a rate of no fewer than 80 pits per year by 2030, the existing Complex Transformation SPEIS should be supplemented, a new environmental impact statement be prepared, or that no further National Environmental Policy Act (NEPA) analysis is required. Implementing a Modified DCE Alternative would enable NNSA to meet federal law and national policy by producing a minimum of 50 pits per year at a repurposed Mixed-Oxide Fuel Fabrication Facility (MFFF) at the Savannah River Site (SRS) and a minimum of 30 pits per year at the Los Alamos National Laboratory (LANL). An additional surge capacity would be available at each site, if needed, to meet the requirements of producing pits at a rate of no fewer than 80 pits per year by 2030 for the nuclear weapons stockpile. The Final SA includes NNSA's determination that no further NEPA documentation at a programmatic level is required. The SA of the Complex Transformation SPEIS is an important element of the overall NEPA strategy related to fulfilling national requirements for pit production. DOE announced this NEPA strategy on June 10, 2019 (84 FR 26849).
National security policies require DOE, through NNSA, to maintain the United States' nuclear weapons stockpile, as well as the nation's core competencies in nuclear weapons. NNSA has the mission to maintain and enhance the safety, security, and effectiveness of the nuclear weapons stockpile. Plutonium pits are critical components of every nuclear weapon, with nearly all current stockpile pits having been produced from 1978-1989. Today, the United States' capability to produce plutonium pits is limited.
Since 2008, the United States has emphasized the need to eventually produce 80 pits per year. Since 2014, federal law has required the Secretary of Energy to produce no less than 30 war reserve plutonium pits by 2026 and thereafter demonstrate the capability to produce war reserve plutonium pits at a rate sufficient to produce 80 pits per year (50 U.S.C. 2538a). On January 27, 2017, the President directed the Department of Defense (DoD) to conduct an updated Nuclear Posture Review (NPR) to ensure a safe, secure, and effective nuclear deterrent that protects the homeland, assures allies, and above all, deters adversaries. The 2018 NPR echoed the need for pit production and confirmed that the United States will pursue initiatives to ensure the necessary capability, capacity, and responsiveness of the nuclear weapons infrastructure and the needed skill of the workforce, including providing the enduring capability and capacity to produce plutonium pits at a rate of no fewer than 80 pits per year by 2030. In 2018, Congress enacted as formal policy of the United States that LANL will produce a minimum of 30 pits per year for the national production mission and will implement surge efforts to exceed 30 pits per year to meet NPR and national policy (Pub. L. 115-232, Section 3120).
To these ends, the DoD Under Secretary of Defense for Acquisition and Sustainment and the NNSA Administrator issued a Joint Statement on May 10, 2018, identifying their recommended alternative to meet the pit production requirement based on the
On June 10, 2019, DOE announced the overall NEPA strategy related to fulfilling national requirements for pit production (84 FR 26849). DOE announced that it would prepare at least three documents including this Final SA, a site-specific EIS for the proposal to produce pits at SRS (also announced in that notice), and site-specific documentation for the proposal to authorize expanding pit production beyond 20 pits per year at LANL.
In 2008, NNSA prepared the Complex Transformation SPEIS, which evaluated, among other things, alternatives for producing 10-200 plutonium pits per year at different sites including LANL and SRS. In the Complex Transformation SPEIS ROD, NNSA did not make any new decisions related to pit production capacity and did not foresee an imminent need to produce more than 20 pits per year to meet national security requirements. NNSA now foresees an imminent need to provide the enduring capability and capacity to produce plutonium pits at a rate of no fewer than 80 pits per year by 2030 for the nuclear weapons stockpile. NNSA's preferred alternative is now to implement a Modified DCE Alternative. NNSA has prepared the SA to determine whether, prior to implementing a Modified DCE Alternative, the existing Complex Transformation SPEIS should be supplemented, a new EIS be prepared, or no further NEPA analysis be required.
Although pertinent regulations do not require public review and comment on an SA, NNSA decided, in its discretion, that public comment in this instance would be helpful. NNSA issued the
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified date(s). Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
This is a supplemental notice in the above-referenced proceeding Willow Creek Wind Power LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is January 22, 2020.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
This is a supplemental notice in the above-referenced proceeding of Plum Creek Wind, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is January 22, 2020.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
This is a supplemental notice in the above-referenced proceeding of 41MB 8me LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is January 22, 2020.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following public utility holding company filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
This is a supplemental notice in the above-referenced Cambria Wind, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is January 22, 2020.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for electronic review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the website that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) has submitted an information collection request (ICR), Spill Prevention, Control, and Countermeasure (SPCC) Plans (EPA ICR Number 0328.18, OMB Control Number 2050-0021) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. This is a proposed extension of the ICR, which is currently approved through May 31, 2020. Public comments were previously requested via the
Comments must be submitted on or before February 7, 2020.
Submit your comments, referencing Docket ID No. EPA-HQ-OPA-2007-0584, to (1) EPA online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Wendy Hoffman, Regulations Implementation Division, Office of Emergency Management, Mail Code 5104A, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: 202-564-8794; fax number: 202-564-2620; email address:
Supporting documents, which explain in detail the information that the EPA will be collecting, are available in the public docket for this ICR. The docket can be viewed online at
Annual O&M costs are estimated to increase by approximately $17,841,833 compared to the costs currently approved by OMB. These increases are due to the combination of the higher
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) has submitted an information collection request (ICR), Tips and Complaints Regarding Environmental Violations (EPA ICR Number 2219.03, OMB Control Number 2020-0032) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. This is a proposed extension of the ICR, which is currently approved through January 21, 2020. Public comments were previously requested via the
Additional comments may be submitted on or before February 7, 2020.
Submit your comments, referencing Docket ID Number EPA-HQ-OECA-2009-0494 to (1) EPA online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Michael Le Desma; Legal Counsel Division; Office of Criminal Enforcement, Forensics, and Training; Environmental Protection Agency, Building 25, Box 25227, Denver Federal Center, Denver, CO 80025; telephone number: (303) 462-9453; fax number: (303) 462-9075; email address:
Supporting documents, which explain in detail the information that the EPA will be collecting, are available in the public docket for this ICR. The docket can be viewed online at
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency (EPA) has submitted an information collection request (ICR), NSPS for Sewage Sludge Treatment Plants (EPA ICR Number 1063.14, OMB Control Number 2060-0035), to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act. This is a proposed extension of the ICR, which is currently approved through March 31, 2020. Public comments were previously requested, via the
Additional comments may be submitted on or before February 7, 2020.
Submit your comments, referencing Docket ID Number EPA-HQ-OECA-2013-0310, to: (1) EPA online using
EPA's policy is that all comments received will be included in the public docket without change, including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI), or other information whose disclosure is restricted by statute.
Patrick Yellin, Monitoring, Assistance, and Media Programs Division, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Ave. NW, Washington, DC 20460; telephone number: (202) 564-2970; fax number: (202) 564-0050; email address:
Supporting documents, which explain in detail the information that the EPA will be collecting, are available in the public docket for this ICR. The docket can be viewed online at
In general, all NSPS standards require initial notifications, performance tests, and periodic reports by the owners/operators of the affected facilities. They are also required to maintain records of the occurrence and duration of any startup, shutdown, or malfunction in the operation of an affected facility, or any period during which the monitoring system is inoperative. These notifications, reports, and records are essential in determining compliance, and are required of all affected facilities subject to NSPS.
Federal Deposit Insurance Corporation (FDIC).
Agency information collection activities: Submission for OMB review; comment request.
The FDIC, as part of its obligations under the Paperwork Reduction Act of 1995, invites the general public and other Federal agencies to take this opportunity to comment on the renewal of the existing information collections described below. On October 29, 2019, the FDIC requested comment for 60 days on a proposal to renew these information collections. No comments were received. The FDIC hereby gives notice of its plan to submit to OMB a request to approve the renewal of these information collections, and again invites comment on their renewal.
Comments must be submitted on or before February 7, 2020.
Interested parties are invited to submit written comments to the FDIC by any of the following methods:
•
•
•
•
All comments should refer to the relevant OMB control number. A copy of the comments may also be submitted to the OMB desk officer for the FDIC: Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, DC 20503.
Manny Cabeza, Regulatory Counsel, 202-898-3767,
Proposal to renew the following currently approved collections of information:
1.
There is no change in the method or substance of the collection. The estimated number of respondents is estimated to increase based on the response rate observed over the last three years. The estimated time per response and the frequency of responses is expected to remain the same.
2.
This information collection includes the following:
There is no change in the method or substance of the collection. The estimated number of respondents, as well as the estimated time per response and the frequency of response, is expected to remain the same.
3.
There is no change in the method or substance of the collection. The estimated number of respondents has been revised based on the number of responses recorded over the last three years. The estimated time per response and the frequency of responses is expected to remain the same.
4.
12 CFR part 362 details the activities that state savings associations and/or their subsidiaries may engage in, under certain criteria and conditions, and identifies the information that banks must furnish to the FDIC in order to obtain the FDIC's approval or non-objection.
There is no change in the method or substance of the collection. The estimated number of respondents has been revised upward based on the number of responses recorded over the last three years. The estimated time per response and the frequency of responses is expected to remain the same.
5.
Section 349.1(d) refers to statutory provisions that set forth conditions for an exemption from clearing. Section 349.1(d)(1) provides an exemption for non-cleared swaps if one of the counterparties to the swap is not a financial entity, is using swaps to hedge or mitigate commercial risk, and notifies the CFTC of how it generally meets its financial obligations associated with entering into non-cleared swaps. Section 349.1(d)(2) provides an exemption for security-based swaps if the counterparty notifies the SEC of how it generally meets its financial obligations associated with entering into non-cleared security-based swaps. Section 349.1(h) contains the disclosure requirements for transfers of legacy swaps initiated by a covered swap entity's counterparty that fall outside the scope of the Swap Margin Rule.
Section 349.2 defines terms used in part 349, including the definition of “eligible master netting agreement,” which provides that a covered swap entity that relies on the agreement for purpose of calculating the required margin must: (1) Conduct sufficient legal review of the agreement to conclude with a well-founded basis that the agreement meets specified criteria; and (2) establish and maintain written procedures for monitoring relevant changes in law and to ensure that the agreement continues to satisfy the requirements of this section. The term “eligible master netting agreement” is used elsewhere in part 349 to specify instances in which a covered swap entity may: (1) Calculate variation margin on an aggregate basis across multiple non-cleared swaps and security-based swaps and (2) calculate initial margin requirements under an initial margin model for one or more swaps and security-based swaps.
Section 349.5(c)(2)(i) specifies that a covered swap entity shall not be deemed to have violated its obligation to collect or post margin from or to a counterparty if the covered swap entity has made the necessary efforts to collect or post the required margin, including the timely initiation and continued pursuit of formal dispute resolution mechanisms, or has otherwise demonstrated upon request to the satisfaction of the agency that it has made appropriate efforts to collect or post the required margin.
Section 349.7 generally requires a covered swap entity to ensure that any initial margin collateral that it collects or posts is held at a third-party custodian. Section 349.7(c) requires the custodian to act pursuant to a custody agreement that: (1) Prohibits the custodian from rehypothecating, repledging, reusing, or otherwise transferring (through securities lending, securities borrowing, repurchase agreement, reverse repurchase
With respect to collateral collected by a covered swap entity pursuant to § 349.3(a) or posted by a covered swap entity pursuant to § 349.3(b), the agreement must require the posting party to substitute only funds or other property that would qualify as eligible collateral under § 349.6 and for which the amount net of applicable discounts described in Appendix B would be sufficient to meet the requirements of § 349.3 and direct reinvestment of funds only in assets that would qualify as eligible collateral under § 349.6.
Section 349.8 establishes standards for the use of initial margin models. These standards include: (1) A requirement that the covered swap entity receive prior approval from the relevant Agency based on demonstration that the initial margin model meets specific requirements (§§ 349.8(c)(1) and 349.8(c)(2)); (2) a requirement that a covered swap entity notify the relevant Agency in writing 60 days before extending use of the model to additional product types, making certain changes to the initial margin model, or making material changes to modeling assumptions (§ 349.8(c)(3)); and (3) a variety of quantitative requirements, including requirements that the covered swap entity validate and demonstrate the reasonableness of its process for modeling and measuring hedging benefits, demonstrate to the satisfaction of the relevant Agency that the omission of any risk factor from the calculation of its initial margin is appropriate, demonstrate to the satisfaction of the relevant Agency that incorporation of any proxy or approximation used to capture the risks of the covered swap entity's non-cleared swaps or noncleared security-based swaps is appropriate, periodically review and, as necessary, revise the data used to calibrate the initial margin model to ensure that the data incorporate an appropriate period of significant financial stress (§§ 349.8(d)(5), 349.8(d)(10), 349.8(d)(11), 349.8(d)(12), and 349.8(d)(13)). Also, if the validation process reveals any material problems with the initial margin model, the covered swap entity must promptly notify the Agency of the problems, describe to the Agency any remedial actions being taken, and adjust the initial margin model to ensure an appropriately conservative amount of required initial margin is being calculated (§ 349.8(f)(3)). Section 349.8 also establishes requirements for the ongoing review and documentation of initial margin models. These standards include: (1) A requirement that a covered swap entity review its initial margin model annually (§ 349.8(e)); (2) a requirement that the covered swap entity validate its initial margin model at the outset and on an ongoing basis, describe to the relevant Agency any remedial actions being taken, and report internal audit findings regarding the effectiveness of the initial margin model to the covered swap entity's board of directors or a committee thereof (§§ 349.8(f)(2), 349.8(f)(3), and 349.8(f)(4)); (3) a requirement that the covered swap entity adequately document all material aspects of its initial margin model (§ 349.8(g)); and (4) that the covered swap entity must adequately document internal authorization procedures, including escalation procedures, that require review and approval of any change to the initial margin calculation under the initial margin model, demonstrable analysis that any basis for any such change is consistent with the requirements of this section, and independent review of such demonstrable analysis and approval (§ 349.8(h)).
Section 349.9 addresses the treatment of cross-border transactions and, in certain limited situations, will permit a covered swap entity to comply with a foreign regulatory framework for noncleared swaps (as a substitute for compliance with the prudential regulators' rule) if the prudential regulators jointly determine that the foreign regulatory framework is comparable to the requirements in the prudential regulators' rule. Section 349.9(e) allows a covered swap entity to request that the prudential regulators make a substituted compliance determination and must provide the reasons therefore and other required supporting documentation. A request for a substituted compliance determination must include: (1) A description of the scope and objectives of the foreign regulatory framework for non-cleared swaps and non-cleared security-based swaps; (2) the specific provisions of the foreign regulatory framework for non-cleared swaps and security-based swaps (scope of transactions covered; determination of the amount of initial and variation margin required; timing of margin requirements; documentation requirements; forms of eligible collateral; segregation and rehypothecation requirements; and approval process and standards for models); (3) the supervisory compliance program and enforcement authority exercised by a foreign financial regulatory authority or authorities in such system to support its oversight of the application of the non-cleared swap and security-based swap regulatory framework; and (4) any other descriptions and documentation that the prudential regulators determine are appropriate. A covered swap entity may make a request under this section only if directly supervised by the authorities administering the foreign regulatory framework for non-cleared swaps and non-cleared security-based swaps.
Section 349.10 requires a covered swap entity to execute trading documentation with each counterparty that is either a swap entity or financial end user regarding credit support arrangements that: (1) Provides the contractual right to collect and post initial margin and variation margin in such amounts, in such form, and under such circumstances as are required and (2) specifies the methods, procedures, rules, and inputs for determining the value of each non-cleared swap or noncleared security-based swap for purposes of calculating variation margin requirements and the procedures for resolving any disputes concerning valuation.
Section 349.11(b)(1) provides that the requirement for a covered swap entity to post initial margin under § 349.3(b) does not apply with respect to any noncleared swap or non-cleared security based swap with a counterparty that is an affiliate. A covered swap entity shall calculate the amount of initial margin that would be required to be posted to an affiliate that is a financial end user with material swaps exposure pursuant to § 349.3(b) and provide documentation of such amount to each affiliate on a daily basis.
There is no change in the method or substance of the collection. The FDIC currently does not supervise any institutions that are subject to this information collection but is reporting one respondent as a placeholder to
Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.
The Commission hereby gives notice of the filing of the following agreement under the Shipping Act of 1984. Interested parties may submit comments on the agreements to the Secretary by email at
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)).
Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington, DC 20551-0001, not later than February 7, 2020.
1.
Section 7A of the Clayton Act, 15 U.S.C. 18a, as added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, requires persons contemplating certain mergers or acquisitions to give the Federal Trade Commission and the Assistant Attorney General advance notice and to wait designated periods before consummation of such plans. Section 7A(b)(2) of the Act permits the agencies, in individual cases, to terminate this waiting period prior to its expiration and requires that notice of this action be published in the
The following transactions were granted early termination—on the dates indicated—of the waiting period provided by law and the premerger notification rules. The listing for each transaction includes the transaction number and the parties to the transaction. The grants were made by the Federal Trade Commission and the Assistant Attorney General for the Antitrust Division of the Department of Justice. Neither agency intends to take any action with respect to these proposed acquisitions during the applicable waiting period.
Theresa Kingsberry (202-326-3100), Program Support Specialist, Federal Trade Commission Premerger Notification Office, Bureau of Competition, Room CC-5301, Washington, DC 20024.
By direction of the Commission.
Agency for Healthcare Research and Quality (AHRQ), HHS.
Request for Supplemental Evidence and Data Submissions.
The Agency for Healthcare Research and Quality (AHRQ) is seeking scientific information submissions from the public. Scientific information is being solicited to inform our review on
Center for Evidence and Practice Improvement, Agency for Healthcare Research and Quality, ATTN: EPC SEADs Coordinator, 5600 Fishers Lane, Mail Stop 06E77D, Rockville, MD 20857.
Jenae Benns, Telephone: 301-427-1496 or Email:
The Agency for Healthcare Research and Quality has commissioned the Evidence-based Practice Centers (EPC) Program to complete a review of the evidence for Treatments for Acute Pain: A Systematic Review. AHRQ is conducting this systematic review pursuant to Section 902(a) of the Public Health Service Act, 42 U.S.C. 299a(a).
The EPC Program is dedicated to identifying as many studies as possible that are relevant to the questions for each of its reviews. In order to do so, we are supplementing the usual manual and electronic database searches of the literature by requesting information from the public (
This is to notify the public that the EPC Program would find the following information on
A list of completed studies that your organization has sponsored for this indication. In the list, please
Description of whether the above studies constitute
Your contribution is very beneficial to the Program. Materials submitted must be publicly available or able to be made public. Materials that are considered confidential; marketing materials; study types not included in the review; or information on indications not included in the review cannot be used by the EPC Program. This is a voluntary request for information, and all costs for complying with this request must be borne by the submitter.
The draft of this review will be posted on AHRQ's EPC Program website and available for public comment for a period of 4 weeks. If you would like to be notified when the draft is posted, please sign up for the email list at:
Each Key Question (KQ) focuses on a specific acute pain condition. The conditions and related subquestions are listed below:
KQ1: Acute back pain (including back pain with radiculopathy)
KQ2: Acute neck pain (including neck pain with radiculopathy)
KQ3: Musculoskeletal pain not otherwise included in KQ1 or KQ2 (including fractures)
KQ4: Peripheral neuropathic pain (related to herpes zoster and trigeminal neuralgia)
KQ5: Postoperative pain after discharge
KQ6: Dental pain (surgical and nonsurgical after discharge)
KQ7: Kidney stones
KQ8: Sickle cell crisis (episodic pain)
For each condition above, the following subquestions will be addressed:
a. What is the comparative effectiveness of opioid therapy versus: (1) Nonopioidpharmacologic therapy (
b. How does effectiveness of opioid therapy vary depending on: (1) Patient demographics (
c. What are the harms of opioid therapy versus nonopioid pharmacologic therapy, or nonpharmacologic therapy with respect to: (1) misuse, opioid use disorder, and related outcomes; (2) overdose; (3) other harms including gastrointestinal-related harms, falls, fractures, motor vehicle accidents, endocrinological harms, infections, cardiovascular events, cognitive harms, and psychological harms (
d. How do harms vary depending on: (1) Patient demographics (
e. What are the effects of prescribing opioid therapy versus not prescribing opioid therapy for acute pain on (1) short-term (<3 months) continued need for prescription pain relief, such as need for opioid refills, and (2) long-term opioid use (3 months or greater)?
f. For patients with acute pain being considered for opioid therapy, what is the accuracy of instruments for predicting risk of opioid misuse, opioid use disorder, or overdose?
g. For patients with acute pain being considered for opioid therapy, what is the effectiveness of instruments for predicting risk of opioid misuse, opioid use disorder, or overdose?
h. For patients with acute pain being considered for opioid therapy, what is the effect of the following factors on the decision to prescribe opioids: (1) Existing opioid management plans; (2) patient education; (3) clinician and patient values and preferences related to opioids; (4) urine drug screening; (5) use of prescription drug monitoring program data; (6) availability of close followup?
i. What is the comparative effectiveness of nonopioid pharmacologic therapy (
j. How does effectiveness of nonopioid pharmacologic therapy vary depending on: (1) Patient demographics (
k. What are the harms of nonopioid pharmacologic therapy versus other nonopioid pharmacologic therapy, or nonpharmacologic therapy with respect to: (1) Misuse, (2) overdose; (3) other harms including gastrointestinal-related harms, cardiovascular-related harms, kidney-related harms, falls, fractures, motor vehicle accidents, endocrinological harms, infections, cognitive harms, and psychological harms (
l. How do harms vary depending on: (1) Patient demographics (
m. What is the comparative effectiveness of nonpharmacologic therapy versus sham treatment, waitlist, usual care, attention control, and no treatment after followup at the following intervals: Less than 1 day; 1 day to less than 1 week; 1 week to less than 2 weeks; 2 weeks to less than 4 weeks; 4 weeks or longer?
n. What is the comparative effectiveness of nonpharmacologic treatments (
o. How does effectiveness of nonpharmacologic therapy vary depending on: (1) Patient demographics (
p. How do harms vary depending on: (1) Patient demographics (
Office of Planning, Research, and Evaluation; Administration for Children and Families; HHS.
Request for public comment.
The Office of Planning, Research, and Evaluation (OPRE) within the Administration for Children and Families (ACF) is proposing data collection activities conducted for the Next Generation of Enhanced Employment Strategies (NextGen) Project. The objective of this project is to identify and rigorously evaluate innovative interventions designed to promote employment and economic security among low-income individuals with complex challenges to employment. The project will include an experimental impact study, descriptive study, and cost study.
Copies of the proposed collection of information can be obtained and comments may be forwarded by emailing
To further build the evidence around effective strategies for helping low-income individuals find and sustain employment, OPRE is conducting the NextGen Project. This project will identify and test up to 10 innovative, promising employment interventions designed to help individuals facing complex challenges secure a pathway toward economic independence. These challenges may be physical and mental health conditions, a criminal history, or limited work skills and experience. The project is actively coordinating with the Building Evidence on Employment Strategies for Low-Income Families Project (0970-0537), another OPRE project focused on strengthening ACF's understanding of effective interventions aimed at supporting low-income individuals to find jobs, advance in the labor market, and improve their economic security. Additionally, the project is working closely with the Social Security Administration (SSA) to incorporate a focus on employment-related early interventions for individuals with current or foreseeable disabilities who have limited work
The NextGen Project will use a two-phased approach for approval of this proposed information collection activity. In Phase 1 (current request) the research team seeks approval to formally recruit programs, to administer the informed consent form and baseline participant survey, and to collect identifying and contact information for study participants. The project intends for these data collections to be uniform across programs selected for evaluation and it does not anticipate that they will require revisions.
Under Phase 2 of the request, the project will update the information collection request for the remaining instruments to tailor to each program selected for the evaluation, as needed.
The proposed information collection activities cover an experimental impact study, descriptive study, and cost study. Data collection activities for the impact study include: (1) Baseline survey and identifying and contact information data collection, (2) a first follow-up survey, and (3) a second follow-up survey. Data collection activities for the descriptive study include: (1) Service receipt tracking; (2) staff characteristics survey; (3) program leadership survey; (4) semi-structured program discussion guide (conducted with program leaders, supervisors, partners, staff, and providers); (5) semi-structured employer discussion guide (for those interventions that include an employer component); and (6) in-depth participant interviews. Data collection activities for the cost study include an Excel-based cost workbook.
Section 413 of the Social Security Act, as amended by the FY 2017 Consolidated Appropriations Act, 2017 (Public Law 115-31).
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing
Fax written comments on the collection of information by February 7, 2020.
To ensure that comments on the information collection are received, OMB recommends that written comments be faxed to the Office of Information and Regulatory Affairs, OMB, Attn: FDA Desk Officer, Fax: 202-395-7285, or emailed to
Domini Bean, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-5733,
In compliance with 44 U.S.C. 3507, FDA has submitted the following proposed collection of information to OMB for review and clearance.
In the United States, Federal and State Government Agencies ensure the safety of animal feed. FDA is responsible for ensuring that all food and feed moving in interstate commerce, except those under the U.S. Department of Agriculture jurisdiction, are safe, wholesome, and labeled properly. States are responsible for conducting inspections and regulatory activities that help ensure food and feed produced, processed, and distributed within their jurisdictions are safe and in compliance with State laws and regulations. States primarily perform inspections under their own regulatory authority. Some States conduct inspections of feed facilities under contract with FDA. Because jurisdictions may overlap, FDA and States collaborate and share resources to protect animal feed.
The FDA Food Safety Modernization Act (Pub. L. 111-353) passed on January 4, 2011, calls for enhanced partnerships and provides a legal mandate for developing an Integrated Food Safety System (IFSS). FDA is committed to implementing an IFSS thereby optimizing coordination of food and feed safety efforts with Federal, State, local, tribal, and territorial regulatory and public health agencies. Model standards provide a consistent, underlying foundation that is critical for uniformity across State and Federal Agencies to ensure credibility of food and feed programs within the IFSS.
The Animal Feed Regulatory Program Standards (AFRPS) provide a uniform and consistent approach to feed regulation in the United States. Implementation of the draft feed program standards is voluntary. States implementing the standards will identify and maintain program improvements that will strengthen the safety and integrity of the U.S. animal feed supply.
The feed standards are the framework that each State should use to design, manage, and improve its feed program. The standards include the following: (1) Regulatory foundation; (2) training; (3) inspection program; (4) auditing; (5) feed-related illness or death and emergency response; (6) enforcement program; (7) outreach activities; (8) budget and planning; (9) assessment and improvement; (10) laboratory services; and (11) sampling program.
Each standard has a purpose statement, requirement summary, description of program elements, projected outcomes, and a list of required documentation. When a State program voluntarily agrees to implement the feed standards, it must fully implement and maintain the individual program elements and documentation requirements in each standard in order to fully implement the standard.
The feed standards package includes forms, worksheets, and templates to help the State program assess and meet the program elements in the standard. State programs are not obligated to use the forms, worksheets, and templates provided with the feed standards. Other manual or automated forms, worksheets, and templates may be used as long as the pertinent data elements are present. Records and other documents specified in the feed standards must be maintained in good order by the State program and must be available to verify the implementation of each standard. The feed standards are not intended to address the performance appraisal processes that a State agency may use to evaluate individual employee performance.
As set forth in the feed standards, the State program is expected to review and update its improvement plan on an annual basis. The State program completes an evaluation of its implementation status at least every 3 years following the baseline evaluation by reviewing and updating the self-assessment worksheets and required documentation for each standard. The evaluation is needed to determine if each standard's requirements are, or remain, fully met, partially met, or not met. The State program revises the improvement plan based upon this evaluation.
Although FDA plans to provide financial support to State programs that implement the feed standards, funding opportunities are contingent upon the availability of funds. Funding opportunities may be only available to State feed regulatory programs that currently have an FDA feed inspection contract. State programs receiving financial support to implement the feed standards will be audited by FDA.
Persons with access to the internet may submit requests for a single copy of the current feed standards from
In the
We estimate the burden of this collection of information as follows:
Respondents to the information collection are State agencies seeking to avail themselves of the options described in the document. State agencies that conduct feed inspections under contract are interested in implementing the standards. The total estimated annual recordkeeping burden for implementation is 569 hours per respondent. The burden was determined by capturing the average amount of time for each respondent to assess the current state of the program and work toward implementation of each of the 11 standards contained in the AFRPS. The hours per State feed regulatory program will average the same to account for continual improvement and self-sufficiency in the program. Our burden estimate reflects a decrease of 100,654 hours as a result of fewer respondents to the collection and a reevaluation of the time we ascribe for recordkeeping activities.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or Agency) is withdrawing approval of 23 abbreviated new drug applications (ANDAs) from multiple applicants. The applicants notified the Agency in writing that the drug products were no longer marketed and requested that the approval of the applications be withdrawn.
Approval is withdrawn as of February 7, 2020.
Martha Nguyen, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 75, Rm. 1676, Silver Spring, MD 20993-0002, 240-402-6980,
The applicants listed in the table have informed FDA that these drug products are no longer marketed and have requested that FDA withdraw approval of the applications under the process described in § 314.150(c) (21 CFR 314.150(c)). The applicants have also, by their requests, waived their opportunity for a hearing. Withdrawal of approval of an application or abbreviated application under § 314.150(c) is without prejudice to refiling.
Therefore, approval of the applications listed in the table, and all amendments and supplements thereto, is hereby withdrawn as of February 7, 2020. Approval of each entire application is withdrawn, including any strengths or products inadvertently missing from the table. Introduction or delivery for introduction into interstate commerce of products without approved new drug applications violates section 301(a) and (d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331(a) and (d)). Drug products that are listed in the table that are in inventory on February 7, 2020 may continue to be dispensed until the inventories have been depleted or the drug products have reached their expiration dates or otherwise become violative, whichever occurs first.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the revocation of three Emergency Use Authorizations (EUAs) (the Authorizations) issued to OraSure Technologies, Inc. (OraSure) for the OraQuick Ebola Rapid Antigen Test used with whole blood specimens; OraSure for the OraQuick Ebola Rapid Antigen Test used with cadaveric oral fluid swab specimens; and DiaSorin Inc. (DiaSorin) for the LIAISON XL Zika Capture IgM II assay. FDA revoked both of OraSure's Authorizations on October 10, 2019, under the Federal Food, Drug, and Cosmetic Act (the FD&C Act), in consideration of a De Novo classification request granted to OraSure for the OraQuick Ebola Rapid Antigen Test on October 10, 2019. FDA revoked DiaSorin's Authorization on October 28, 2019, under the FD&C Act, in consideration of the premarket clearance of DiaSorin's LIAISON XL Zika Capture IgM II assay, which FDA determined to be substantially equivalent to a legally marketed class II predicate device on October 28, 2019. The revocations, which include an explanation of the reasons for each revocation, are reprinted in this document.
OraSure's Authorizations are revoked as of October 10, 2019. DiaSorin's Authorization is revoked as of October 28, 2019.
Submit written requests for single copies of the revocation(s) to the Office of Counterterrorism and Emerging Threats, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 1, Rm. 4338, Silver Spring, MD 20993-0002. Send one self-addressed adhesive label to assist that office in processing your request or include a fax number to which the revocation may be sent. See the
Jennifer J. Ross, Office of Counterterrorism and Emerging Threats, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 1, Rm. 4332, Silver Spring, MD 20993-0002, 240-402-8155 (this is not a toll-free number).
Section 564 of the FD&C Act (21 U.S.C. 360bbb-3) as amended by the Project BioShield Act of 2004 (Pub. L. 108-276) and the Pandemic and All-Hazards Preparedness Reauthorization Act of 2013 (Pub. L. 113-5) allows FDA to strengthen the public health protections against biological, chemical, nuclear, and radiological agents. Among other things, section 564 of the FD&C Act allows FDA to authorize the use of an unapproved medical product or an unapproved use of an approved medical product in certain situations.
First, on July 31, 2015, FDA issued an EUA to OraSure for the OraQuick Ebola Rapid Antigen Test used with whole blood specimens, subject to the terms of the Authorization. Notice of the issuance of the Authorization was published in the
Second, on March 4, 2016, FDA issued an EUA to OraSure for the OraQuick Ebola Rapid Antigen Test used with cadaveric oral fluid, subject to the terms of the Authorization. Notice of the issuance of the Authorization was published in the
Third, on April 5, 2017, FDA issued an EUA to DiaSorin for the LIAISON XL
Under section 564(g)(2) of the FD&C Act, the Secretary of HHS may revoke an EUA if, among other things, the criteria for issuance are no longer met. Under section 564(c)(3) of the FD&C Act, an EUA may be issued only if FDA concludes there is no adequate, approved, and available alternative to the product for diagnosing, preventing, or treating the disease or condition. On October 10, 2019, FDA revoked the EUAs for OraSure's OraQuick Ebola Rapid Antigen Test for use with whole blood specimens and cadaveric oral fluid, and on October 28, 2019, FDA revoked the EUA for DiaSorin's LIAISON XL Zika Capture IgM II assay because the criteria for issuance were no longer met. FDA determined that the criteria for issuance of OraSure's two Authorizations are no longer met because OraSure had a De Novo classification request granted for the OraQuick Ebola Rapid Antigen Test as a Class II device under the generic name “Device to detect antigens of biothreat microbial agents in human clinical specimens” on October 10, 2019.
FDA also determined that the criteria for issuance of DiaSorin's Authorization are no longer met because the LIAISON XL Zika Capture IgM II assay was determined to be substantially equivalent to a legally marketed class II predicate device with the generic name “Zika virus serological reagents.” As such, in each case FDA concluded that there is an adequate, approved, and available alternative for purposes of section 564(c)(3) of the FD&C Act and accordingly revoked the Authorizations pursuant to section 564(g)(2)(B) of the Act.
An electronic version of this document and the full text of the revocation are available on the internet at
Having concluded that the criteria for revocations of the Authorizations under section 564(g) of the FD&C Act are met, FDA has revoked the EUAs for OraSure's OraQuick Ebola Rapid Antigen Test for use with whole blood specimens and cadaveric oral fluid and for DiaSorin's LIAISON XL Zika Capture IgM II assay. The revocations in their entirety follow and provide an explanation of the reasons for each revocation, as required by section 564(h)(1) of the FD&C Act.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or Agency) is withdrawing approval of 19 new drug applications (NDAs) from multiple applicants. The applicants notified the Agency in writing that the drug products were no longer marketed and requested that the approval of the applications be withdrawn.
Approval is withdrawn as of February 7, 2020.
Kimberly Lehrfeld, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 6226, Silver Spring, MD 20993-0002, 301-796-3137.
The applicants listed in the table have informed FDA that these drug products are no longer marketed and have requested that FDA withdraw approval of the applications under the process in § 314.150(c) (21 CFR 314.150(c)). The applicants have also, by their requests, waived their opportunity for a hearing. Withdrawal of approval of an application or abbreviated application under § 314.150(c) is without prejudice to refiling.
Therefore, approval of the applications listed in the table, and all amendments and supplements thereto, is hereby withdrawn as of February 7, 2020. Approval of each entire application is withdrawn, including any strengths and dosage forms inadvertently missing from the table. Introduction or delivery for introduction into interstate commerce of products without approved new drug applications violates section 301(a) and (d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331(a) and (d)). Drug products that are listed in the table that are in inventory on February 7, 2020 may continue to be dispensed until the inventories have been depleted or the drug products have reached their expiration dates or otherwise become violative, whichever occurs first.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing an opportunity for public comment on the proposed collection of certain information by the Agency. Under the Paperwork Reduction Act of 1995 (PRA), Federal Agencies are required to publish notice in the
Submit either electronic or written comments on the collection of information by March 9, 2020.
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before March 9, 2020. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Ila S. Mizrachi, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-7726,
Under the PRA (44 U.S.C. 3501-3521), Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal Agencies to provide a 60-day notice in the
With respect to the following collection of information, FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.
FDA conducts focus group interviews on a variety of topics involving FDA-regulated products, including drugs, biologics, devices, food, tobacco, and veterinary medicine.
Focus groups provide an important role in gathering information because they allow for a more indepth understanding of consumers' attitudes, beliefs, motivations, and feelings than do quantitative studies. Focus groups serve the narrowly defined need for direct and informal opinion on a specific topic and as a qualitative research tool have three major purposes:
• To obtain consumer information that is useful for developing variables and measures for quantitative studies,
• To better understand consumers' attitudes and emotions in response to topics and concepts, and
• To further explore findings obtained from quantitative studies.
FDA will use focus group findings to test and refine their ideas but will generally conduct further research before making important decisions such as adopting new policies and allocating or redirecting significant resources to support these policies.
Respondents to this collection of information will include members of the general public, healthcare professionals, the industry, and other stakeholders who are related to a product under FDA's jurisdiction. Inclusion and exclusion criteria will vary depending on the research topic.
FDA estimates the burden of this collection of information as follows:
Based on a review of the information collection since our last request for OMB approval, we have made no adjustments to our burden estimate.
Food and Drug Administration, HHS.
Notice of availability; extension of comment period.
The Food and Drug Administration (FDA or Agency) is extending the comment period for the notice entitled “Drug Products Labeled as Homeopathic; Draft Guidance for Food and Drug Administration Staff and Industry” that appeared in the
FDA is extending the comment period on the notice published October 25, 2019 (84 FR 57441). Submit either electronic or written comments on the draft guidance by March 23, 2020, to ensure that the Agency considers your comment on this draft guidance before it begins work on the final version of the guidance.
You may submit comments on any guidance at any time as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
You may submit comments on any guidance at any time (see 21 CFR 10.115(g)(5)).
Submit written requests for single copies of the draft guidance to the Division of Drug Information, Center for Drug Evaluation and Research, Food and Drug Administration, 10001 New Hampshire Ave., Hillandale Building, 4th Floor, Silver Spring, MD 20993-0002; or to the Office of Communication, Outreach and Development, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 3128, Silver Spring, MD 20993-0002. Send one self-addressed adhesive label to assist that office in processing your requests. See the
Elaine Lippmann, Center for Drug Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 51, Rm. 6238, Silver Spring, MD 20993, 301-796-3600; or Stephen Ripley, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 7301, Silver Spring, MD 20993, 240-402-7911.
In the
Persons with access to the internet may obtain the draft guidance at
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration's (FDA or Agency) Center for Veterinary Medicine (CVM) is proposing to withdraw approval of seven new animal drug applications (NADAs) and is announcing an opportunity for the NADA holders to request a hearing on this proposal. The basis for the proposal is that the NADA holders have repeatedly failed to file required annual reports for those NADAs.
The NADA holders may submit a request for a hearing by February 7, 2020. Submit all data, information, and analyses upon which the request for a hearing relies March 9, 2020. Submit electronic or written comments by March 9, 2020.
The request for a hearing may be submitted by the NADA holders by either of the following methods:
Submit electronic comments in the following way:
•
Submit written/paper submissions as follows:
•
• Because your request for a hearing will be made public, you are solely responsible for ensuring that your request does not include any confidential information that you or a third party may not wish to be posted, such as medical information, your or anyone else's Social Security number, or confidential business information, such as a manufacturing process. The request for a hearing must include the Docket No. FDA-2019-N-5405 for “Alaco, Inc., et al.; Proposal to Withdraw Approval of Seven New Animal Drug Applications; Opportunity for a Hearing.” The request for a hearing will be placed in the docket and publicly viewable at
The NADA holders may submit all data and analyses upon which the request for a hearing relies in the same manner as the request for a hearing except as follows:
• Confidential Submissions—To submit any data analyses with confidential information that you do not wish to be made publicly available, submit your data and analyses only as a written/paper submission. You should submit two copies total of all data and analyses. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of any decisions on this matter. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Vernon Toelle, Center for Veterinary Medicine (HFV-234), Food and Drug Administration, 7519 Standish Pl., Rockville, MD 20855, 240-402-5637.
The FDA's CVM is proposing to withdraw approval of seven new animal drug applications (NADAs) and is announcing an opportunity for the NADA sponsors to request a hearing on this proposal. The new animal drugs approved in these NADAs have not been marketed for several years. The establishments associated with these drug products are not registered under 21 CFR 207.21 nor are these drug products listed under 21 CFR 207.45. The basis for this proposal is that these NADA sponsors have repeatedly failed to submit annual drug experience reports to FDA concerning their approved NADA as required under § 514.80 (21 CFR 514.80). These sponsors have not responded to the Agency's requests, sent by certified mail, for submission of the reports. The delinquent approved NADAs and their sponsors are listed in table 1.
Therefore, notice is given to the holders of the approved NADAs listed in table 1 and to all other interested persons that the Director of CVM proposes to issue an order, under section 512(e) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 360b(e)), withdrawing approval of the NADAs and all amendments and supplements thereto on the grounds that the NADA holders have failed to submit the reports required under § 514.80. Upon withdrawal of approval of these NADAs, the regulations published pursuant to section 512(i) of the FD&C Act in 21 CFR 510.600, 520.260, 520.580, 522.84, 522.518, and 522.1620 will be revoked.
In accordance with section 512 of the FD&C Act and parts 12 and 514 (21 CFR parts 12 and 514), the NADA holders are hereby provided an opportunity for a hearing to show why the approval of the NADAs listed previously should not be withdrawn (and the corresponding regulations revoked) and an opportunity to raise, for administrative determination, all issues relating to the legal status of the new animal drug products covered by these NADAs.
An NADA holder who decides to seek a hearing must file the following: (1) A written notice of participation and a request for a hearing (see
The failure of an NADA holder to file a timely written notice of participation and request for a hearing, as required by § 514.200 and part 12, constitutes an election by that NADA holder not to avail itself of the opportunity for a hearing concerning CVM's proposal to withdraw approval of the NADAs and constitutes a waiver of any contentions concerning the legal status of the drug products. FDA will then withdraw approval of the NADAs, and the new animal drug products may not thereafter be lawfully introduced or delivered for introduction into interstate commerce. Any new animal drug product introduced or delivered for introduction into interstate commerce without an approved NADA, conditional approval, or index listing is subject to regulatory action at any time.
A request for a hearing may not rest upon mere allegations or denials but must present specific facts showing that there is a genuine and substantial issue of fact that requires a hearing. Reports submitted to remedy the deficiencies must be complete in all respects in accordance with § 514.80. If a request for a hearing is not complete or is not supported, the Commissioner of Food and Drugs will enter summary judgment against the person who requests the hearing, making findings and conclusions, and denying a hearing.
All submissions under this notice of opportunity for a hearing must be filed in two copies. Except for data and information prohibited from public disclosure under 21 U.S.C. 331(j) or 18 U.S.C. 1905, the submissions may be seen at the Dockets Management Staff (see
This notice is issued under section 512 of the FD&C Act and under authority delegated to the Principal Associate Commissioner for Policy by the Commissioner of Food and Drugs.
Food and Drug Administration, HHS.
Notice of availability; extension of comment period.
The Food and Drug Administration (FDA or Agency) is extending the comment period for the notice entitled “Certificates of Confidentiality; Guidance for Sponsors, Sponsor-Investigators, Researchers, Industry, and Food and Drug Administration Staff; Availability” that appeared in the
FDA is extending the comment period on the notice published November 25, 2019 (84 FR 64906). Submit either electronic or written comments on the draft guidance by January 24, 2020, to ensure that the Agency considers your comment on this draft guidance before it begins work on the final version of the guidance.
You may submit comments on any guidance at any time as follows:
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
You may submit comments on any guidance at any time (see 21 CFR 10.115(g)(5)).
Submit written requests for single copies of this guidance to the Office of Policy, Bldg. 32, Rm. 4248, 10903 New Hampshire Ave., Silver Spring, MD 20993-0002. See the
Jarilyn Dupont, Office of Policy, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 32, Rm. 4248, Silver Spring, MD 20993-0002, 301-796-4850.
In the
Persons with access to the internet may obtain the draft guidance at either
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA, the Agency, or we) is announcing an opportunity for public comment on the proposed collection of certain information by the Agency. Under the Paperwork Reduction Act of 1995 (PRA), Federal Agencies are required to publish notice in the
Submit either electronic or written comments on the collection of information by March 9, 2020.
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before March 9, 2020. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked and identified, as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in
Domini Bean, Office of Operations, Food and Drug Administration, Three White Flint North, 10A-12M, 11601 Landsdown St., North Bethesda, MD 20852, 301-796-5733,
Under the PRA (44 U.S.C. 3501-3521), Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal Agencies to provide a 60-day notice in the
With respect to the following collection of information, FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.
FDA intends to interview blood donors to collect risk factor information associated with testing positive for a TTI. This collection of information is part of a larger initiative called TTIMS, which is a collaborative project funded by FDA, the NHLBI of the National Institutes of Health (NIH), and the Department of Health and Human Services (HHS) Office of the Assistant Secretary of Health with input from other Agencies in HHS, including the Centers for Disease Control and Prevention (CDC). FDA will use these scientific data collected through such interview-based risk factor elicitation of blood donors to monitor and help ensure the safety of the U.S. blood supply.
Previous assessments of risk factor profiles among blood donors found to be positive for human immunodeficiency virus (HIV) were funded by CDC for approximately 10 years after implementation of HIV serologic screening of blood donors in the mid-1980s, whereas studies of Hepatitis C virus (HCV) seropositive donors, funded by NIH, were conducted in the early 1990s. Information on current risk factors in blood donors as assessed using analytical study designs was next evaluated by the Transfusion-Transmitted Retrovirus and Hepatitis Virus Rates and Risk Factors Study conducted by the NHLBI Retrovirus Epidemiology Donor Study-II (REDS-II) approved under OMB control number 0925-0630. Through a risk factor questionnaire, this study elicited risk factors in blood donors who tested confirmed positive for one of four transfusion-transmissible infections: HIV, HCV, Hepatitis B virus (HBV), and Human T-cell Lymphotropic virus. The study also elicited risk factors from donors who did not have any infections (controls) and compared their responses to those of the donors with confirmed infection (cases). Results from the REDS-II study were published in 2015.
FDA issued a document entitled “Revised Recommendations for Reducing the Risk of Human Immunodeficiency Virus Transmission by Blood and Blood Products; Guidance for Industry” dated December 2015 (available at:
This study will help identify the specific risk factors for TTI and their prevalence in blood donors and help inform FDA on the proportion of incident (new) infections among all HIV positive blood donors. Donations with incident infections have the greatest potential transmission risk because they could be missed during routine blood screening. The study will help FDA evaluate the effectiveness of screening strategies in reducing the risk of HIV transmission from at-risk donors and to evaluate if there are unexpected consequences associated with the recent change in donor deferral policy such as an increase in HIV incidence among donors. These data also will inform FDA regarding future blood donor deferral policy options to reduce the risk of HIV transmission, including the feasibility of moving from the existing time-based deferrals related to risk behaviors to alternate deferral options, such as the use of individual risk assessments, and to inform the design of potential studies to evaluate the feasibility and effectiveness of such alternative deferral options.
TTIMS will include a comprehensive interview-based epidemiological study of risk factor information for viral infection-positive blood donors at the American Red Cross (ARC), Blood Systems, Inc. (BSI), New York Blood
As part of the TTIMS project, a comprehensive hemovigilance database will be created that integrates the risk factor information collected through donor interviews of blood donor with the resulting data from disease marker testing and blood components collected by participating organizations into a research database. Following successful initiation of the risk factor interviews, the TTIMS network is poised to be expanded to include additional blood centers and/or refocused on other safety threats as warranted. In this way, the TTIMS program will maintain standardized, statistically, and scientifically robust processes for applying hemovigilance information across blood collection organizations.
The specific objectives are to:
• Determine current behavioral risk factors associated with all HIV infections, incident HBV, and incident HCV infections in blood donors (including parenteral and sexual risks) across the participating blood collection organizations using a case-control study design.
• Determine infectious disease marker prevalence and incidence for HIV, HBV, and HCV overall and by demographic characteristics of donors in the majority of blood donations collected in the country. This will be accomplished by forming epidemiological databases consisting of harmonized operational data from ARC, BSI, NYBC, and OneBlood.
• Analyze integrated risk factor and infectious marker testing data concurrently because when taken together these may suggest that blood centers are not achieving the same degree of success in educational efforts to prevent donation by donors with risk behaviors across all demographic groups.
The respondents will be persons who donated blood in the United States and these participants will be defined as cases and controls. The estimated number of respondents is based on an overall expected participation in the risk factor survey. We estimate a case-to-control ratio of 1:2 (200 to 400) with a 50 percent case enrollment.
FDA estimates the burden of this collection of information as follows:
We have adjusted our burden estimate, which has resulted in a decrease to the currently approved burden. Based on experience with this survey, we decreased the average burden per response from 45 to 30 minutes, resulting in a change from 450 to 300 total hours.
Food and Drug Administration, HHS.
Notice of public meeting; request for comments.
The Food and Drug Administration (FDA, the Agency, or we) is announcing the following public meeting entitled “Modernizing FDA's Data Strategy.” The purpose of the public meeting and the request for comments is to discuss possible Agency level approaches to modernizing FDA's data strategy, including approaches to data quality, data stewardship, data exchange, and data analytics.
The public meeting will be held on March 27, 2020, from 9 a.m. to 5 p.m. Eastern time. The public meeting may be extended or may end early. Submit electronic or written comments on this public meeting by April 30, 2020. See the
The public meeting will be held at the FDA White Oak Campus, 10903 New Hampshire Ave., Bldg. 31 Conference Center, the Great Room (Rooms 1503B/C), Silver Spring, MD 20993-0002. Entrance for the public meeting participants (non-FDA employees) is through Building 1, where routine security check procedures will be performed. For parking and security information, please refer to
You may submit comments as follows. Please note that late, untimely filed comments will not be considered. Electronic comments must be submitted on or before April 30, 2020. The
Submit electronic comments in the following way:
•
• If you want to submit a comment with confidential information that you do not wish to be made available to the public, submit the comment as a written/paper submission and in the manner detailed (see “Written/Paper Submissions” and “Instructions”).
Submit written/paper submissions as follows:
•
• For written/paper comments submitted to the Dockets Management Staff, FDA will post your comment, as well as any attachments, except for information submitted, marked, and identified as confidential, if submitted as detailed in “Instructions.”
• Confidential Submissions—To submit a comment with confidential information that you do not wish to be made publicly available, submit your comments only as a written/paper submission. You should submit two copies total. One copy will include the information you claim to be confidential with a heading or cover note that states “THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION.” The Agency will review this copy, including the claimed confidential information, in its consideration of comments. The second copy, which will have the claimed confidential information redacted/blacked out, will be available for public viewing and posted on
Jessica Berrellez, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 1, Rm. 2308, Silver Spring, MD 20993, 301-796-0511,
In September 2019, FDA announced its Technology Modernization Action Plan (TMAP;
To achieve these goals, FDA intends to develop a modernized Agency-wide, strategic approach not only to technology, but to data itself. Data is at the heart of FDA's work as a science-based Agency, and we anticipate ongoing, rapid increases in the amount and complexity of the data that informs FDA's regulatory decision-making process and how we advance our public health mission. FDA will hold a public meeting on March 27, 2020, from 9 a.m. to 5 p.m., to provide an opportunity to hear from FDA staff and outside experts on topics directly related to modernizing FDA's data strategy, including data quality, data stewardship, data exchange, and data analytics.
FDA is gathering scientific and technical information to help inform its development of an Agency-wide, strategic approach to modernizing its data strategy, including data quality, data stewardship, data exchange, and data analytics. The Agency has determined that a public meeting and an open public docket will encourage public input and engagement in this important topic.
The Agency welcomes any relevant scientific and technical information related to FDA's consideration of the following topics:
1. Standards and policy, including:
a. How can FDA best use policy and common data standards to help ensure the effective and efficient use of data assets?
b. What are the consequences/issues as we move from “static point-in-time data sets” to updating digital data streams for analyses?
c. As we move into increased sharing and integrated data sets, how might FDA manage data in a way that avoids unnecessary duplication?
2. Data security, privacy, and management including:
a. How can FDA modernize its data strategy to continue ensuring privacy and security of data?
b. What should FDA do to promote the management and organization of data assets across the Agency, as the amount and complexity of data (
3. Data strategies and data sharing, including:
a. How can FDA's data strategy facilitate broader goals of integration and interoperability of health care data, and scientific data/virtual patient data generated using scientific models?
b. How can FDA design its data strategy to reflect a global marketplace and promote clarity to data providers like regulated industry and other stakeholders?
c. How can FDA design its data strategy and policy development to facilitate appropriate data access, data sharing within the Agency and via data sharing agreements, as well as the appropriate reuse and repurposing of data to advance Agency regulatory science priorities?
d. For stakeholders, including regulated industry, that submit data to FDA, how can FDA enhance the efficiency of the preparation and submission of data to FDA?
Registration is free and based on space availability, with priority given to early registrants. Persons interested in attending this public meeting must register by 11:59 p.m. Eastern Time on March 24, 2020. Early registration is recommended because seating is limited; therefore, FDA may limit the number of participants from each organization.
If you need special accommodations due to a disability, please contact
To be considered to serve as a presenter and/or panelist, please provide the following:
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•
If you are interested in serving as a presenter or a panelist, you must submit the above information, along with the topic(s) on which you would like to speak, to
We will do our best to accommodate requests to make presentations and serve on the panel. Individuals and organizations with common interests are urged to consolidate or coordinate their presentations, and request time for a joint presentation. Following the close of registration, we will determine the amount of time allotted to each presenter and the approximate time each oral presentation is to begin, and will select and notify presenters and panelists by March 6, 2020. If selected for presentation, any presentation materials must be emailed to
If you have never attended a Connect Pro event before, test your connection at
An agenda for the public meeting and any other background materials will be made available 5 days before the public meeting at
Persons attending FDA's meetings are advised that the Agency is not responsible for providing access to electrical outlets.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of a meeting of the National Heart, Lung, and Blood Advisory Council.
The meeting will be open to the public as indicated below, with attendance limited to space available. Individuals who plan to attend and need special assistance, such as sign language interpretation or other reasonable accommodations, should notify the Contact Person listed below in advance of the meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Any interested person may file written comments with the committee by forwarding the statement to the Contact Person listed on this notice. The statement should include the name, address, telephone number and when applicable, the business or professional affiliation of the interested person.
In the interest of security, NIH has instituted stringent procedures for entrance onto the NIH campus. All visitor vehicles, including taxicabs, hotel, and airport shuttles will be inspected before being allowed on campus. Visitors will be asked to show one form of identification (for example, a government-issued photo ID, driver's license, or passport) and to state the purpose of their visit.
Information is also available on the Institute's/Center's home page:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended, notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The contract proposals and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the contract proposals, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Coast Guard, DHS.
Notice of intent to prepare an EIS; and request for comments.
In accordance with the National Environmental Policy Act of 1969 (NEPA) and the regulations implemented by the Council on Environmental Quality (CEQ), and the National Historic Preservation Act (NHPA), the Coast Guard announces its intent to prepare an Environmental Impact Statement (EIS) to evaluate the potential environmental consequences of replacing the existing BNSF bridge across the Missouri River at Bismarck, ND, or constructing a bridge adjacent to the existing bridge. CEQ regulations require an early and open process for determining the scope of issues that the Coast Guard needs to address in an EIS (“scoping”). Scoping determines which issues to analyze in depth in the EIS and eliminates from detailed study the issues that are not significant or were covered in prior environmental reviews. This document invites the participation of affected federal, state, and local agencies, any affected Indian tribes and other interested persons in determining the appropriate issues for EIS analysis for this project.
Comments must be submitted to the online docket via
You may submit comments identified by docket number USCG-2019-0882 using the Federal eRulemaking Portal at
Rob McCaskey, Coast Guard District Eight Project Officer, 314-269-2381.
BNSF Railway Company owns and operates the existing bridge that crosses the Missouri River between the cities of Mandan, and Bismarck, North Dakota. With components over 130 years old, the in-place structure is approaching the end of its useful service life. The structure has a history of exposure to ice jams and its substructure configuration renders it potentially susceptible to scour events. Although currently stable, the structure has experienced structural issues at both approaches in the past, resulting in unanticipated substructure movements. Since constructing the original bridge in 1882, the east hill slope began to move and resulted in the slope moving the pier west towards the river inches per year. Multiple remediation efforts to correct the pier damage/location and slope movement took place from the early 1800s to the mid 1950s. The intent of the project is to construct a new, independent bridge across the Missouri River upstream of the in-place structure. Operationally, the new structure will carry the mainline track and the current structure will be taken down. The new structure will provide a significant improvement in operational reliability and safety, and will provide enhanced structural redundancy thereby making it less susceptible to damage. As the current structure is 130 years old, it requires substantial inspection and maintenance, which are disruptive to rail service. The new structure will be a single-track bridge but have the capability to carry a second track in the future when and if volumes necessitate that addition.
The BNSF Bismarck Bridge was constructed with similar methods in the same era as the Brooklyn Bridge. It is an iconic landmark that predates official North Dakota statehood by six years. The bridge is eligible for listing in the National Register of Historic Places for its association with broad patterns of railroad, commercial and military history of the United States. Because of these attributes, certain interest groups have expressed a desire to preserve the existing bridge.
The federal bridge statutes, including the River and Harbors Act of 1899, as amended, the Act of March 23, 1906, as amended, and the General Bridge Act of 1946 (33 U.S.C. 525
The Coast Guard is the lead federal agency (LFA) for this project and, as such, responsible for the review of its potential effects on the human environment, including historic properties and tribal impacts, pursuant to NEPA and NHPA. The Coast Guard is, therefore, required by law to ensure potential environmental effects are carefully evaluated in each bridge permitting decision.
On December 14, 2017, the Coast Guard held a public meeting and open house in Bismarck, ND, to identify impacts of the bridge alteration or replacement and to provide an opportunity for the public to offer comments relating to the bridge project. The meeting was held in compliance with Section 106 of the NHPA, 36 CFR 800.2(d). In addition, the meeting was also used to explain the NEPA process for this project. At the meeting, the Coast Guard accepted input from the public on the potential impacts associated with the project that should be addressed while developing the Environmental Assessment. Since that time, it has been determined that there might be a significant impact associated with the potential removal of the existing historic bridge. Therefore, the Coast Guard has decided to proceed with the development of an EIS. During this process, the Coast Guard will be addressing the significant impact on the historic bridge through a Programmatic Agreement in accordance with Section 106 of the NHPA. Both the draft EIS and draft Programmatic Agreement will be available for public comment when the documents are developed.
The transcript for the meeting is available on the Federal Docket associated with this notice and provides a summary of the impacts associated with the alternatives considered to date. The four alternatives considered include different span lengths, with the piers at different distances from the current bridge. Specifically, the options included:
• Building a new bridge with 200 foot spans and piers 92.5
• Building a new bridge with 400 foot spans and piers 92.5
• Building a new bridge with 200 foot spans and piers 42.5 feet upstream of the existing bridge (alternative considered keeping the existing bridge and removing the existing bridge)
• Building a new bridge with 200 foot spans and piers 20 feet upstream of the existing bridge and removing the existing bridge (BNSF Preferred Design).
The alternatives were developed to meet the purpose and need of the project, which is to provide BNSF Railway with a new bridge that can accommodate two tracks at a future date should a second track become needed. There are specific constraints in the area that must be taken into consideration as designs are evaluated. For example, the bridge is close to the Missouri River Natural Area, which is a federally funded park managed by the North Dakota Parks and Recreation Department in cooperation with the North Dakota Department of Transportation, Morton County Parks, and the City of Mandan. The Missouri River Natural Area is the home to many species, including bald eagles, fox, deer and owls. Likewise, the bridge is in close proximity to the Bismarck Reservoir, which is a major source of drinking water for residents of the area and is located in an area with a history of significant slope stability issues.
The Federal Docket also contains a slide show and Fact Sheet providing additional information on the alternatives being considered.
As part of this evaluation process, the Coast Guard solicits comments from State and Federal agencies with expertise in, and authority over, particular resources that may be impacted by a project. Additionally, the Coast Guard seeks input from any tribes that may be affected or otherwise have expertise or equities in the project. Agencies that have already participated in the environmental review of this Project include the U.S. Army Corps of Engineers (USACE), the U.S. Fish and Wildlife Service (USFWS), the U.S. Federal Emergency Management Agency (FEMA), the North Dakota State Historic Preservation Office (SHPO) and the Advisory Council on Historic Preservation (ACHP).
This project meets the definition of a Major Infrastructure Project under Executive Order 13807
CEQ NEPA regulations at 40 CFR part 1501.7 require an early and open process for determining the scope of issues that the LFA needs to address in an EIS. This is known as scoping. LFAs are required to invite the participation of affected federal, state, and local agencies, any affected Indian tribes and other interested persons in determining the appropriate issues for EIS analysis. Scoping determines which issues to analyze in depth in the EIS and eliminates from detailed study the issues that are not significant or were covered in prior environmental reviews.
When evaluating potential alternatives to this project, the Coast Guard will consider impacts on historic properties including the current bridge, impacts to endangered or threatened species and impacts to the Bismarck Reservoir and the Missouri River Natural Area. Additionally, FEMA has identified the area of the project as a floodplain under the National Flood Insurance Program. As such, the design must meet FEMA's “no net rise” requirement, which is intended to prevent increasing flood hazard risks to existing structures and property.
The Coast Guard is developing a draft EIS that addresses impacts associated with the alternatives mentioned in Section I above. These impacts include those environmental control laws listed in the Coast Guard's Bridge Permit Application Guide (available at
In accordance with the CEQ regulations, the Coast Guard invites public participation in the NEPA and NHPA process. This notice requests public participation in the scoping process, establishes a public comment period, and provides information on how to participate. If you submit a comment, please include the docket number for this notice and provide a reason for each suggestion or recommendation.
We encourage you to submit comments through the Federal portal at
We accept anonymous comments. All comments received will be posted without change to
We do not plan to hold public meetings during this scoping period. Our scoping meeting for NEPA and the NHPA was held on December 14, 2017, at the commencement of the Coast Guard bridge permitting process.
Bureau of Land Management, Interior.
Notice of Proposed Official Filing.
The plats of survey for the lands described in this notice are scheduled to be officially filed 30 calendar days after the date of this publication in the BLM Montana State Office, Billings, Montana. The surveys, which were executed at the request of the Bureau of Land Management, Butte Field Office, Butte Montana, are necessary for the management of these lands.
A person or party who wishes to protest this decision must file a notice of protest in time for it to be received in the BLM Montana State Office no later than 30 days after the date of this publication.
A copy of the plats may be obtained from the Public Room at the BLM Montana State Office, 5001 Southgate Drive, Billings, Montana 59101, upon required payment. The plats may be viewed at this location at no cost.
Josh Alexander, BLM Chief Cadastral Surveyor for Montana; telephone: (406) 896-5123; email:
The lands surveyed are:
A person or party who wishes to protest an official filing of a plat of survey identified above must file a written notice of protest with the BLM Chief Cadastral Surveyor for Montana at the address listed in the
If a notice of protest of the plat(s) of survey is received prior to the scheduled date of official filing or during the 10 calendar day grace period provided in 43 CFR 4.401(a) and the delay in filing is waived, the official filing of the plat(s) of survey identified in the notice of protest will be stayed pending consideration of the protest. A plat of survey will not be officially filed until the next business day after all timely protests have been dismissed or otherwise resolved, including appeals.
If a notice of protest is received after the scheduled date of official filing and the 10 calendar day grace period provided in 43 CFR 4.401(a), the notice of protest will be untimely, may not be considered, and may be dismissed.
Before including your address, phone number, email address, or other personal identifying information in a notice of protest or statement of reasons, you should be aware that the documents you submit—including your personal identifying information—may be made publicly available in their entirety at any time. While you can ask us to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
43 U.S.C. Chapter 3.
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the scheduling of the final phase of antidumping and countervailing duty investigation Nos. 701-TA-624-625 and 731-TA-1450-1451 (Final) pursuant to the Tariff Act of 1930 (“the Act”) to determine whether an industry in the United States is materially injured or threatened with material injury, or the establishment of an industry in the United States is materially retarded, by reason of imports of quartz surface products from India and Turkey, provided for in subheading 6810.99.00 of the Harmonized Tariff Schedule of the United States, preliminarily determined by the Department of Commerce (“Commerce”) to be subsidized and sold at less-than-fair-value.
December 13, 2019.
Julie Duffy ((202) 708-2579), Office of Investigations, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202-205-1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202-205-2000. General information concerning the Commission may also be obtained at
Subject merchandise includes material matching the above description that has been finished, packaged, or otherwise fabricated in a third country, including by cutting, polishing, curing, edging, thermoforming, attaching to, or packaging with another product, or any other finishing, packaging, or fabrication that would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the quartz surface products. The scope of the investigation does not cover quarried stone surface products, such as granite, marble, soapstone, or quartzite. Specifically excluded from the scope of the investigation are crushed glass surface products. Crushed glass surface products must meet each of the following criteria to qualify for this exclusion: (1) The crushed glass content is greater than any other single material, by actual weight; (2) there are pieces of crushed glass visible across the surface of the product; (3) at least some of the individual pieces of crushed glass that are visible across the surface are larger than 1 centimeter wide as measured at their widest cross-section (Glass Pieces); and (4) the distance between any single Glass Piece and the closest separate Glass Piece does not exceed three inches.
The products subject to the scope are currently classified in the Harmonized Tariff Schedule of the United States (HTSUS) under the following subheading: 6810.99.0010. Subject merchandise may also enter under subheadings 6810.11.0010, 6810.11.0070, 6810.19.1200, 6810.19.1400, 6810.19.5000, 6810.91.0000, 6810.99.0080, 6815.99.4070, 2506.10.0010, 2506.10.0050, 2506.20.0010, 2506.20.0080, and 7016.90.1050. The HTSUS subheadings set forth above are provided for convenience and U.S. Customs purposes only. The written description of the scope is dispositive.
For further information concerning the conduct of this phase of the investigations, hearing procedures, and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A and B (19 CFR part 201), and part 207, subparts A and C (19 CFR part 207).
Additional written submissions to the Commission, including requests pursuant to section 201.12 of the Commission's rules, shall not be accepted unless good cause is shown for accepting such submissions, or unless the submission is pursuant to a specific request by a Commissioner or Commission staff.
In accordance with sections 201.16(c) and 207.3 of the Commission's rules, each document filed by a party to the investigations must be served on all other parties to the investigations (as identified by either the public or BPI service list), and a certificate of service must be timely filed. The Secretary will not accept a document for filing without a certificate of service.
By order of the Commission.
On December 19, 2019, the Department of Justice lodged a proposed Consent Decree with the United States District Court for the Northern District of Oklahoma in the lawsuit entitled
The publication of this notice opens a period for public comment on the Consent Decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, and should refer to
During the public comment period, the Consent Decree may be examined
Please enclose a check or money order for $7.75 (25 cents per page reproduction cost) payable to the United States Treasury.
Notice.
The Department of Labor (DOL), Employment Training Administration (ETA) is soliciting comments concerning a proposed extension for the authority to conduct the information collection request (ICR) titled “Job Corps Application Data.” This comment request is part of continuing Departmental efforts to reduce paperwork and respondent burden in accordance with the Paperwork Reduction Act of 1995 (PRA).
Consideration will be given to all written comments received by March 9, 2020.
A copy of this ICR with applicable supporting documentation, including a description of the likely respondents, proposed frequency of response and estimated total burden, may be obtained free by contacting Lawrence Lyford by telephone at 202-693-3121 (this is not a toll-free number), TTY 1-877-889-5627 (this is not a toll-free number), or by email at
Submit written comments about or requests for a copy of, this ICR by mail or courier to the U.S. Department of Labor, Employment and Training Administration, Office of Job Corps, 200 Constitution Avenue NW, Room N-4507, Washington, DC 20210; by email:
Lawrence Lyford by telephone at 202-693-3121 (this is not a toll free number) or by email at
DOL, as part of continuing efforts to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and Federal agencies an opportunity to comment on proposed and/or continuing collections of information before submitting them to the Office of Management and Budget (OMB) for final approval. This program helps to ensure that requested data can be provided in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the impact of collection requirements can be properly assessed.
Job Corps is the nation's largest residential, educational, and career technical training program for young Americans. The Economic Opportunity Act established Job Corps in 1964 and it currently operates under the authority of the Workforce Innovation and Opportunity Act (WIOA) of 2014. For over 55 years, Job Corps has helped prepare over 3 million at-risk young people between the ages of 16 and 24 for success in our nation's workforce. With 121 centers in 50 states, Puerto Rico, and the District of Columbia, Job Corps assists students across the nation in attaining academic credentials, including High School Diplomas (HSD) and/or High School Equivalency (HSE), and career technical training credentials, including industry-recognized certifications, state licensures, and pre-apprenticeship credentials.
Job Corps is a national program administered by DOL through the Office of Job Corps and six regional offices. DOL awards and administers contracts for the recruiting and screening of new students, center operations, and the placement and transitional support of graduates and former enrollees. Large and small corporations and nonprofit organizations manage and operate 96 Job Corps centers under contractual agreements with DOL. These contract center operators are selected through a competitive procurement process that evaluates potential operators' technical expertise, proposed costs, past performance, and other factors, in accordance with the Competition in Contracting Act and the Federal Acquisition Regulations. The remaining 25 Job Corps centers, called Civilian Conservation Centers, are operated by the U.S. Department of Agriculture Forest Service, via an interagency agreement. DOL has a direct role in the operation of Job Corps, and does not serve as a pass-through agency for this program.
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number. See 5 CFR 1320.5(a) and 1320.6.
Interested parties are encouraged to provide comments to the contact shown in the
Submitted comments will also be a matter of public record for this ICR and posted on the internet, without redaction. DOL encourages commenters not to include personally identifiable information, confidential business data, or other sensitive statements/information in any comments.
DOL is particularly interested in comments that:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, (
44 U.S.C. 3506(c)(2)(A).
Nuclear Regulatory Commission.
License amendment application; opportunity to comment, request a hearing, and petition for leave to intervene.
The U.S. Nuclear Regulatory Commission (NRC) is considering issuance of amendments to Renewed Facility Operating License Nos. NPF-41, NPF-51, and NPF-74, issued to Arizona Public Service Company (the licensee), for operation of the Palo Verde Nuclear Generating Station, Units 1, 2, and 3 (Palo Verde). The proposed amendments would extend the implementation time from February 23, 2020, to August 31, 2020, for the NRC-approved license amendments issued May 29, 2019, associated with risk-informed completion times in accordance with Nuclear Energy Institute (NEI) Topical Report NEI 06-09, Revision 0-A, “Risk-Informed Technical Specification Initiative 4b, Risk-Managed Technical Specifications (RMTS) Guidelines.” The licensee is requesting this extension due to unforeseen circumstances.
Submit comments by February 7, 2020. Requests for a hearing or petition for leave to intervene must be filed by March 9, 2020.
You may submit comments by any of the following methods:
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For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Siva P. Lingam, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-1564; email:
Please refer to Docket ID NRC-2019-0254 when contacting the NRC about the availability of information for this action. You may obtain publicly-available information related to this action by any of the following methods:
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Please include Docket ID NRC-2019-0254 in your comment submission.
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment into ADAMS.
The NRC is considering issuance of amendments to Renewed Facility Operating License Nos. NPF-41, NPF-51, and NPF-74 issued to Arizona Public Service Company, for operation of Palo Verde, located in Maricopa County, Arizona.
The proposed amendments would extend the implementation time from February 23, 2020, to August 31, 2020, for the NRC-approved license amendments issued May 29, 2019 (Amendment Nos. 209; ADAMS Accession No. ML19085A525), associated with risk-informed completion times in accordance with NEI 06-09, Revision 0-A, “Risk-Informed Technical Specification Initiative 4b, Risk-Managed Technical Specifications (RMTS) Guidelines.” The licensee is requesting this extension due to unforeseen circumstances.
Before any issuance of the proposed license amendments, the NRC will need to make the findings required by the Atomic Energy Act of 1954, as amended (the Act), and NRC regulations.
The NRC has made a proposed determination that the license amendment request involves no significant hazards consideration. Under the NRC's regulations in section 50.92 of title 10 of the
1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated?
The proposed extension of the implementation date of the Risk-Informed Completion Time (RICT) License Amendment (LA) Number (No.) 209 does not involve a significant increase in the probability of an accident previously evaluated because the existing Technical Specification (TS) Conditions, Required Actions and Completion Times (CT) will remain in effect during the extended implementation period.
The current TSs are effective and acceptable for establishing all actions necessary to mitigate the consequences of an accident previously evaluated and have been previously approved by the NRC. Therefore, the proposed extended RICT TS implementation does not involve a significant increase in the probability or consequences of an accident previously evaluated.
2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated?
The proposed extension of the implementation date of the RICT LA No. 209 does not create the possibility of a new or different kind of accident from any accident previously evaluated because the existing TS Conditions, Required Actions and CTs will be in effect during the extended implementation period. The proposed change does not involve a physical alteration of the plant and does not involve installation of new or different kind of equipment.
Therefore, the proposed change does not create the possibility of a new or different kind of accident from any accident previously evaluated.
3. Does the proposed change involve a significant reduction in a margin of safety?
The proposed extension of the implementation date of the RICT LA No. 209 is not a significant reduction in margin of safety since the existing TS Conditions, Required Actions and CTs will remain in effect during the extended implementation period, have an acceptable margin of safety and have been approved by the NRC.
Therefore, the proposed change does not involve a significant reduction in a margin of safety.
The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the license amendment request involves no significant hazards consideration.
The NRC is seeking public comments on this proposed determination that the license amendment request involves no significant hazards consideration. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determination.
Normally, the Commission will not issue the amendments until the expiration of 60 days after the date of publication of this notice. The Commission may issue the license amendments before expiration of the 60-day notice period if the Commission concludes the amendments involve no significant hazards consideration. In addition, the Commission may issue the amendments prior to the expiration of the 30-day comment period if circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example, in derating or shutdown of the facility. If the Commission takes action prior to the expiration of either the comment period or the notice period, it will publish in the
Within 60 days after the date of publication of this notice, any persons (petitioner) whose interest may be affected by this action may file a request for a hearing and petition for leave to intervene (petition) with respect to the action. Petitions shall be filed in accordance with the Commission's “Agency Rules of Practice and Procedure” in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309. The NRC's regulations are accessible electronically from the NRC Library on the NRC's website at
As required by 10 CFR 2.309(d) the petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements for standing: (1) The name, address, and telephone number of the petitioner; (2) the nature of the petitioner's right under the Act to be made a party to the proceeding; (3) the nature and extent of the petitioner's property, financial, or other interest in the proceeding; and (4) the possible effect of any decision or order which may be entered in the proceeding on the petitioner's interest.
In accordance with 10 CFR 2.309(f), the petition must also set forth the specific contentions which the petitioner seeks to have litigated in the proceeding. Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner must provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner intends to rely in proving the contention at the hearing. The petitioner must also provide references to the specific sources and documents on which the petitioner intends to rely to support its position on the issue. The petition must include sufficient information to show that a genuine dispute exists with the applicant or licensee on a material issue of law or fact. Contentions must be limited to matters within the scope of the proceeding. The contention must be one which, if proven, would entitle the petitioner to relief. A petitioner who fails to satisfy the requirements at 10 CFR 2.309(f) with respect to at least one contention will not be permitted to participate as a party.
Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene. Parties have the opportunity to participate fully in the conduct of the hearing with respect to resolution of that party's admitted contentions, including the opportunity to present evidence, consistent with the NRC's regulations, policies, and procedures.
Petitions must be filed no later than 60 days from the date of publication of this notice. Petitions and motions for leave to file new or amended contentions that are filed after the deadline will not be entertained absent a determination by the presiding officer that the filing demonstrates good cause by satisfying the three factors in 10 CFR 2.309(c)(1)(i) through (iii). The petition must be filed in accordance with the filing instructions in the “Electronic Submissions (E-Filing)” section of this document.
If a hearing is requested, and the Commission has not made a final
A State, local governmental body, Federally-recognized Indian Tribe, or agency thereof, may submit a petition to the Commission to participate as a party under 10 CFR 2.309(h)(1). The petition should state the nature and extent of the petitioner's interest in the proceeding. The petition should be submitted to the Commission no later than 60 days from the date of publication of this notice. The petition must be filed in accordance with the filing instructions in the “Electronic Submissions (E-Filing)” section of this document, and should meet the requirements for petitions set forth in this section, except that under 10 CFR 2.309(h)(2) a State, local governmental body, or Federally-recognized Indian Tribe, or agency thereof does not need to address the standing requirements in 10 CFR 2.309(d) if the facility is located within its boundaries. Alternatively, a State, local governmental body, Federally-recognized Indian Tribe, or agency thereof may participate as a non-party under 10 CFR 2.315(c).
If a hearing is granted, any person who is not a party to the proceeding and is not affiliated with or represented by a party may, at the discretion of the presiding officer, be permitted to make a limited appearance pursuant to the provisions of 10 CFR 2.315(a). A person making a limited appearance may make an oral or written statement of his or her position on the issues but may not otherwise participate in the proceeding. A limited appearance may be made at any session of the hearing or at any prehearing conference, subject to the limits and conditions as may be imposed by the presiding officer. Details regarding the opportunity to make a limited appearance will be provided by the presiding officer if such sessions are scheduled.
All documents filed in NRC adjudicatory proceedings, including a request for hearing and petition for leave to intervene (petition), any motion or other document filed in the proceeding prior to the submission of a request for hearing or petition to intervene, and documents filed by interested governmental entities that request to participate under 10 CFR 2.315(c), must be filed in accordance with the NRC's E-Filing rule (72 FR 49139; August 28, 2007, as amended at 77 FR 46562; August 3, 2012). The E-Filing process requires participants to submit and serve all adjudicatory documents over the internet, or in some cases to mail copies on electronic storage media. Detailed guidance on making electronic submissions may be found in the Guidance for Electronic Submissions to the NRC and on the NRC website at
To comply with the procedural requirements of E-Filing, at least 10 days prior to the filing deadline, the participant should contact the Office of the Secretary by email at
Information about applying for a digital ID certificate is available on the NRC's public website at
A person filing electronically using the NRC's adjudicatory E-Filing system may seek assistance by contacting the NRC's Electronic Filing Help Desk through the “Contact Us” link located on the NRC's public website at
Participants who believe that they have a good cause for not submitting documents electronically must file an exemption request, in accordance with 10 CFR 2.302(g), with their initial paper filing stating why there is good cause for not filing electronically and requesting authorization to continue to submit documents in paper format. Such filings must be submitted by: (1) First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemaking and Adjudications Staff; or (2) courier, express mail, or expedited delivery service to the Office of the Secretary, 11555 Rockville Pike, Rockville, Maryland 20852, Attention: Rulemaking and Adjudications Staff. Participants filing adjudicatory documents in this manner are responsible for serving the document on all other participants. Filing is considered complete by first-class mail as of the time of deposit in the mail, or by courier, express mail, or expedited
Documents submitted in adjudicatory proceedings will appear in the NRC's electronic hearing docket which is available to the public at
For further details with respect to this action, see the licensee's application dated December 26, 2019 (ADAMS Accession No. ML19360A155).
For the Nuclear Regulatory Commission.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend the Exchange's transaction fees at Equity 7, Section 118(a) to amend the Exchange's transaction fees at Equity 7, Section 118(a) to raise the qualifying thresholds for several of the Exchange's credits for displayed orders/quotes that provide liquidity to the Exchange and to eliminate one such credit, as described further below.
While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on January 2, 2020.
The text of the proposed rule change is available on the Exchange's website at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend the schedule of credits it provides to members, pursuant to Equity 7, Section 118(a), in several respects.
First, the Exchange proposes to amend its schedule of credits by raising the volume thresholds to qualify for four of the credits it provides to its members for displayed quotes/orders (other than Supplemental Orders or Designated Retail Orders) that provide liquidity to the Exchange, as follows:
• For Orders in securities in each of Tapes A, B, and C, the Exchange presently provides a $0.0029 per share executed credit to a member with shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.60% of Consolidated Volume
• For Orders in securities in each of Tapes A, B, and C, the Exchange presently provides a $0.0029 per share executed credit to a member (i) with shares of liquidity accessed in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.70% of Consolidated Volume during the month and (ii) with shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.50% of Consolidated Volume during the month. The Exchange proposes to raise the first of these qualifying volume thresholds for this credit from 0.70% to 0.80% of Consolidated Volume and the second threshold from 0.50% to 0.60% of Consolidated Volume.
• For Orders in securities in each of Tapes A, B, and C, the Exchange presently provides a $0.0028 per share executed credit to a member (i) with shares of liquidity accessed in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.60% of Consolidated Volume during the month,
• For Orders in securities in each of Tapes A, B, and C, the Exchange presently provides a $0.0027 per share executed credit to a member (i) with shares of liquidity accessed in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.50% of Consolidated Volume during the month, and (ii) with shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent more than 0.175% of Consolidated Volume during the month. The Exchange proposes to raise the first of these qualifying volume thresholds for this credit from 0.50% to 0.60% of Consolidated Volume and the second threshold from 0.175% to 0.25% of Consolidated Volume.
For each of the foregoing credits, the Exchange intends to raise qualifying volumes to incentivize members to increase the extent of their liquidity adding activity to qualify for and to continue to qualify for these credits.
Second, the Exchange proposes to eliminate its $0.0026 per share executed credit that it presently provides to a member (i) with shares of liquidity provided in securities that are listed on exchanges other than Nasdaq or NYSE through one or more of its Nasdaq Market Center MPIDs that represents at least 800,000 shares a day on average during the month and (ii) doubles the daily average share volume provided in securities that are listed on exchanges other than Nasdaq or NYSE through one or more of its Nasdaq Market Center MPIDs during the month versus the member's daily average share volume provided in securities that are listed on exchanges other than Nasdaq or NYSE in January 2017. The Exchange has observed that historically, few members have received this credit, with little associated volume, and it has not served to meaningfully increase activity on the Exchange or improve the quality of the market. The Exchange therefore proposes to eliminate it.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act,
The Exchange's proposed changes to its schedule of credits are reasonable in several respects. As a threshold matter, the Exchange is subject to significant competitive forces in the market for equity securities transaction services that constrain its pricing determinations in that market. The fact that this market is competitive has long been recognized by the courts. In
The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system “has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.”
Numerous indicia demonstrate the competitive nature of this market. For example, clear substitutes to the Exchange exist in the market for equity security transaction services. The Exchange is only one of several equity venues to which market participants may direct their order flow. Competing equity exchanges offer similar tiered pricing structures to that of the Exchange, including schedules of rebates and fees that apply based upon members achieving certain volume thresholds.
Within this environment, market participants can freely and often do shift their order flow among the Exchange and competing venues in response to changes in their respective pricing schedules. As such, the proposal represents a reasonable attempt by the Exchange to increase its liquidity and market share relative to its competitors.
In particular, the Exchange proposes to raise the volume thresholds to qualify for two of its $0.0029 per share executed credits and its $0.0028 and $0.0027 per share executed credits because as Nasdaq has grown over time, the activity of members that currently qualify for these credits has also grown, such that an increase in credit qualifying criteria is now needed to ensure that this credit remains relevant to current levels of liquidity providing activity on the Exchange. To the extent that this proposal results in an increase in liquidity adding activity on the Exchange, this will improve the quality of the Nasdaq market and increase its attractiveness to existing and prospective participants.
Nasdaq also believes that it is reasonable to eliminate its $0.0026 per share executed credit because few members historically have received the credit (and only one member currently receives it), related volume is low, and it has not served to meaningfully increase volume or market quality.
The Exchange notes that those participants that are dissatisfied with the proposed amended credits are free to shift their order flow to competing venues.
The Exchange believes its proposal will allocate its charges fairly among its market participants. It is equitable for the Exchange to raise the qualification requirement for the two $0.0029 per share executed credits and the $0.0028 and $0.0027 per share executed credits because as Nasdaq has grown, the activity of members that currently qualify for these credits has also grown, such that an increase in credit qualifying criteria is now needed to ensure this credit remains relevant to current levels of liquidity providing
Likewise, the Exchange believes that it is equitable to eliminate the $0.0026 per share executed credit because few members have received this credit historically (only one receives it presently) and it has not prompted a meaningful increase in volume or market quality. The one member that would be affected by the elimination of the credit may seek to qualify for other credits that the Exchange offers.
The Exchange believes that the proposal is not unfairly discriminatory. As an initial matter, the Exchange believes that nothing about its volume-based tiered pricing model is inherently unfair; instead, it is a rational pricing model that is well-established and ubiquitous in today's economy among firms in various industries—from co-branded credit cards to grocery stores to cellular telephone data plans—that use it to reward the loyalty of their best customers that provide high levels of business activity and incent other customers to increase the extent of their business activity. It is also a pricing model that the Exchange and its competitors have long employed with the assent of the Commission. It is fair because it incentivizes customer activity that increases liquidity, enhances price discovery, and improves the overall quality of the equity markets.
Although the Exchange's proposal to raise the qualifying criteria for its two $0.0029 per share executed credits and its $0.0028 and $0.0027 per share executed credits will require members to add more liquidity than is currently required to qualify for these credits, any resulting increase in liquidity to the market will improve market-wide quality and price discovery, to the benefit all market participants.
Additionally, the Exchange believes that elimination of its $0.0026 per share executed credit is not unfairly discriminatory. Historically, only a few members have received the credit, and only one member presently qualifies for it and would be affected by its elimination. Elimination of the credit for this member would not be unfair, however, because the credit has not fulfilled its intended purpose of prompting meaningful increases in volume or market quality. Moreover, elimination of the credit from the rule book will allow the Exchange to consider new, more effective incentives.
Finally, the Exchange notes that any participant that does not find the amended credits to be sufficiently attractive is free to shift its order flow to a competing venue.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
The Exchange does not believe that its proposals will place any category of Exchange participant at a competitive disadvantage.
The Exchange's proposals to raise the qualification requirements for two $0.0029 per share executed credits and the $0.0028 and $0.0027 per share executed credits will not disadvantage any category of member because all members that currently qualify for these credits will continue to do so under the proposed changes. Furthermore, all members of the Exchange will benefit from any increase in market activity that the proposals effectuates.
The Exchange's proposal to eliminate the $0.0026 per share executed credit will not place any undue burden on competition. Although elimination of the credit would impact the one member that currently receives it, that member may seek to mitigate the effects of the loss of the credit by qualifying for other similar credits that the Exchange offers. Any residual burden that the proposal imposes on this member is outweighed by the fact that the credit has not served its intended purpose of incentivizing a broader population of members to increase their market-improving participation.
Moreover, members are free to trade on other venues to the extent they believe that the credits provided are too low or the qualification criteria are not attractive. As one can observe by looking at any market share chart, price competition between exchanges is fierce, with liquidity and market share moving freely between exchanges in reaction to fee and credit changes. The Exchange notes that the tier structure is consistent with broker-dealer fee practices as well as the other industries, as described above.
The Exchange believes that its proposed modification to its schedule of credits will not impose a burden on competition because the Exchange's execution services are completely voluntary and subject to extensive competition both from the other 12 live exchanges and from off-exchange venues, which include 32 alternative trading systems. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its credits to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which credit changes in this market may impose any burden on competition is extremely limited.
The proposed amended credits are reflective of this competition because, even as one of the largest U.S. equities exchanges by volume, the Exchange has less than 20% market share, which in most markets could hardly be categorized as having enough market power to burden competition. Moreover, as noted above, price competition between exchanges is fierce, with liquidity and market share moving freely between exchanges in reaction to fee and credit changes. This is in addition to free flow of order flow to and among off-exchange venues which comprised more than 38% of industry volume for the month of November 2019.
The Exchange's proposals to raise the qualification requirement for its two $0.0029 per share executed credits and its $0.0028 and $0.0027 per share executed credits per share executed credit are pro-competitive in that the Exchange intends for them to increase liquidity on the Exchange and thereby render the Exchange a more attractive and vibrant venue to market participants.
As discussed above, the Exchange's proposal to eliminate its $0.0026 per share executed credit will not meaningfully impact intermarket competition. Only one member currently receives the credit.
In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend its Rules to adopt a new complex order instruction, Index Combo orders, to further facilitate delta neutral transactions for investors that use complex orders to trade index options.
The text of the proposed rule change is also available on the Exchange's website (
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend its Rules to adopt a new complex order instruction, Index Combo orders, to further facilitate delta neutral transactions for investors that use complex orders to trade index options. Under the Exchange's current Rules, a “complex order” is an order involving the concurrent execution of two or more different series in the same class (the “legs” or “components” of the complex order), for the same account, occurring at or near the same time and for the purpose of executing a particular investment strategy with no more than the applicable number of legs (which number the Exchange determines on a class-by-class basis). For purposes of Rules 5.33 (regarding electronic processing of complex orders) and 5.85(b)(1) (regarding priority of complex orders with respect to open outcry trading), the term “complex order” means a complex order with any ratio
A complex order can also be a “stock-option order.” A stock-option order is the purchase or sale of a stated number units of an underlying stock or a security convertible into the stock (“convertible security”) coupled with the purchase or sale of an option contract(s) on the opposite side of the market representing either (1) the same number of units of the underlying stock or convertible security or (2) the number of units of the underlying stock necessary to create a delta neutral position, but in no case in a ratio greater than eight-to-one (8.00), where the ratio represents the total number of units of the underlying stock or convertible security in the option leg(s) to the total number of units of the underlying stock or convertible security in the stock leg.
An option's price can be influenced by a number of different factors. Some of these are known as the “Greeks” because they are commonly abbreviated with Greek letters: Delta, Gamma, Theta, and Vega.
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Options can be traded not only for profits attributable to movements in the underlying, but also for profits attributable to changes in other factors such as volatility or the amount of time left until expiration. An investor may seek exposure to the Greeks (
A delta neutral position is one in which the overall delta is approximately zero, which minimizes the options' price movements in relation to the underlying asset. For example, assume an investor holds one call option with a delta of 0.50, which indicates the option is at-the-money and wishes to maintain a delta neutral position. The investor could purchase an at-the-
Buying a call on an equity stock and selling a put on an equity stock (or selling a call on an equity stock and buying a put on an equity stock) with the same expiration date and strike price results in the creation of a synthetic stock position. For example, assume a call and put for XYZ have a strike price of $15. Buying a call gives the buyer the right, but not the obligation, to purchase the stock (XYZ) at the strike price ($15). Selling a put imposes upon the sell the obligation (and not just the right) to purchase the stock (XYZ) at the strike price ($15) should the put be exercised.
If the stock price of XYZ is greater than the strike price of the call option ($15) at expiration, the call option may be exercised and the holder of the call option has the right to purchase XYZ at $15 resulting in a long position of 100 shares of XYZ. If the stock price of XYZ is greater than the strike price of the put option ($15), the put expires worthless as the holder of the put can sell shares on the open market at a price greater than the option's strike price.
If the stock price of XYZ is less than the strike price of the call option ($15), the call option expires worthless as it is cheaper to purchase the stock on the open market. If the stock price of XYZ is less than the strike price of the put option at expiration, the put will be exercised and the seller of the put will be obligated to purchase 100 shares of XYZ.
The net result is that the combination of buying a call and selling a put with the same expiration date and strike price results in an effective (or synthetic) long position of 100 shares of XYZ stock, regardless of whether the stock price is above or below the strike price of the call or put option. Similarly, selling the call and buying the put for the same expiration date and strike price would result in an effective (or synthetic) short position of 100 shares of XYZ stock (−100). The following is an example of a synthetic underlying.
Buy 1 XYZ May 15 Put (45 delta)
(−1 * 55 delta) + (1 * −45 delta) + (1 * 100 delta) −55 + (−45) + 100 = 0
The net position that results from combining Strategy 1 from Example #1 above and Strategy 2 from Example #2 above is a long position of 200 May 18 Calls—the May 15 Combination 25x (a short synthetic stock position of 2,500 shares as a result of selling a call and buying a put with the same expiration date and strike price).
The Exchange proposes to adopt a complex order instruction in Rule 5.33(b)(5) to codify and further facilitate delta neutral hedging for all index options listed for trading on the Exchange.
As noted above, the Exchange lists multiple index options for trading. MIAX currently only lists options on one index—the SPIKE Index. The primary basis for MIAX's adoption of a SPIKES Combo Order was the lack of an
The Exchange also proposes to adopt a provision that states an Index Combo order may not have a ratio greater than eight options to one Index Combination (8.00). The Exchange proposes to use this ratio as it is already a defined conforming ratio in the System
Index options do not have an underlying that can serve as a hedge, as the option is based on an index. However, a synthetic underlying position may be created by purchasing a call and selling a put (or selling a call and purchasing a put), as discussed above. An Index Combination creates a synthetic underlying position that is the functional equivalent of the stock leg in stock-option orders. Therefore, the Exchange proposes to amend the ratio from one-to-three/three-to-one to eight-to-one for Index Combo orders to align the treatment of these orders to that of stock-option orders. This will allow for more transactions with better hedging opportunities in all index options.
Below is an example of an index option delta neutral strategy that provides the investor exposure to the Greeks that may be created under the Exchange's proposal to allow Index Combo orders to leverage the eight-to-one ratio afforded stock-option orders.
−2500 Deltas (−25 × 55) + (25 × −45)
Example #4 illustrates a delta neutral position in an index option which is identical to the net delta neutral position demonstrated in Example #1 for a stock-option order. This position may be accomplished in a single transaction by using the proposed Index Combo order, which includes an Index Combination. The Index Combination (sell call, buy put with the same underlying index, expiration date, and strike price) creates the synthetic underlying position for the index option, similar to the way selling the XYZ call and buying the XYZ put creates the synthetic stock position demonstrated in Example #3.
Under the Exchange's proposal, Index Combinations would be treated similar to the stock-leg component of a stock-option order. As demonstrated in Example #3 above, the stock leg component of a stock-option order can be created synthetically by selling a call and buying a put option with the same expiration date and strike price. The Exchange proposes to define this transaction as an Index Combination and allow Index Combo orders to be treated similarly to stock-option orders by permitting these orders to leverage the eight-to-one ratio defined for stock-option orders. The Exchange believes that a ratio greater than three-to-one, but not greater than eight-to-one, would allow investors the opportunity to create additional delta neutral transactions with index options.
The Exchange represents that it has the System capacity and capability to handle the potential increase in transaction rates. Further, the Exchange represents that it has surveillances in place to surveil for conduct that violates the Exchange's Rules, specifically as it pertains to delta neutral transactions as described herein.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes the proposed rule change promotes just and equitable principles of trade and removes impediments to and perfects the mechanisms of a free and open market and a national market system
The proposed eight-to-one ratio for Index Combo orders is already a conforming ratio on the Exchange for stock-option orders. The Exchange's proposal promotes just and equitable principles of trade and removes impediments to and perfects the mechanisms of a free and open market and a national market system and, in general, protects investors and the public interest, by providing similar hedging capabilities as afforded stock-option orders.
Additionally, another options exchange that offers options on an index provides for the creation of delta neutral strategies.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe the proposed rule change will impose any burden on intramarket competition, as it will be applicable to all Trading Permit Holders equally. Any Trading Permit Holder may trade index options and submit Index Combo orders, and all Trading Permit Holders can benefit from the creation of delta neutral transactions as described in this proposal. The System will handle all Index Combo orders in the same manner. The Exchange does not believe the proposed rule change will impose any burden on intermarket competition, because another exchange options offers the same order type for the index option listed on that exchange.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On October 29, 2019, Banque Centrale de Compensation, which conducts business under the name LCH SA (“LCH SA” or “CDSClear”), filed with the Securities and Exchange Commission (“Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
LCH SA is proposing to amend its CDSClear Risk Methodology in order to allow Index Basis Packages margining as a single instrument.
A transaction would need to satisfy the following criteria to constitute an Index Basis Package:
• The package is constituted of an Index CDS and Single Name CDS on all the entities constituting the index;
• The position (Long/Short) on the Index offsets the positions on the Single Names (Short/Long);
• The notional of the Index and across all the Singles Names match exactly;
• All the Single Names CDS trades have the same currency, coupon, and maturity as constituents of the Index CDS; and
• All the Single Name CDS trades have the same Seniority, ISDA Definition and Restructuring Clause as constituents of the Index CDS.
Clearing Members and/or Clients would be required to identify all trades being part of an Index Basis Package and to notify LCH SA CDSClear. CDSClear would then perform controls to ensure all principles and requirements stated above for qualifying the trades as an Index Basis Package are satisfied and would flag them with a common ID number. These trades would continue to be margined as different trades until LCH SA completes these controls and confirms the qualification as an Index Basis Package.
Once an Index Basis Package is validated as complete, the margin enhancement proposed in the current rule change would then be applied as part of the overnight margin calculation.
In order to ensure that the trades continue to meet the criteria of an Index Basis Package, controls would be performed every day at the start of the overnight batch process.
Index Basis Packages identified and flagged as such would be excluded from compression runs with the rest of the portfolio in order to avoid breaking any packages.
Index Basis Packages could be un-flagged as such at the Clearing Member and/or Client's request. The Index CDS and the Single Name CDS would then be treated and margined separately as per the current framework.
In case of a Clearing Member's default, CDSClear would have the ability to liquidate Index Basis Packages in a dedicated auction should it be advised to do so by the Default Management Group in order to minimize the liquidation costs.
In order to take into account the specific risk created by Index Basis Packages positions, LCH SA proposes to amend the calculation of the Spread Margin and the calculation of the Liquidity Charge Margin as described in its Reference Guide,
LCH SA CDSClear currently considers an Index Basis Package as multiple instruments in the calculation of its Spread Margin. In accordance with the portfolio margining requirements under Article 27 of Commission Delegated Regulation (EU) No 153/2013
CDSClear believes that this does not appropriately reflect the actual risk of an Index Basis Package meeting the criteria stated above, so it is proposing to amend its CDSClear Risk Methodology in order to consider Index Basis Packages identified as such as a single instrument when calculating the amount of margins required. In particular, the 80% cap on offsets between the components of the Index Basis Package would not be applied in the calculation of the Spread Margin, but would be maintained between an Index Basis Package and all the other positions in the portfolio. This may result in a lower amount of margin being collected on an Index Basis Package.
In the opinion published in April 2017
Considering that an Index Basis Package would likely be sold off in a dedicated auction in case of default of a Clearing Member, LCH SA also proposes to amend the calculation of the Liquidity Charge Margin described in the CDSClear Risk Methodology in order to better reflect the actual cost it would incur when liquidating an Index Basis Package. CDSClear proposes to charge a specific bid/ask spread for each Index family underlying an Index Basis Package identified as such rather than use the current Liquidity Charge Margin algorithm based on charging bid/ask spreads for each individual component in the package taken independently. The current Liquidity Charge Margin methodology would nevertheless remain in the calculation specific to Index Basis Packages identified as such by acting as a cap to the new calculation method. Because the bid/ask spread may be smaller, a lower amount of this category of margin could be collected.
Finally, Index Basis Packages flagged as such would be excluded from the Recovery Risk, Interest Risk, or Wrong Way Risk Margin calculations as by construction Index Basis Packages are immune to the risks these margins aim at capturing.
Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization.
Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of LCH SA be designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, as well as to assure the safeguarding of securities and funds which are in the custody or control of LCH SA or for which it is responsible, and, in general, to protect investors and the public interest.
Additionally, as noted above, LCH SA also proposes to amend the calculation of the Liquidity Charge Margin to better reflect the actual cost it would incur when liquidating an Index Basis Package. Similarly, LCH SA proposes to exclude Index Basis Packages from inapplicable margin calculations such as the Recovery Risk, Interest Risk, and Wrong Way Risk Margin calculations because Index Basis Packages are not subject to these risks. Similar to the Spread Margins discussed above, the Commission believes that these changes would result in the collection of margins more commensurate to the risks associated with clearing Index Basis Packages, which in turn would help ensure that LCH SA does not require higher margins than necessary and that Clearing Members are able to effectively accumulate and manage their financial resources.
Taken together, the Commission believes that these changes would enhance the operation and effectiveness of LCH SA's margin collection system, which is necessary to manage LCH SA's credit exposures to its Clearing Members and the risks associated with clearing security based swap-related portfolios. By managing such exposures and risks, LCH SA's margin system helps it avoid losses that could result from the mismanagement of such credit exposures and risks. Because such losses could disrupt LCH SA's ability to promptly and accurately clear security based swap transactions, by making the above-described improvements to LCH SA's margin system, the proposed rule change would help promote the prompt and accurate clearance and settlement os securities transactions. Similarly, given that such losses could threaten LCH SA's access to securities and funds in LCH SA's control, by making the above-described improvements to LCH SA's margin system, the Commission believes that the proposed rule change would help assure the safeguarding of funds and securities which are in the custody or control of LCH SA or for which it is responsible. As noted above, the Commission believes that these changes also would help promote the prudent and accurate accumulation and management of financial resources by both LCH SA and its Clearing Members.
Therefore, for the reasons stated above, the Commission finds that the proposed rule change would promote the prompt and accurate clearance and settlement of securities transactions, assure the safeguarding of securities and funds in LCH SA's custody and control, and, in general, protect investors and the public interest, consistent with the Section 17A(b)(3)(F) of the Act.
Rule 17Ad-22(e)(6)(i) requires a covered clearing agency that provides central counterparty services to cover its credit exposures to its participants by establishing a risk-based margin system
Therefore, for the above reasons the Commission finds that the proposed rule change is consistent with Rule 17Ad-22(e)(6)(i).
Rule 17Ad-22(e)(6)(iii) requires a covered clearing agency that provides central counterparty services to cover its credit exposures to its participants by establishing a risk-based margin system that, as applicable, calculates margin sufficient to cover its potential future exposure to participants in the interval between the last margin collection and the close out of positions following a participant default.
On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act, and in particular, with the requirements of Section 17A(b)(3)(F) of the Act
It is therefore ordered pursuant to Section 19(b)(2) of the Act
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94-409, that the Securities and Exchange Commission Asset Management Advisory Committee (“AMAC”) will hold a public meeting on Tuesday, January 14, 2020 at 9:00 a.m.
The meeting will be held in Multi-Purpose Room LL-006 at the Commission's headquarters, 100 F Street NE, Washington, DC.
The meeting will begin at 9:00 a.m. and will be open to the public. Seating will be on a first-come, first-served basis. Doors will open at 8:30 a.m. Visitors will be subject to security checks. The meeting will be webcast on the Commission's website at
On December 30, 2019, the Commission published notice of the Committee meeting (Release No. 34-87835), indicating that the meeting is open to the public and inviting the public to submit written comments to the Committee. This Sunshine Act notice is being issued because a majority of the Commission may attend the meeting.
The meeting will include a discussion of various aspects of the asset management industry as well as administrative items.
For further information, please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551-5400.
Union Pacific Railroad Company (UP), a Class I rail carrier, has filed a verified notice of exemption under 49 CFR 1180.2(d)(8) for the acquisition of temporary overhead trackage rights over an approximately 51.7-mile rail line of BNSF Railway Company (BNSF) between milepost 579.3 near Mill Creek, Okla., on BNSF's Creek Subdivision and milepost 631.0 near Joe Junction, Tex., on BNSF's Madill Subdivision, pursuant to the terms of a Temporary Trackage Rights Agreement (Agreement).
UP states that the purpose of the temporary trackage rights is to permit it to move empty and loaded unit ballast trains solely for UP's maintenance of way projects. The Agreement provides that the trackage rights are temporary in nature and are scheduled to expire on December 31, 2020.
The transaction may be consummated on or after January 22, 2020, the effective date of the exemption (30 days after the verified notice was filed).
As a condition to this exemption, any employees affected by the acquisition of the temporary trackage rights will be protected by the conditions imposed in
If the verified notice contains false or misleading information, the exemption is void ab initio. Petitions to revoke the exemption under 49 U.S.C. 10502(d) may be filed at any time. The filing of a petition to revoke will not automatically stay the effectiveness of the exemption. Petitions for stay must be filed no later than January 15, 2020 (at least seven days before the exemption becomes effective).
All pleadings, referring to Docket No. FD 36372, must be filed with the Surface Transportation Board either via e-filing or in writing addressed to 395 E Street SW, Washington, DC 20423-0001. In addition, a copy of each pleading must be served on UP's representative, Jeremy M. Berman, Union Pacific Railroad Company, 1400 Douglas Street, Stop 1580, Omaha, NE 68179.
According to UP, this action is categorically excluded from environmental review under 49 CFR 1105.6(c)(4) and historic preservation reporting requirements under 49 CFR 1105.8(b)(3).
Board decisions and notices are available at
By the Board, Allison C. Davis, Director, Office of Proceedings.
The Office of Resolution Management, Department of Veterans Affairs.
Notice.
The Office of Resolution Management (ORM), Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the
Written comments and recommendations on the proposed collection of information should be received on or before March 9, 2020.
Submit written comments on the collection of information through Federal Docket Management System (FDMS) at
William Preston, Office of Resolution Management, Office of Policy and Compliance by telephone at: (216) 390-3607, electronically at:
Under the PRA of 1995, Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA.
With respect to the following collection of information, ORM invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of ORM's functions, including whether the information will have practical utility; (2) the accuracy of ORM's estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology.
b. Information for Pre-Complaint Processing, VA Form 08-10192.
By direction of the Secretary.
Fish and Wildlife Service, Interior.
Proposed rule.
We, the U.S. Fish and Wildlife Service (Service), propose to list the Hermes copper butterfly (
We will accept comments received or postmarked on or before March 9, 2020. Comments submitted electronically using the Federal eRulemaking Portal (see
You may submit comments by one of the following methods:
(1)
(2)
We request that you send comments only by the methods described above. We will post all comments on
Scott Sobiech, Acting Field Supervisor, Carlsbad Fish and Wildlife Office, 2177 Salk Avenue, Suite 250, Carlsbad, CA 92008; telephone 760-431-9440. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Relay Service at 800-877-8339.
For the proposed critical habitat designation, the coordinates or plot points or both from which the maps are generated are included in the decisional file and are available at
This document also includes a proposed rule to designate critical habitat for the Hermes copper butterfly. We have determined that designating critical habitat is both prudent and determinable for the Hermes copper butterfly, and we propose a total of approximately 14,249 ha (35,211 ac) for the species in San Diego County, California.
Under the Endangered Species Act, any species that is determined to be a threatened or endangered species shall, to the maximum extent prudent and determinable, have habitat designated that is considered to be critical habitat. Section 4(b)(2) of the Act states that the Secretary shall designate and make revisions to critical habitat on the basis of the best available scientific data after taking into consideration the economic impact, the impact on national security, and any other relevant impact of specifying any particular area as critical habitat. The Secretary may exclude an area from critical habitat if he determines that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless he determines, based on the best scientific data available, that the failure to designate
We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from the public, other concerned governmental agencies, Native American Tribes, the scientific community, industry, or any other interested parties concerning this proposed rule. We particularly seek comments concerning:
(1) The Hermes copper butterfly's biology, range, and population trends, including:
(a) Biological or ecological requirements of the species, including habitat requirements for feeding, breeding, and sheltering;
(b) Genetics and taxonomy;
(c) Historical and current range including distribution patterns;
(d) Historical and current population levels, and current and projected trends; and
(e) Past and ongoing conservation measures for the species, its habitat, or both.
(2) Factors that may affect the continued existence of the species, which may include habitat modification or destruction, overutilization, disease, predation, the inadequacy of existing regulatory mechanisms, or other natural or manmade factors.
(3) Biological, commercial trade, or other relevant data concerning any threats (or lack thereof) to this species and existing regulations that may be addressing those threats.
(4) Information on activities or areas that might warrant being exempted from the section 9(a)(1) take prohibitions proposed in this rule under section 4(d) of the Act. The Service will evaluate ideas provided by the public in considering the extent of prohibitions that are necessary and advisable to provide for the conservation of the species.
(5) Any additional conservation opportunities, such as mitigation banks, candidate conservation agreements with assurances, or habitat conservation plans that could provide for conservation and regulatory certainty for the development community.
(6) Any additional information on Hermes copper butterfly occurrence locations or threats impacting Hermes copper butterfly habitat in northern Baja California, Mexico, particularly impacts of wildfire or development.
(7) The reasons why we should or should not designate habitat as “critical habitat” under section 4 of the Act (16 U.S.C. 1531
(a) The species is threatened by taking or other human activity and identification of critical habitat can be expected to increase the degree of such threat to the species;
(b) The present or threatened destruction, modification, or curtailment of a species' habitat or range is not a threat to the species, or threats to the species' habitat stem solely from causes that cannot be addressed through management actions resulting from consultations under section 7(a)(2) of the Act;
(c) Areas within the jurisdiction of the United States provide no more than negligible conservation value, if any, for a species occurring primarily outside the jurisdiction of the United States;
(d) No areas meet the definition of critical habitat.
(8) Specific information on:
(a) The amount and distribution of Hermes copper butterfly habitat;
(b) What areas within the geographical area currently occupied by the species, that contain the physical or biological features essential to the conservation of the species, should be included in the designation and why;
(c) Special management considerations or protection that may be needed for the physical or biological features essential to the conservation of the species in critical habitat areas we are proposing, including managing for the potential effects of climate change; and
(d) What areas not occupied at the time of listing are essential for the conservation of the species. We particularly seek comments regarding:
(i) Whether occupied areas are inadequate for the conservation of the species; and,
(ii) Specific information that supports the determination that unoccupied areas will, with reasonable certainty, contribute to the conservation of the species and, contain at least one physical or biological feature essential to the conservation of the species.
(9) Land use designations and current or planned activities in the subject areas and their possible impacts on proposed critical habitat.
(10) Any probable economic, national security, or other relevant impacts of designating any area that may be included in the final designation, and the benefits of including or excluding areas that may be impacted.
(11) Information on the extent to which the description of probable economic impacts in the draft economic analysis is a reasonable estimate of the likely economic impacts.
(12) Whether any specific areas we are proposing for critical habitat designation should be considered for exclusion under section 4(b)(2) of the Act, and whether the benefits of potentially excluding any specific area outweigh the benefits of including that area under section 4(b)(2) of the Act.
(13) The likelihood of adverse social reactions to the designation of critical habitat, as discussed in the associated documents of the draft economic analysis, and how the consequences of such reactions, if likely to occur, would relate to the conservation and regulatory benefits of the proposed critical habitat designation.
(14) Whether we could improve or modify our approach to designating critical habitat in any way to provide for greater public participation and understanding, or to better accommodate public concerns and comments.
You may submit your comments and materials concerning this proposed rule by one of the methods listed in
Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include. All comments submitted electronically via
Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on
Please note that submissions merely stating support for or opposition to the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is a threatened or endangered species must be made “solely on the basis of the best scientific and commercial data available.”
Section 4(b)(5) of the Act provides for one or more public hearings on this proposal, if requested. Requests must be received within 45 days after the date of publication of this proposed rule in the
In accordance with our joint policy on peer review published in the
The Hermes copper butterfly was included as a Category 2 candidate species in our November 21, 1991 (56 FR 58804), and November 15, 1994 (59 FR 58982), Candidate Notices of Review (CNOR). Category 2 included taxa for which information in the Service's possession indicated that a proposed listing rule was possibly appropriate, but for which sufficient data on biological vulnerability and threats were not available to support a proposed rule. In the CNOR published on February 28, 1996 (61 FR 7596), the Service announced a revised list of plant and animal taxa that were regarded as candidates for possible addition to the Lists of Endangered and Threatened Wildlife and Plants. The revised candidate list included only former Category 1 species. All former Category 2 species were dropped from the list in order to reduce confusion about the conservation status of these species and to clarify that the Service no longer regarded these species as candidates for listing. Since the Hermes copper butterfly was a Category 2 species, it was no longer recognized as a candidate species as of the February 28, 1996, CNOR.
On October 26, 2004, we received a petition dated October 25, 2004, from the Center for Biological Diversity (CBD) and David Hogan requesting that Hermes copper butterfly be listed as endangered under the Act and that critical habitat be designated. On August 8, 2006, we published a 90-day finding for the Hermes copper butterfly in the
On March 17, 2009, CBD and David Hogan filed a complaint for declaratory and injunctive relief challenging the Service's decision not to list Hermes copper butterfly as endangered or threatened under the Act. In a settlement agreement dated October 23, 2009 (Case No. 09-0533 S.D. Cal.), the Service agreed to submit a new 90-day petition finding to the
On April 14, 2011, we published a 12-month finding stating that the Hermes copper butterfly was warranted for listing as threatened or endangered under the Act (76 FR 20918). However, we also found that listing the Hermes copper butterfly was precluded by higher priority listing actions. Based on species-level taxonomic classification and on high-magnitude but non-imminent threats, we assigned the Hermes copper butterfly a listing priority number of 5 and added it to the list of candidate species. Candidate species are those fish, wildlife, and plants for which we have on file sufficient information on biological vulnerability and threats to support preparation of a listing proposal, but for which development of a listing regulation is precluded by other higher priority listing activities. We reaffirmed the Hermes copper butterfly's candidate status in the annual CNOR in subsequent years (76 FR 66370, October 26, 2011; 77 FR 69994, November 21, 2012; 78 FR 70104, November 22, 2013; 79 FR 72450, December 5, 2014; 80 FR 80584, December 24, 2015).
In the 2016 CNOR (81 FR 87246, December 2, 2016), we announced that, although listing Hermes copper butterfly continued to be warranted but precluded at the date of publication of the notice, we were working on a thorough review of all available data. This proposed listing rule constitutes completion of our status review for this candidate species.
A thorough review of the taxonomy, life history, and ecology of the Hermes copper butterfly is presented in the Species Status Assessment for the Hermes Copper Butterfly (
The Hermes copper butterfly is a small-sized butterfly historically found in San Diego County, California, and northwestern Baja California, Mexico (Service 2018a, Figure 4). There are 95 known historical or extant Hermes copper butterfly occurrences in the United States and northwestern Baja California, Mexico; 45 are extant or presumed extant (all in the United States), 40 are presumed extirpated, and 10 are permanently extirpated (Table 1).
While most recent scientific studies support recognition of Hermes copper butterfly as belonging to the monotypic
Hermes copper butterfly individuals diapause (undergo a low metabolic rate resting stage) as eggs during the late summer, fall, and winter (Deutschman
There are two types of “habitat connectivity” important to the Hermes copper butterfly. Hermes copper butterflies need within-habitat patch connectivity—an unfragmented habitat patch where reproduction occurs. Habitat patches are a collection of host plants and host plant patches among which adult butterflies readily and randomly move during a flight season (any given butterfly is just as likely to be found anywhere within that area). Butterflies must be free and likely to move among individual host plants and patches of host plants within a habitat patch. They also require dispersal corridor-connectivity areas, which are undeveloped wildlands with suitable vegetation structure between habitat patches close enough that recolonization of a formerly occupied habitat patch is likely. We refer to both types of connectivity in this proposed rule.
To assess Hermes copper butterfly viability, we used the three conservation biology principles of resiliency, redundancy, and representation (together, the 3Rs) (Shaffer and Stein 2000, pp. 306-310). Briefly, resiliency supports the ability of the species to withstand environmental stochasticity (for example, wet or dry, warm or cold years); representation supports the ability of the species to adapt over time to long-term changes in the environment (for example, climate changes); and redundancy supports the ability of the species to withstand catastrophic events (for example, droughts, hurricanes). In general, the more redundant, representative, and resilient a species is, the more likely it is to sustain populations over time, even under changing environmental conditions. Using these principles, we identified the species' ecological requirements for survival and reproduction at the individual, population, and species levels, and described the beneficial and risk factors influencing the species' viability.
The assessment process used to develop the SSA (Service 2018a) can be categorized into three sequential stages. During the first stage, we used the principles of resiliency, redundancy, and representation to evaluate the Hermes copper butterfly's life-history needs. The next stage involved an assessment of the historical and current condition of the species' demographics and habitat characteristics, including an explanation of how the Hermes copper butterfly arrived at its current condition. The final stage involved making predictions about the species' response to positive and negative environmental and anthropogenic influences. This process used the best scientific and commercial data available to characterize viability as the ability of the Hermes copper butterfly to sustain populations in the wild over time.
In the SSA (Service 2018a), we describe the ecological needs of the Hermes copper butterfly at the hierarchical levels of individual, population, and species. There are also spatial and temporal components to hierarchical resource needs, reflected in the average area occupied by and “life expectancy” of each ecological entity. Individual needs are met and resource availability should be assessed at the adult male territory scale on an annual basis, reflecting the life span of an individual (from egg to adult). Population-level resilience needs are met and resource availability should be assessed on the habitat patch or metapopulation (interconnected habitat patches) scale over a period of decades. Populations or subpopulations persist in intact habitat until they are extirpated by stochastic events such as wildfire, to eventually be replaced as habitat is recolonized (18 years is the estimated time it took for the Mission Trails occurrence recolonization). Species-level viability needs are assessed and must be met at a range-wide scale if the species is to avoid extinction. The following list describes the Hermes copper butterfly's ecological needs:
(1) Individual Resource Needs:
(a) Egg: Suitable spiny redberry stems for substrate.
(b) Larvae: Suitable spiny redberry leaf tissue for development.
(c) Pupae: Suitable leaves for pupation.
(d) Adults: Suitable spiny redberry stem tissue for oviposition; nectar sources (primarily California buckwheat); mates.
(2) Population Needs:
(a) Resource needs and/or circumstances: Habitat elements required by populations include spiny redberry bushes (quantity uncertain, but not isolated individuals) and associated stands of California buckwheat or similar nectar sources.
(b) Population-level redundancy: Populations must have enough individuals (population growth) in “good years” that after reproduction is limited by poor environmental conditions such as drought in intervening “bad years,” individuals can still find mates. Alternatively, there need to be enough diapausing eggs to wait out a bad year and restore the average population size or greater in the subsequent year. That is, populations are always large enough to persist through expected periods of population decline.
(c) Population-level representation: It is unclear how susceptible the Hermes copper butterfly is to inbreeding depression. A mix of open, sunny areas should be present within habitat patches and stands of California buckwheat for nectar in the vicinity of spiny redberry host plants. Additionally, individuals must be distributed over a large enough area (population footprint/distribution) that not all are likely to be killed by stochastic events such as wildfire.
(3) Species Needs:
(a) Resource needs and/or circumstances: Dispersal corridor-connectivity areas among subpopulations to maintain metapopulation dynamics. For Hermes copper butterfly, this means suitable corridor habitat with suitable intervening vegetation structure and topography between habitat patches that are close enough so that recolonization of habitat patches where a subpopulation was extirpated is likely. Apparent impediments to dispersal include forested, riparian, and developed areas.
(b) Species-level redundancy: 95 known historical or extant Hermes copper butterfly occurrences have been documented in southern California, United States, and northwestern Baja California, Mexico: 45 are extant or presumed extant (all in the United States), 40 are presumed extirpated, and 10 are permanently extirpated (Table 1). In order to retain the species-level redundancy required for species viability, populations and temporarily unoccupied habitats must be distributed throughout the species' range in sufficient numbers and in a geographic configuration that supports dispersal corridor-connectivity areas described in (a) above.
(c) Species-level representation: Populations must be distributed in a variety of habitats (including all four California Ecological Units; Service 2018a, p. 58) so that there are always some populations experiencing conditions that support reproductive success. In especially warm, dry years, populations in wetter habitats should experience the highest population growth rates within the species' range, and in colder, wetter years populations in drier habitats should experience the highest growth rates. Populations should be represented across a continuum of elevation levels from the coast to the mountain foothills. There is currently only one known extant occurrence remaining with marine climate influence, four with montane climate influence, and the remainder at intermediate elevations with a more arid climate (Service 2018a, p. 55). Those populations in higher elevation, cooler habitats, and coastal habitats with more marine influence are less susceptible to a warming climate and are, therefore, most important to maintain.
The Act directs us to determine whether any species is an endangered species or a threatened species because of any factors affecting its continued existence. We completed a comprehensive assessment of the biological status of the Hermes copper butterfly and prepared a report of the assessment, which provides a thorough account of the species' overall viability. We generally define viability as the ability of the species to sustain
The SSA (Service 2018a) documents the results of our comprehensive biological status review for the Hermes copper butterfly, including an assessment of the potential threats to the species. The SSA does not represent a decision by the Service on whether the Hermes copper butterfly should be proposed for listing as an endangered or threatened species under the Act. The SSA does, however, provide the scientific basis that informs our regulatory decision, which involves the further application of standards within the Act and its implementing regulations and policies. In this section, we summarize the conclusions of the SSA report, which can be accessed at Docket No. FWS-R8-ES-2017-0053 on
To evaluate the current and future viability of the Hermes copper butterfly, we assessed a range of conditions to allow us to consider the species' resiliency, redundancy, and representation. We use the terms “stressor” and “threat” interchangeably as any action or condition that is known to or is reasonably likely to negatively affect individuals of a species. This includes those actions or conditions that have a direct impact on individuals, as well as those that affect individuals through alteration of their habitat or required resources. The mere identification of “threats” is not sufficient to compel a finding that listing is warranted. Describing the negative effects of the action or condition (
The following sections include summary evaluations of five threats impacting the Hermes copper butterfly or its habitat, including wildfire (Factor A), land use change (Factor A), habitat fragmentation and isolation (Factor A), climate change (Factor E), and drought (Factor E); as well as evaluating the cumulative effect of these on the species, including synergistic interactions between the threats and the vulnerability of the species resulting from small population size. We also consider the impacts of existing regulatory mechanisms (Factor D) on all existing threats (Service 2018a, pp. 33-54). We also note that potential impacts associated with overutilization (Factor B), disease (Factor C), and predation (Factor C) were evaluated but found to have minimal to no impact on the species (Service 2018a, pp. 33-54).
For the purpose of this analysis, we generally define viability as the ability of the species to sustain populations in the natural ecosystem for the foreseeable future—in this case, 30 years. We chose 30 years because it is within the range of the available hydrological and climate change model forecasts, fire hazard period calculations, and the fire-return interval estimates for habitat-vegetation associations that support the Hermes copper butterfly.
Wildfire impacts both Hermes copper butterfly and its habitat. The vegetation types that support Hermes copper butterfly—chaparral and coastal sage scrub—are prone to relatively frequent wildfire ignitions, and many plant species that characterize those habitat types are fire-adapted. The Hermes copper butterfly's host plant, spiny redberry, resprouts after fires and is relatively resilient to frequent burns (Keeley 1998, p. 258). The effect of wildfire on Hermes copper butterfly's primary nectar source California buckwheat is more complicated. California buckwheat is a facultative seeder that has minimal resprouting capability (approximately 10 percent) for young individuals (Keeley 2006, p. 375). Wildfires cause high mortality in California buckwheat, and densities are reduced the following year within burned areas (Zedler
The historical fire regime in southern California likely was characterized by many small, lightning-ignited fires in the summer and a few infrequent large fires in the fall (Keeley and Fotheringham 2003, pp. 242-243). These infrequent, large, high-intensity wildfires, so-called “megafires” (defined in the SSA as those fires greater than 16,187 hectares (ha) (40,000 acres (ac)) in size) (Service 2018a, p. 33), burned the landscape long before Europeans settled the Pacific coast (Keeley and Zedler 2009, p. 90). As such, the current pattern of small, low-intensity fires with large infrequent fires is consistent with that of historical regimes (Keeley and Zedler 2009, p. 69). Therefore, habitat that supports Hermes copper butterfly is naturally adapted to fire and has some natural resilience to impacts from wildfire.
However, in recent decades, wildfire has been increasing in both frequency and magnitude (Safford and Van de Water 2014, pp. i, 31-35). Annual mean area under extreme fire risk has increased steadily in California since 1979, and 2014 ranked highest in the history of the State (Yoon
For the historical range of the Hermes copper butterfly, the fire rotation interval decreased from 68 (1910-2000) to 49 years (1925-2015) (Service 2017, entire). In other words, the amount of time it took for all burned areas to add up to the total range decreased when the last 15 years of data were added to the analysis. A change in only 17 percent of the time period analyzed resulted in a 28 percent decrease in fire rotation interval (Service 2017, entire).
Increasing fire frequency and size is of particular concern for the Hermes copper butterfly because of how long it can take for habitat to be recolonized after wildfire. For example, in Mission Trails Park the 2,596-ha (7,303-ac) “Assist #59” Fire in 1981 and the smaller 51-ha (126-ac) “Assist #14” Fire in 1983 (no significant overlap between acreages burned by the fires), resulted in an approximate 18-year extirpation of the Mission Trails Park Hermes copper butterfly occurrence (Klein and Faulkner 2003, pp. 96, 97).
To assess the impacts of fire on the Hermes copper butterfly, we examined maps of recent high-fire-hazard areas in San Diego County (Service 2018a, Figure 8). Almost all remaining habitat within mapped Hermes copper butterfly occurrences falls within the “very high” fire hazard severity zone for San Diego County (Service 2018a, Figure 8). Areas identified in our analysis as most vulnerable to extirpation by wildfire include most occupied and potentially occupied Hermes copper butterfly habitats in San Diego County within the southern portion of the range. Twenty-eight potential source occurrences for recolonization of recently burned habitat fall within a contiguous area that has not recently burned (Service 2018a, Figure 7), and where the fire hazard is considered high (Service 2018a, Figure 8).
Although habitat that supports Hermes copper butterfly is adapted to fire, increased fire frequency can still
Extensive and intense wildfire events are the primary recent cause of direct mortality and extirpation of Hermes copper butterfly occurrences. The magnitude of this threat appears to have increased due to an increased number of recent megafires created by extreme “Santa Ana” driven weather conditions of high temperatures, low humidity, strong erratic winds, and human-caused ignitions (Keeley and Zedler 2009, p. 90; Service 2018a, pp. 33-41). The 2003 Otay and Cedar fires and the 2007 Harris and Witch Creek fires in particular have negatively impacted the species, resulting in or contributing to the extirpation of 33 occurrences (Table 1). Only 3 of the 31 U.S. occurrences thought to have been extirpated in whole or in part by fire since 2003 appear to have been naturally re-established, or were not entirely extirpated (Table 1; Service 2018a, Figure 7; Winter 2017, pers. comm.).
Wildfires that occur in occupied Hermes copper butterfly habitat result in direct mortality of Hermes copper butterflies (Klein and Faulkner 2003, pp. 96-97; Marschalek and Klein 2010, pp. 4-5). Butterfly populations in burned areas rarely survive wildfire because immature life stages of the butterfly inhabit host plant foliage, and spiny redberry typically burns to the ground and resprouts from stumps (Deutschman
Wildfires can also leave patches of unburned occupied habitat that are functionally isolated (further than the typical dispersal distance of the butterfly) from other occupied habitat. Furthermore, large fires can eliminate source populations before previously burned habitat can be recolonized, and can result in long-term or permanent loss of butterfly populations. Historically, Hermes copper butterfly persisted through wildfire by recolonizing extirpated occurrences once the habitat recovered. However, as discussed below, ongoing loss and isolation of habitat has resulted in smaller, more isolated populations than existed historically. This isolation has likely reduced or removed the ability of the species to recolonize occurrences extirpated by wildfire.
Our analysis of current fire danger and fire history illustrates the potential for catastrophic loss of the majority of remaining butterfly occurrences should another large fire occur prior to recolonization of burned habitats. As discussed by Marschalek and Klein (2010, p. 9) and Deutschman
The current fire regime in Mexico is not as well understood. Some researchers claim chaparral habitat in Mexico within the Hermes copper butterfly's range is not as affected by megafires because there has been less fire suppression activity than in the United States (Minnich and Chou 1997, pp. 244-245; Minnich 2001, pp. 1,549-1,552). In contrast, Keeley and Zedler (2009, p. 86) contend the fire regime in Baja California mirrors that of Southern California, similarly consisting of “small fires punctuated at periodic intervals by large fire events.” Local experts agree the lack of fire suppression activities in Mexico has reduced the fuel load on the landscape, subsequently reducing the risk of megafire in Mexico (Oberbauer 2017, pers. comm.; Faulkner 2017, pers. comm.). However, examination of satellite imagery from the 2000s indicates impacts from medium-sized wildfire in Mexico are similar to those in San Diego County, as evidenced by two large fires in 2014 that likely impacted habitats associated with the Hermes copper butterfly records near Ensenada (NASA 2017a; 2017b; Service 2018a p. 37).
Although the level of impact may vary over time, wildfires cause ongoing degradation, destruction, fragmentation, and isolation of Hermes copper butterfly habitat as well as direct losses of Hermes copper butterfly that have contributed to the extirpation of numerous populations. As discussed above, only 3 of the 31 U.S. occurrences thought to have been extirpated in whole or in part by fire since 2003 appear to have been naturally re-established. This threat affects all Hermes copper butterfly populations and habitat across the species' entire range.
Urban development within San Diego County has resulted in the loss, fragmentation, and isolation of Hermes copper butterfly habitat (CalFlora 2010; Consortium of California Herbaria 2010; San Diego County Plant Atlas 2010) (see the Habitat Isolation section below). Of the 50 known Hermes copper butterfly occurrences confirmed or presumed extirpated, loss, fragmentation, and isolation of habitat as a result of development contributed to 23 of those (46 percent; Table 1). In particular, habitat isolation is occurring between the northern and southern portions of the species' range and in rural areas of the southeastern county; this loss of dispersal corridor-connectivity areas is of greatest concern where it would impact core occurrences in these areas (Service 2018a, p. 41).
To quantify the remaining land at risk of development, we analyzed all existing habitat historically occupied by the Hermes copper butterfly based on specimens and observation records. We
The County of San Diego has two ordinances in place that restrict new development or other proposed projects within sensitive habitats. The Biological Mitigation Ordinance of the County of San Diego Subarea Plan and the County of San Diego Resource Protection Ordinance regulate development within coastal sage scrub and mixed chaparral habitats that currently support extant Hermes copper butterfly populations on non-Federal land within the County's jurisdiction (for example, does not apply to lands under the jurisdiction of the City of Santee or the City of San Diego). Additionally, County regulations mandate surveys for Hermes copper butterfly occupancy and habitat, and to the extent it is a significant impact under the California Environmental Quality Act (Cal. Pub. Res. Code 21000
There is uncertainty regarding the Hermes copper butterfly's condition within its southernmost known historical range in Mexico; however, one expert estimated that development pressure in known occupied areas near the city of Ensenada was similar to that in the United States (Faulkner 2017, pers. comm.).
We conclude that development is a current, ongoing threat contributing to reduction and especially isolation of remaining Hermes copper butterfly habitat in limited areas on non-Federal lands at this time. However, some regulatory protections are in place, and 64 percent of historically occupied habit is on conserved lands. Therefore, although the rate of habitat loss has been reduced relative to historical conditions, regulations have not served to protect some key populations or dispersal corridor-connectivity areas, and development continues to increase isolation of the northern portion from the southern portion of the species' range (Service 2018a, pp. 40-44).
Habitat isolation directly affects the likelihood of Hermes copper butterfly population persistence in portions of its range, and exacerbates other effects from fire and development. Hermes copper butterfly populations have become isolated both permanently (past and ongoing urban development) and more temporarily (wildfires). Habitat isolation separates extant occurrences and inhibits movement by creating a gap that Hermes copper butterflies are not likely to traverse. Any loss of resources on the ground that does not affect butterfly movement, such as burned vegetation, may degrade but not fragment habitat. Therefore, in order for habitat to be isolated, movement must either be inhibited by a barrier, or the distance between remaining suitable habitat must be greater than adult butterflies will typically move to mate or to deposit eggs. Thus, a small fire that temporarily degrades habitat containing host plants is not likely to support movement between suitable occupied habitat patches and could cause temporary isolation. It is important to note that, although movement may be possible, to ensure successful recolonization, habitat must be suitable at the time Hermes copper butterflies arrive.
Effects from habitat isolation in the northern portion of the species' range have resulted in extirpation of at least four Hermes copper butterfly occurrences (see Table 1 above). A historical Hermes copper butterfly occurrence (Rancho Santa Fe) in the northern portion of the range has been lost since 2004. This area is not expected to be recolonized because it is mostly surrounded by development and the nearest potential “source” occurrence is Elfin Forest, 2.7 mi (4.3 km) away, where at least one adult was last detected in 2011 (Marschalek and Deutschman 2016a, p. 8). Farther to the south, Black Mountain, Lopez Canyon, Van Dam Peak, and the complex of occurrences comprising Mission Trails Park, North Santee, and Lakeside Downs are isolated from other occurrences by development. Because a number of populations have been lost, and only a few isolated and mostly fragmented ones remain, the remaining populations in the northern portion of the range are particularly vulnerable to the effects of further habitat isolation. These populations may already lack the dispersal corridor-connectivity areas needed to recolonize should individual occurrences be extirpated. Reintroduction or augmentation may be required to sustain the northern portion of the species' range. No information is available on the potential impacts of habitat isolation in the species' range in Mexico.
Overall, habitat isolation is a current, ongoing threat that continues to degrade and isolate Hermes copper butterfly habitat across the species' range.
Scientific measurements spanning several decades demonstrate that changes in climate are occurring, and that the rate of change has increased since the 1950s. Global climate projections are informative, and, in some cases, the only or the best scientific information available. However, projected changes in climate and related impacts can vary across and within different regions of the world (IPCC 2013, pp. 15-16). To evaluate climate change for the region occupied by the Hermes copper butterfly, we used climate projections “downscaled” from global projection models, as these provided higher resolution information that is more relevant to spatial scales used for analyses of a given species (Glick
Southern California has a typical Mediterranean climate. Summers are typically dry and hot while winters are cool, with minimal rainfall averaging about 25 centimeters (10 inches) per year. The interaction of the maritime influence of the Pacific Ocean combined with inland mountain ranges creates an inversion layer typical of Mediterranean-like climates. These conditions also create microclimates, where the weather can be highly variable within small geographic areas at the same time.
We evaluated the available historical weather data and the species' biology to determine the likelihood of effects assuming the climate has been and will continue to change. The typical effect of a warmer climate, as observed with Hermes copper butterfly in lower, warmer elevation habitats compared to higher, cooler elevations, is an earlier flight season by several days (Thorne 1963, p. 146; Marschalek and Deutschman 2008, p. 98). Marschalek and Klein (2010, p. 2) noted that past records suggest a slightly earlier flight
Drought has been a major factor affecting southern California ecosystems, starting with the driest 12-month period on record in 2013-2014 (Swain
Though limited, existing data suggest that drought is contributing to the decline of Hermes copper butterflies. Systematic monitoring of adult abundance at five sentinel sites indicates that the past 4 years of warm, dry drought conditions negatively affected habitat suitability and suppressed adult population sizes. At the Sycuan Peak occurrence, where the highest ever maximum adult daily count was recorded in 2013 (41), the population dropped in number with decreased precipitation and has remained at record low numbers for the past 4 years (1, 1, 0, and 0; Service 2018a, Figure 10; Marschalek and Deutschman 2017, p. 9; Marschalek 2018 pers. comm.). The highest elevation occurrence (Boulder Creek Road) was the largest of the monitored sites in 2017 following years of drought and high temperatures with a maximum daily count of 14 (down from 20 in 2013; Service 2018a, Figure 10; Marschalek and Deutschman 2017, p. 9). This higher elevation site received more rain than lower sites. Therefore, though population data are limited, drought appears to negatively impact Hermes copper butterfly populations.
The Hermes copper butterfly is a rare species with limited abundance at all sites across its range, many of which are also isolated by habitat isolation, and population counts have gone down at all sites where surveys are occurring. Temperatures have significantly increased from 1951 to 2016; these changes may be influencing the timing of the Hermes copper butterfly's flight season as well as their phenology (Service 2018a, pp. 47-48). Through increased evapotranspiration and soil drying, high temperatures increase the indirect negative effects of drought on average quality of the host plant and nectar resources. Still, we are unaware of any direct negative impacts on Hermes copper butterfly life history due to these temperature changes. Drought appears to be having a more pronounced indirect negative effect, as the mean maximum daily adult counts have decreased in recent years with a decrease in precipitation that may be more of a concern at low-elevation sites.
Threats working in concert have a much greater effect than threats working individually; for example, habitat loss and isolation due to land use change combined with wildfire together have a greater impact on the species than wildfire alone. Multiple threats at a given hierarchical level have combined effects that emerge at the next higher level. For example, at the population level, habitat loss significantly reducing the resilience of one population combined with wildfire affecting resilience of another has a greater effect on Hermes copper butterfly species-level redundancy and, therefore, species viability than either threat would individually.
Threats that alone may not significantly reduce species viability have at least additive, if not synergistic, effects on species viability. For example, wildfire and habitat modification (type conversion) typically have a synergistic effect on habitat suitability in Mediterranean-type climate zones (Keeley and Brennon 2012, entire; California Chaparral Institute 2017, entire). Wildfire increases the rate of nonnative grass invasion, a component of the habitat modification threat, which in turn increases fire frequency. Overall, these factors increase the likelihood of megafires on a landscape/species range-wide scale.
The relationship between habitat fragmentation and type conversion is in part synergistic, particularly for Hermes copper butterflies, which are typically sedentary with limited direct movement ability. Fragmentation increases the rate of nonnative plant species invasion and type conversion through increased disturbance, nitrogen deposition, and seed dispersal, and type conversion itself reduces habitat suitability and, therefore, habitat contiguity and dispersal corridor-connectivity areas (increasing both habitat fragmentation and isolation). Another example of combined impacts is climate change. Although not a significant threat on its own, the increased temperature resulting from climate change significantly exacerbates other threats, especially wildfire and drought.
Small population size, low population numbers, and population isolation are not necessarily independent factors that threaten a species. Typically, it is the combination of small size and number and isolation of populations in conjunction with other threats (such as the present or threatened destruction and modification of the species' habitat or range) that may significantly increase the probability of species' extinction. Considering reduced numbers in recent surveys and historically low population numbers relative to typical butterfly population sizes, the magnitude of effects due to habitat fragmentation and isolation, drought, and wildfire are likely exacerbated by small population size.
Therefore, multiple threats are acting in concert to fragment, limit, and degrade Hermes copper butterfly habitat and decrease species resiliency, redundancy, and representation. The effects of these threats are evidenced by the loss and isolation of many populations throughout the range; those remaining extant populations fall within very high fire-hazard areas.
To analyze species' viability, we consider the current and future availability or condition of resources. The consequences of missing resources are assessed to describe the species' current condition and to project possible future conditions.
As discussed above, we generally define viability as the ability of the species to sustain populations in the natural ecosystem for the foreseeable future, in this case, 30 years. We chose 30 years because it is within the range of the available hydrological and climate change model forecasts, fire hazard period calculations, habitat-vegetation association, and fire-return intervals.
To consider the possible future viability of Hermes copper butterfly, we first analyzed the potential future conditions of ongoing threats. Possible development still in the preliminary planning stage (Service and CDFW 2016) could destroy occupied or suitable habitat on private land within the North Santee occurrence. Similar concerns apply to habitat in the Lyons Valley, Skyline Truck Trail area. Habitat isolation is a continuing concern for Hermes copper butterfly as lack of dispersal corridor-connectivity areas among occupied areas limits the ability of the species to recolonize extirpated habitat. Development outside of occupied habitat can also negatively affect the species by creating dispersal corridor-connectivity barriers throughout the range.
Anticipated severity of effects from future habitat development and isolation varies across the range of the species. Within U.S. Forest Service (USFS) lands (2,763 ha (6,829 ac)), we anticipate future development, if any, will be limited. As it implements specific activities within its jurisdiction, the USFS has incorporated measures into the Cleveland National Forest Plan to address threats to Hermes copper butterfly and its habitat (USFS 2005, Appendix B, p. 36). The limited number of Hermes copper butterfly occurrences within BLM lands is also unlikely to face future development pressure. Based on our analysis, we conclude land use change, while significant when combined with the stressor of wildfire, will not be the most significant future source of Hermes copper butterfly population decline and loss. Some habitat areas vulnerable to development are more important than others to species' viability. Of particular concern are potential extirpations due to development of the North Santee, Loveland Reservoir, Skyline Truck Trail, North Jamul, and South Japutal core occurrences (26 percent of the core occurrences considered or presumed extant; Service 2018a, pp. 23-28, 41). Absent additional conservation of occupied habitat and dispersal corridor-connectivity areas, effects of habitat loss, fragmentation, and isolation will continue to extirpate occurrences, degrade existing Hermes copper butterfly habitat, and reduce movement of butterflies among occurrences, which reduces the likelihood of natural recolonizations following extirpation events (Service 2018a, p. 53 and Figure 9).
As discussed above, wildfire can permanently affect habitat suitability. If areas are reburned at a high enough frequency, California buckwheat may not have the time necessary to become reestablished, rendering the habitat unsuitable for Hermes copper butterfly (Marschalek and Klein 2010, p. 728). Loss of nectar plants is not the only habitat effect caused by wildfire; habitat type conversion increases flammable fuel load and fire frequency, further stressing Hermes copper butterfly populations. Therefore, habitat modification due to wildfire is cause for both short- and long-term habitat impact concerns.
We expect that wildfire will continue to cause direct mortality of Hermes copper butterflies. In light of the recent drought-influenced wildfires in southern California, a future megafire affecting most or all of the area burned by the Laguna Fire in 1970 (40-year-old chaparral) could encompass the majority of extant occurrences and result in significantly reduced species viability (Service 2018a, Figures 7 and 8).
In the case of Hermes copper butterfly, the primary limiting species-level resource is dispersal corridor-connectivity areas of formerly occupied to currently occupied habitats, on which the likelihood of post-fire recolonization depends, is a limiting factor. We further analyzed fire frequency data to determine the effect on occurrence status and the likelihood of extirpation over the next 30 years. Our analysis concluded that the probability of a megafire occurring in Hermes copper butterfly's range has significantly increased. During the past 15 years (2002-2017), there were six megafires within Hermes copper butterfly's possible historical range (Poomacha, Paradise, Witch, Cedar, Otay Mine, and Harris; all prior to 2008), a significant increase compared to none during the two previous 15 years (1987-2001 and 1972-1986), and only one during the 15-year period prior to 1972 (Laguna). This represents a more than six-fold increase in the rate of megafire occurrence over the past 15 years. While fires meeting our megafire definition of greater than 16,187 ha (40,000 ac) have not occurred in the past 10 years, several relatively large fires occurred in the Hermes copper butterfly's range in 2014 and 2017. The Cocos and Bernardo fires burned approximately 809 ha (2,000 ac) and 607 ha (1,500 ac) of potentially occupied Hermes copper butterfly habitat near the Elfin Forest and the Black Mountain occurrences (Service 2018a, Figure 5). A smaller unnamed fire burned approximately 38 ha (95 ac) of potential habitat near the extant core Mission Trails occurrence (Burns
Combined effects increase the likelihood of significant and irreversible loss of populations, compared to individual effects. If fewer source populations are available over time to recolonize burned habitat when host and nectar plants have sufficiently regenerated, the combined effects of these threats will continue to reduce resiliency, redundancy, and representation, resulting in an increase in species extinction risk.
In order to quantify population viability for the Hermes copper butterfly, we calculated a viability index in our SSA (Service 2018a, pp. 58-62). In our index calculations, the contribution of a population to species-level redundancy depends on population-level resiliency, and contribution to species-level representation depends on how rare populations are in the habitat type (California Ecological Unit) it occupies (Service 2018a, Figure 12). Species redundancy and representation are assumed to equally influence species' viability. We assign a 100 percent species viability index value to the baseline state of all known historical population occurrences in the United States. For this index calculation, we do not consider Mexican occurrences, because there are only 3 (possibly 2) out of a total of 95, and all are presumed extirpated.
Our index of species viability is proportional to, but not equal to, the ability of a species to sustain populations in the wild (in other words, it is an index that should change proportionally with the likelihood of persistence, but is not itself a probability value). As such, our viability index uses population resilience, species redundancy, and species representation to quantify changes in species viability, but does not predict probability of persistence. For a detailed description of our methodology and of viability index results, see the Species Viability Index section of the SSA (Service 2018a, pp. 58-62).
To estimate species viability, we first estimated species redundancy and species representation. To estimate a current species redundancy value, we ranked each occurrence's resiliency value using a scale of 0-4, with 0 being extirpated, and 4 being connected core occurrences (Service 2018a, p. 53; Appendix III). We estimate there are currently 18 presumed extant occurrences (rank sum of 18), 3 extant non-core isolated (rank sum of 6), 11 extant non-core connected or core isolated (rank sum of 33), and 13 extant core connected (rank sum of 52) occurrences for a total current species redundancy value of 109 (Service 2018a, p. 57). Based on our calculations, the species currently retains 30 percent of its historical population redundancy.
In order to model species representation, we used California Ecological Units (Goudey and Smith 1994 [2007]; see Table 1 above) as a measure of habitat diversity (Service 2018a, Figure 10). Using those units, occupancy in the Coastal Terraces (CT) ecological unit has been reduced to 18 percent (2/11 occurrences not extirpated), in the Coastal Hills (CH) unit to 40 percent (16/40 not extirpated), in the Western Granitic Foothills (WGF) unit to 63 percent (22/35 not extirpated), while the Palomar-Cuyamaca Peak Coastal Terraces (PC) unit remains at 100 percent (none extirpated). Based on these proportional values, the species retains 55 percent of its historical species representation (Service 2018a, p. 57).
Species viability was calculated by summing the results of the redundancy and representation calculations (Service 2018a, p. 57); we estimate the species currently retains no more than 43 percent of its estimated historical viability.
Given climate change predictions of more extreme weather, less precipitation, and warmer temperatures, and the recent trend of relatively frequent and large fires, we can assume the primary threats of drought and wildfire will continue to increase in magnitude. If land managers work to conserve and manage all occupied and temporarily unoccupied habitat, and maintain habitat contiguity and dispersal corridor-connectivity, this should prevent further habitat loss. Although fire and drought are difficult to control and manage for, natural recolonization and assisted recolonization through translocation in higher abundance years (
All scenarios described below incorporate some change in environmental conditions. However, it is important to keep in mind that even if environmental conditions remain unchanged, the species may continue to lose populations so that viability declines by virtue of maintaining the current trend. Given that there is uncertainty as to exact future trends of many threats, these future scenarios are meant to explore the range of uncertainty and examine the species' response across the range of likely future conditions. For more detailed discussions of the future scenarios, see the Possible Future Conditions section of the SSA (Service 2018a, pp. 60-62).
Due to a combination of increased wildfire and drought frequency and severity, no habitat patches are recolonized, and all Hermes copper butterfly occurrences with a resilience score of less than 4 are extirpated (without reducing the redundancy weight of remaining occurrences based on changed size or isolation status). These losses would reduce the species redundancy value from 109 to 52. Based on the resulting redundancy value ratio of 52/368, the species would retain 14 percent of its historical baseline population redundancy. There would be no occupancy remaining in the CT ecological unit (0 percent), CH ecological unit occupancy would be reduced from 40 to 8 percent (3/40 not extirpated), WGF unit from 63 to 26 percent (9/35 not extirpated), and PC unit from 100 to 17 percent (1/6 not extirpated). Based on these proportional values, the species would retain approximately 13 percent of its historical representation. Resulting changes to the population redundancy and representation values would cause an approximate drop from 43 to 14 percent species viability relative to historical conditions. We judge this scenario about as likely as not to occur in the next 30 years.
If there was a megafire comparable to the 1970 Laguna Fire, many occurrences would likely be extirpated, and, due to the number of occurrences already lost, the likelihood of any being recolonized would be low. With regard to redundancy, these losses would result in the additional loss of four unknown status occurrences; no small isolated occurrences; three small, connected or large, isolated occurrences; and five large, connected occurrences.
In this scenario, the species would retain 18 percent of its historical baseline redundancy and 30 percent of its historical representation. These changes to population redundancy and representation values would result in an approximate drop in species viability relative to historical conditions from the current 43 percent to 24 percent. We judge this scenario more likely than not to occur in the next 30 years.
While environmental conditions never stay the same, changes that negatively affect populations may be offset by positive ones—for example, continued habitat conservation and management actions such as translocations to recolonize burned habitats. In this scenario, the risk of wildfire remains high. Occurrence extirpations and decreased resiliency of some populations in this scenario are balanced by habitat recolonizations and increased resiliency in others. Species viability would thus remain at approximately 43 percent relative to historical conditions. Even if environmental conditions remain unchanged, the species may continue to lose populations so that viability declines by virtue of maintaining the current trend. We judge this scenario about as likely as not to occur in the next 30 years.
In this scenario, environmental threats such as fire and drought decrease in frequency and magnitude relative to the past 30 years, and management actions such as continued conservation and translocation efforts are successful. Due to favorable climate conditions and proactive management and conservation, all fire-extirpated occurrence habitats are recolonized, no further occurrences are extirpated, and at least half the “unknown status” occurrences are determined to be extant. This scenario would result in an increase to 62 percent species viability relative to historical conditions. We judge this scenario unlikely to occur in the next 30 years.
Section 4 of the Act (16 U.S.C. 1533) and its implementing regulations (50 CFR part 424) set forth the procedures for determining whether a species meets the definition of “endangered species” or “threatened species.” The Act defines an “endangered species” as a species
We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats to the Hermes copper butterfly, and we have determined the following factors are impacting the resiliency, redundancy, and representation of the species: wildfire (Factor A), land use change (Factor A), habitat fragmentation and isolation (Factor A), climate change (Factor E), and drought (Factor E); as well as the cumulative effect of these on the species, including synergistic interactions between the threats and the vulnerability of the species resulting from small population size. We also considered the effect of existing regulatory mechanisms (Factor D) on the magnitude of existing threats. We also note that potential impacts associated with overutilization (Factor B), disease (Factor C), and predation (Factor C) were evaluated but found to have little to no impact on species viability (Service 2018a, p. 50); thus, we did not discuss them in this document.
Individually, land use change (Factor A), habitat fragmentation and isolation (Factor A), climate change (Factor A), and drought (Factor E) are impacting the Hermes copper butterfly and its habitat. Although most impacts from land use change have occurred in the past, and some existing regulations are in place to protect remaining occurrences, 36 percent of historically occupied habitat is not protected and remains at risk from land use change. As a result of past development, which has contributed to the loss of 23 occurrences (Table 1), species representation has been reduced through loss of most occurrences in ecological units closest to the coast, while redundancy has decreased through loss of overall numbers of occurrences. Remaining habitat has been fragmented, decreasing species resiliency by removing habitat corridors and thus decreasing the species' ability to recolonize previously extirpated occurrences. Climate change is currently having limited effects on the species; however, drought is a significant threat resulting in degradation of habitat and decreased numbers of Hermes copper butterflies at all monitored occurrences, with the exception of the highest elevation occurrence that receives the most rainfall.
Wildfire (Factor A) is the most substantial threat currently impacting Hermes copper butterfly and is the most significant source of ongoing population decline and loss of occurrences. Large fires can eliminate source populations before previously burned habitat can be recolonized, and can result in long-term or permanent loss of butterfly populations. Since 2003, wildfire is estimated to have caused or contributed to the extirpation of 31 U.S. occurrences (and 3 in Mexico), only 3 of those are known to have been apparently repopulated. Wildfire frequency has significantly increased in Hermes copper butterfly habitat since 1970, and the likelihood of additional megafires occurring over the next 30 years is high. Frequent wildfire degrades available habitat through conversion of suitable habitat to nonnative grasslands, and we anticipate that fire will continue to modify and degrade Hermes copper butterfly habitat into the foreseeable future. Furthermore, though fuel-reduction activities are ongoing throughout much of the species' range, megafires cannot be controlled through regulatory mechanisms. We expect the ongoing effects of wildfire will continue to result in substantial reductions of species resiliency, redundancy, and representation for the Hermes copper butterfly.
Combined effects of threats have a greater impact on the Hermes copper butterfly than each threat acting individually. Wildfire increases the rate of nonnative grass invasion, which in turn increases fire frequency. Overall, these factors increase the likelihood of megafires on a range-wide scale now and in the foreseeable future. The combination of habitat fragmentation and isolation (as a result of past and potential limited future urban development), existing dispersal barriers, and megafires (that encompass vast areas and are increasing in frequency) that limit, and degrade Hermes copper butterfly habitat, results in substantial reduction in species resiliency, redundancy, and representation. Furthermore, remaining extant populations fall within very high fire-hazard areas, increasing the risk that a single megafire could result in the extirpation of the majority of extant occurrences. Additionally, effects from habitat fragmentation and isolation, megafire, and drought are exacerbated by the small population size and isolated populations of the Hermes copper butterfly. Overall, the combined effects of threats are currently decreasing the resiliency, redundancy, and representation of the Hermes copper butterfly, and we expect that they will continue to decrease species viability into the foreseeable future.
After evaluating threats to the species and assessing the cumulative effect of the threats under the section 4(a)(1) factors, we find that that the Hermes copper butterfly meets the definition of a threatened species. Multiple threats are impacting Hermes copper butterfly across its range, and the most probable future scenarios predict that species viability will either remain at 43 percent of historical levels, or decrease to 24 percent or 14 percent of historical viability within the foreseeable future. Thus, after assessing the best available information, we conclude that the Hermes copper butterfly is likely to become in danger of extinction within the foreseeable future throughout all of its range. We find that the Hermes copper butterfly is not currently in danger of extinction, because although a megafire has the potential to extirpate a high number of occurrences, it is not likely that a single megafire would impact all occurrences, particularly given the urban area separating the most northern and southern occurrences. Furthermore, even the future scenarios resulting in the lowest species viability do not predict that the species is currently in danger of extinction. Therefore, threatened status is the most appropriate for the species.
Under the Act and our implementing regulations, a species may warrant listing if it is in danger of extinction or likely to become so in the foreseeable future throughout all or a significant portion of its range. Because we have determined that the Hermes copper butterfly is likely to become an endangered species within the foreseeable future throughout all of its range, we find it unnecessary to proceed to an evaluation of potentially significant portions of the range. Where the best available information allows the Services to determine a status for the species rangewide, that determination should be given conclusive weight because a rangewide determination of status more accurately reflects the
Our review of the best available scientific and commercial information indicates that the Hermes copper butterfly meets the definition of a threatened species. Therefore, we propose to list the Hermes copper butterfly as a threatened species in accordance with sections 3(20) and 4(a)(1) of the Act.
Critical habitat is defined in section 3 of the Act as:
(1) The specific areas within the geographical area occupied by the species, at the time it is listed in accordance with the Act, on which are found those physical or biological features
(a) Essential to the conservation of the species, and
(b) Which may require special management considerations or protection; and
(2) Specific areas outside the geographical area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species.
Our regulations at 50 CFR 424.02 define the geographical area occupied by the species as: An area that may generally be delineated around species' occurrences, as determined by the Secretary (
Conservation, as defined under section 3 of the Act, means to use and the use of all methods and procedures that are necessary to bring an endangered or threatened species to the point at which the measures provided pursuant to the Act are no longer necessary. Such methods and procedures include, but are not limited to, all activities associated with scientific resources management such as research, census, law enforcement, habitat acquisition and maintenance, propagation, live trapping, and transplantation, and, in the extraordinary case where population pressures within a given ecosystem cannot be otherwise relieved, may include regulated taking.
Critical habitat receives protection under section 7 of the Act through the requirement that Federal agencies ensure, in consultation with the Service, that any action they authorize, fund, or carry out is not likely to result in the destruction or adverse modification of critical habitat. The designation of critical habitat does not affect land ownership or establish a refuge, wilderness, reserve, preserve, or other conservation area. Such designation does not allow the government or public to access private lands. Such designation does not require implementation of restoration, recovery, or enhancement measures by non-Federal landowners. Where a landowner requests Federal agency funding or authorization for an action that may affect a listed species or critical habitat, the consultation requirements of section 7(a)(2) of the Act would apply, but even in the event of a destruction or adverse modification finding, the obligation of the Federal action agency and the landowner is not to restore or recover the species, but to implement reasonable and prudent alternatives to avoid destruction or adverse modification of critical habitat.
Under the first prong of the Act's definition of critical habitat, areas within the geographical area occupied by the species at the time it was listed are included in a critical habitat designation if they contain physical or biological features (1) which are essential to the conservation of the species and (2) which may require special management considerations or protection. For these areas, critical habitat designations identify, to the extent known using the best scientific and commercial data available, those physical or biological features that are essential to the conservation of the species (such as space, food, cover, and protected habitat). In identifying those physical or biological features that occur in specific areas, we focus on the specific features that are essential to the life-history needs of the species, including but not limited to, water characteristics, soil type, geological features, prey, vegetation, symbiotic species, or other features. A feature may be a single habitat characteristic, or a more complex combination of habitat characteristics. Features may include habitat characteristics that support ephemeral or dynamic habitat conditions. Features may also be expressed in terms relating to principles of conservation biology, such as patch size, distribution distances, and connectivity.
Under the second prong of the Act's definition of critical habitat, we can designate critical habitat in areas outside the geographical area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. When designating critical habitat, the Secretary will first evaluate areas occupied by the species. The Secretary will only consider unoccupied areas to be essential where a critical habitat designation limited to geographical areas occupied by the species would be inadequate to ensure the conservation of the species. In addition, for an unoccupied area to be considered essential, the Secretary must determine that there is a reasonable certainty both that the area will contribute to the conservation of the species and that the area contains one or more of those physical or biological features essential to the conservation of the species.
Section 4 of the Act requires that we designate critical habitat on the basis of the best scientific data available. Further, our Policy on Information Standards Under the Endangered Species Act (published in the
When we are determining which areas should be designated as critical habitat, our primary source of information is generally the information from the species status assessment (SSA) report and information developed during the listing process for the species. Additional information sources may include any generalized conservation strategy, criteria, or outline that may
Habitat is dynamic, and species may move from one area to another over time. We recognize that critical habitat designated at a particular point in time may not include all of the habitat areas that we may later determine are necessary for the recovery of the species. For these reasons, a critical habitat designation does not signal that habitat outside the designated area is unimportant or may not be needed for recovery of the species. Areas that are important to the conservation of the species, both inside and outside the critical habitat designation, will continue to be subject to: (1) Conservation actions implemented under section 7(a)(1) of the Act, (2) regulatory protections afforded by the requirement in section 7(a)(2) of the Act for Federal agencies to ensure their actions are not likely to jeopardize the continued existence of any endangered or threatened species, and (3) section 9 of the Act's prohibitions on taking any individual of the species, including taking caused by actions that affect habitat. Federally funded or permitted projects affecting listed species outside their designated critical habitat areas may still result in jeopardy findings in some cases. These protections and conservation tools will continue to contribute to recovery of this species. Similarly, critical habitat designations made on the basis of the best available information at the time of designation will not control the direction and substance of future recovery plans, habitat conservation plans (HCPs), or other species conservation planning efforts if new information available at the time of these planning efforts calls for a different outcome.
Section 4(a)(3) of the Act, as amended, and implementing regulations (50 CFR 424.12), require that, to the maximum extent prudent and determinable, the Secretary shall designate critical habitat at the time the species is determined to be an endangered or threatened species. Our regulations (50 CFR 424.12(a)(1)) state that the Secretary may, but is not required to, determine that a designation would not be prudent in the following circumstances:
(i) The species is threatened by taking or other human activity and identification of critical habitat can be expected to increase the degree of such threat to the species;
(ii) The present or threatened destruction, modification, or curtailment of a species' habitat or range is not a threat to the species, or threats to the species' habitat stem solely from causes that cannot be addressed through management actions resulting from consultations under section 7(a)(2) of the Act;
(iii) Areas within the jurisdiction of the United States provide no more than negligible conservation value, if any, for a species occurring primarily outside the jurisdiction of the United States;
(iv) No areas meet the definition of critical habitat; or
(v) The Secretary otherwise determines that designation of critical habitat would not be prudent based on the best scientific data available.
We did not identify any of the factors above to apply to the Hermes copper butterfly. Therefore, we find designation of critical habitat is prudent for the species.
Having determined that designation is prudent, under section 4(a)(3) of the Act we must find whether critical habitat for the Hermes copper butterfly is determinable. Our regulations at 50 CFR 424.12(a)(2) state that critical habitat is not determinable when one or both of the following situations exist:
(i) Data sufficient to perform required analyses are lacking, or
(ii) The biological needs of the species are not sufficiently well known to identify any area that meets the definition of “critical habitat.”
When critical habitat is not determinable, the Act allows the Service an additional year to publish a critical habitat designation (16 U.S.C. 1533(b)(6)(C)(ii)).
We reviewed the available information pertaining to the biological needs of the species and habitat characteristics where the species is located. This and other information represent the best scientific data available and led us to conclude that the designation of critical habitat is determinable for the Hermes copper butterfly.
In accordance with section 3(5)(A)(i) of the Act and regulations at 50 CFR 424.12(b), in determining which areas within the geographical area occupied by the species at the time of listing to designate as critical habitat, we consider the physical or biological features that are essential to the conservation of the species and which may require special management considerations or protection. For example, physical features might include gravel of a particular size required for spawning, alkali soil for seed germination, protective cover for migration, or susceptibility to flooding or fire that maintains necessary early-successional habitat characteristics. Biological features might include prey species, forage grasses, specific kinds or ages of trees for roosting or nesting, symbiotic fungi, or a particular level of nonnative species consistent with conservation needs of the listed species. The features may also be combinations of habitat characteristics and may encompass the relationship between characteristics or the necessary amount of a characteristic needed to support the life history of the species. In considering whether features are essential to the conservation of the species, the Service may consider an appropriate quality, quantity, and spatial and temporal arrangement of habitat characteristics in the context of the life-history needs, condition, and status of the species. These include, but are not limited to:
(1) Space for individual and population growth and for normal behavior;
(2) Food, water, air, light, minerals, or other nutritional or physiological requirements;
(3) Cover or shelter;
(4) Sites for breeding, reproduction, or rearing (or development) of offspring; and
(5) Habitats that are protected from disturbance or are representative of the historic geographical and ecological distributions of a species.
As discussed above, we conducted a Species Status Assessment (SSA) for Hermes copper butterfly, which is an evaluation of the best available scientific and commercial data on the status of the species. The SSA provides the scientific information upon which this proposed critical habitat determination is based (Service 2018a).
Patches of spiny redberry host plants, including post-fire stumps that can resprout, are required to support Hermes copper butterfly populations and subpopulations; the number of plants in a patch required to support a subpopulation is unknown. Because we know that Hermes copper butterflies are periodically extirpated from patches of host plants by wildfire, and subsequently re-colonize these patches (Table 1), we can assume functional metapopulation dynamics are important
Adults require relatively abundant nectar sources associated with patches of their host plants, spiny redberry. Plants specifically identified as significant nectar sources include
All immature life-cycle stages develop on the host plant, spiny redberry. Eggs are deposited on branches, caterpillars are sheltered on and fed by leaves, and chrysalides are attached to live host plant leaves.
Corridor (connective) habitat areas containing adult nectar sources are required among occupied (source subpopulations) and formerly occupied host plant patches, in order to maintain long-term the number and distribution of source subpopulations required to support resilient metapopulation species viability.
Protected spiny redberry host plants must be distributed in four California Ecological Units to maintain species representation.
We derive the specific physical or biological features essential to the conservation of the Hermes copper butterfly from studies of this species' habitat, ecology, and life history as described above and in the Species Status Assessment for the Hermes Copper Butterfly (Service 2018a).
We have determined that the physical or biological features essential to the conservation of the Hermes copper butterfly consist of the following components when found between 30 m and 1,341 m above sea level, and located in habitat providing an appropriate quality, quantity, and spatial and temporal arrangement of these habitat characteristics in the context of the life-history needs, condition, and status of the species (see
(1) Spiny redberry host plants.
(2) Nectar sources for adult butterflies.
When designating critical habitat, we assess whether the specific areas within the geographical area occupied by the species at the time of listing contain features which are essential to the conservation of the species and which may require special management considerations or protection.
The features essential to the conservation of this species may require special management considerations or protection to reduce or mitigate the following threats: Wildfire, land use change, habitat fragmentation and isolation, and climate change and drought. In particular, habitat that has at any time supported a subpopulation will require protection from land use change that would permanently remove host plant patches and nectar sources, and habitat containing adult nectar sources that connects such host plant patches through which adults are likely to move. These management activities will protect from losses of habitat large enough to preclude conservation of the species.
Additionally, when considering the conservation value of areas proposed as critical habitat within each unit, especially among subpopulations within the same California Ecological Unit, maintenance of dispersal corridor-connectivity among them should be a conservation planning focus for stakeholders and regulators (such connectivity was assumed by the criteria used to delineate proposed critical habitat units).
As required by section 4(b)(2) of the Act, we use the best scientific data available to designate critical habitat. In accordance with the Act and our implementing regulations at 50 CFR 424.12(b), we review available information pertaining to the habitat requirements of the species and identify specific areas within the geographical area occupied by the species at the time of listing and any specific areas outside the geographical area occupied by the species to be considered for designation as critical habitat. We are not currently proposing to designate any areas outside the geographical area occupied by the species.
Sources of data for this species and its habitat requirements include multiple databases maintained by universities and by State agencies in San Diego County and elsewhere in California, white papers by researchers involved in conservation activities and planning, peer-reviewed articles on this species and relatives, agency reports, and numerous survey reports for projects throughout the species' range.
The current distribution of the Hermes copper butterfly is much reduced from its historical distribution. We anticipate that recovery will require continued protection of existing subpopulations and habitat, protection of dispersal corridor connectivity areas among subpopulations, as well as re-establishing subpopulations where they have been extirpated within the species' current range in order to ensure adequate numbers of subpopulations to maintain metapopulations. This activity will help to ensure future catastrophic events, such as wildfire, cannot simultaneously affect all known populations.
The following meets the definition of the geographical area currently occupied by the Hermes copper butterfly in the United States: Between approximately 33° 20′ 0″ North latitude and south to the international border with Mexico, and from approximately 30 m (100 ft) in elevation near the coast, east up to 1,340 m (4,400 ft) in elevation near the mountains (Service 2018a, Figure 5). This includes those specific areas within the geographical area occupied by the species at this time or the currently known range of the species.
The proposed critical habitat designation does not include all areas within the geographical area occupied by the species at this time. Rather, it includes those lands with physical and biological features essential to the conservation of the species which may require special management or protections. We also limited the proposal to specific areas historically or currently known to support the species. This proposal focuses on maintaining areas that are known to have supported those known occurrences we consider
In summary, we delineated critical habitat unit boundaries using the following criteria:
(1) We started by considering all high-accuracy record-based occurrences mapped in the SSA (accuracy codes 1 and 2 in Table 1; Service 2018a, p. 20) within the geographical area currently occupied by the species. Occurrences were mapped as intersecting areas within 0.5 km (0.3 mi) of high geographic accuracy records, and areas within 0.5 km (0.3 mi) of any spiny redberry record within 1 km (0.6 mi) of these butterfly records. These distances are based on the maximum recapture distance of 1.1 km (0.7 mi) recorded by Marschalek and Klein's (2010, p. 1) intra-habitat movement study.
(2) We removed seven non-core occurrences that were more than 3 km (1.9 mi) from a core occurrence, or otherwise deemed not-essential for metapopulation resilience or continued species representation within all California Ecological Units.
(3) We added habitat contiguity areas between occurrences that were 0.5 km (0.3 mi) or less apart that are likely to be within a single subpopulation distribution. To do this, we included the area within 0.5 km (0.3 mi) of the midpoint of the tangent between the two closest butterfly records in each occurrence (to capture likely unrecorded physical or biological features).
(4) Using the best available vegetation association GIS database, we removed areas within 95 sub-categories (out of 177) not likely to contain host plants, such as those associated with streams.
(5) We removed by visual review of the best available satellite imagery all clearly developed areas, areas of disturbed vegetation such as nonnative grasslands, and granitic formations not likely to contain host plants, at the scale of approximately 1.2 ha (3 ac).
When determining proposed critical habitat boundaries, we made every effort to avoid including developed areas such as lands covered by buildings, pavement, and other structures because such lands lack physical or biological features necessary for the Hermes copper butterfly. The scale of the maps we prepared under the parameters for publication within the Code of Federal Regulations may not reflect the exclusion of such developed lands. Any such lands inadvertently left inside critical habitat boundaries shown on the maps of this proposed rule have been excluded by text in the proposed rule and are not proposed for designation as critical habitat. Therefore, if the critical habitat is finalized as proposed, a Federal action involving these lands would not trigger section 7 consultation with respect to critical habitat and the requirement of no adverse modification within mapped areas unless the land contained Hermes copper butterfly physical or biological features, or the specific action would affect the physical or biological features in adjacent critical habitat.
We are proposing for designation of critical habitat lands that we have determined are within the geographical area currently occupied by the species and contain one or more of the physical or biological features that are essential to support life-history processes of the species. Three units are proposed for designation.
The critical habitat designation is defined by the map or maps, as modified by any accompanying regulatory text, presented at the end of this document in the Proposed Regulation Promulgation section. We include more detailed information on the boundaries of the critical habitat designation in the preamble of this document. We will make the coordinates or plot points or both on which each map is based available to the public on
We are proposing three units as critical habitat for the Hermes copper butterfly. The critical habitat areas described below constitute our current best assessment of areas that meet the definition of critical habitat for the Hermes copper butterfly. The three units we propose as critical habitat are: (1) Lopez Canyon; (2) Miramar/Santee; and (3) Southeast San Diego. Table 2 shows the land ownership and approximate areas of the proposed designated areas for Hermes copper butterfly.
We present brief descriptions of all proposed critical habitat units, and reasons why they meet the definition of critical habitat for the Hermes copper butterfly, below. Although conservation and management of dispersal corridor connectivity areas among occurrences proposed for designation as critical habitat will also be required for species
Unit 1 consists of 166 ha (410 ac) within the geographical area currently occupied by the species and contains all of the essential physical or biological features. The physical or biological features may require special management to protect them from wildfire and land use change, although the latter is less likely in this unit (see
Unit 2 consists of 2,870 ha (7,092 ac) within the geographical area currently occupied by the species and contains all of the essential physical or biological features. The physical or biological features may require special management to protect them from land use change and wildfire, although wildfire will be challenging to manage for in this unit because of its size and risk of megafire (see
Unit 3 consists of 11,213 ha (27,709 ac) within the geographical area currently occupied by the species and contains all of the essential physical or biological features. The physical or biological features may require special management to protect them from land use change and wildfire, although wildfire will be challenging to manage in this unit because of its size and risk of megafire (see
Section 7(a)(2) of the Act requires Federal agencies, including the Service, to ensure that any action they fund, authorize, or carry out is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of designated critical habitat of such species. In addition, section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any agency action which is likely to jeopardize the continued existence of any species proposed to be listed under the Act or result in the destruction or adverse modification of proposed critical habitat.
We published a final regulation with a revised definition of destruction or adverse modification on August 27, 2019 (84 FR 44976). Destruction or adverse modification means a direct or indirect alteration that appreciably diminishes the value of critical habitat as a whole for the conservation of a listed species.
If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency (action agency) must enter into consultation with us. Examples of actions that are subject to the section 7 consultation process are actions on State, Tribal, local, or private lands that require a Federal permit (such as a permit from the U.S. Army Corps of Engineers under section 404 of the Clean Water Act (33 U.S.C. 1251
As a result of section 7 consultation, we document compliance with the requirements of section 7(a)(2) through our issuance of:
(1) A concurrence letter for Federal actions that may affect, but are not likely to adversely affect, listed species or critical habitat; or
(2) A biological opinion for Federal actions that may affect, and are likely to adversely affect, listed species or critical habitat.
When we issue a biological opinion concluding that a project is likely to jeopardize the continued existence of a
(1) Can be implemented in a manner consistent with the intended purpose of the action,
(2) Can be implemented consistent with the scope of the Federal agency's legal authority and jurisdiction,
(3) Are economically and technologically feasible, and
(4) Would, in the Director's opinion, avoid the likelihood of jeopardizing the continued existence of the listed species and/or avoid the likelihood of destroying or adversely modifying critical habitat.
Reasonable and prudent alternatives can vary from slight project modifications to extensive redesign or relocation of the project. Costs associated with implementing a reasonable and prudent alternative are similarly variable.
Regulations at 50 CFR 402.16 require Federal agencies to reinitiate formal consultation on previously reviewed actions. These requirements apply when the Federal agency has retained discretionary involvement or control over the action (or the agency's discretionary involvement or control is authorized by law) and, subsequent to the previous consultation, we have listed a new species or designated critical habitat that may be affected by the Federal action, or the action has been modified in a manner that affects the species or critical habitat in a way not considered in the previous consultation. In such situations, Federal agencies sometimes may need to request reinitiation of consultation with us, but the regulations also specify some exceptions to the requirement to reinitiate consultation on specific land management plans after subsequently listing a new species or designating new critical habitat. See the regulations for a description of those exceptions.
The key factor related to the destruction or adverse modification determination is whether implementation of the proposed Federal action directly or indirectly alters the designated critical habitat in a way that appreciably diminishes the value of the critical habitat as a whole for the conservation of the listed species. As discussed above, the role of critical habitat is to support physical or biological features essential to the conservation of a listed species and provide for the conservation of the species.
Section 4(b)(8) of the Act requires us to briefly evaluate and describe, in any proposed or final regulation that designates critical habitat, activities involving a Federal action that may violate 7(a)(2) of the Act by destroying or adversely modifying such designation.
Activities that the Services may, during a consultation under section 7(a)(2) of the Act, find are likely to destroy or adversely modify critical habitat include, but are not limited to:
Actions that would remove spiny redberry host plants or a significant amount of nectar source plants. Such activities could include, but are not limited to, residential and commercial development, and conversion to agricultural orchards or fields. These activities could permanently eliminate or reduce the habitat necessary for the growth and reproduction of Hermes copper butterflies.
The Sikes Act Improvement Act of 1997 (Sikes Act) (16 U.S.C. 670a) required each military installation that includes land and water suitable for the conservation and management of natural resources to complete an integrated natural resources management plan (INRMP) by November 17, 2001. An INRMP integrates implementation of the military mission of the installation with stewardship of the natural resources found on the base. Each INRMP includes:
(1) An assessment of the ecological needs on the installation, including the need to provide for the conservation of listed species;
(2) A statement of goals and priorities;
(3) A detailed description of management actions to be implemented to provide for these ecological needs; and
(4) A monitoring and adaptive management plan.
Among other things, each INRMP must, to the extent appropriate and applicable, provide for fish and wildlife management; fish and wildlife habitat enhancement or modification; wetland protection, enhancement, and restoration where necessary to support fish and wildlife; and enforcement of applicable natural resource laws.
The National Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108-136) amended the Act to limit areas eligible for designation as critical habitat. Specifically, section 4(a)(3)(B)(i) of the Act (16 U.S.C. 1533(a)(3)(B)(i)) provides that: “The Secretary shall not designate as critical habitat any lands or other geographic areas owned or controlled by the Department of Defense, or designated for its use, that are subject to an integrated natural resources management plan prepared under section 101 of the Sikes Act (16 U.S.C. 670a), if the Secretary determines in writing that such plan provides a benefit to the species for which critical habitat is proposed for designation.”
We consult with the military on the development and implementation of INRMPs for installations with listed species. Marine Corps Air Station Miramar is the only military installation located within the range of the proposed critical habitat designation for the Hermes copper butterfly that has a completed, Service-approved INRMP. As discussed below, we analyzed the INRMP to determine if it meets the criteria for exemption from critical habitat under section 4(a)(3) of the Act.
Marine Corps Air Station (MCAS) Miramar has an approved INRMP completed in June 2018. The U.S. Marine Corps is committed to working closely with the Service and California Department of Fish and Wildlife to continually refine the existing INRMP as part of the Sikes Act's INRMP review process. The MCAS Miramar INRMP overall strategy for conservation and management is to: (1) Limit activities, minimize development, and perform mitigation actions in areas supporting high densities of vernal pool habitat, threatened or endangered species, and other wetlands; and (2) manage activities and development in areas of low densities, or no regulated resources, with site-specific measures and programmatic instructions.
The MCAS Miramar INRMP contains elements that benefit the Hermes copper butterfly, such as mitigation guidance for projects which may impact Hermes copper butterfly or its habitat (MCAS Miramar 2018, p. 6-13) and natural resources management goals and objectives which support both Hermes copper butterfly conservation and military operational requirements. Identified management actions within the INRMP include restoring degraded sites, restricting access to sensitive
Based on our review of the Hermes copper butterfly habitat on MCAS Miramar, the MCAS Miramar INRMP, and the above considerations, and in accordance with section 4(a)(3)(B)(i) of the Act, we have determined that the identified lands are subject to the Marine Corps Air Station Miramar INRMP and that conservation efforts identified in the INRMP will provide a benefit to the Hermes copper butterfly. Therefore, lands within this installation are exempt from critical habitat designation under section 4(a)(3) of the Act. We are not including approximately 967 ha (2,389 ac) of habitat in this proposed critical habitat designation because of this exemption.
Section 4(b)(2) of the Act states that the Secretary shall designate and make revisions to critical habitat on the basis of the best available scientific data after taking into consideration the economic impact, national security impact, and any other relevant impact of specifying any particular area as critical habitat. The Secretary may exclude an area from critical habitat if he determines that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless he determines, based on the best scientific data available, that the failure to designate such area as critical habitat will result in the extinction of the species. In making that determination, the statute on its face, as well as the legislative history, are clear that the Secretary has broad discretion regarding which factor(s) to use and how much weight to give to any factor.
We have not considered any areas for exclusion from critical habitat. However, the final decision on whether to exclude any areas will be based on the best scientific data available at the time of the final designation, including information obtained during the comment period and information about the economic impact of designation. Accordingly, we have prepared a draft economic analysis concerning the proposed critical habitat designation, which is available for review and comment (see
Section 4(b)(2) of the Act and its implementing regulations require that we consider the economic impact that may result from a designation of critical habitat. To assess the probable economic impacts of a designation, we must first evaluate specific land uses or activities and projects that may occur in the area of the critical habitat. We then must evaluate the impacts that a specific critical habitat designation may have on restricting or modifying specific land uses or activities for the benefit of the species and its habitat within the areas proposed. We then identify which conservation efforts may be the result of the species being listed under the Act versus those attributed solely to the designation of critical habitat for this particular species. The probable economic impact of a proposed critical habitat designation is analyzed by comparing scenarios both “with critical habitat” and “without critical habitat.” The “without critical habitat” scenario represents the baseline for the analysis, which includes the existing regulatory and socio-economic burden imposed on landowners, managers, or other resource users potentially affected by the designation of critical habitat (
For this particular designation, we developed an Incremental Effects Memorandum (IEM) considering the probable incremental economic impacts that may result from this proposed designation of critical habitat (Service 2018b). The information contained in our IEM was then used to develop a screening analysis of the probable effects of the designation of critical habitat for the Hermes copper butterfly (IEc 2018, entire). We began by conducting a screening analysis of the proposed designation of critical habitat in order to focus our analysis on the key factors that are likely to result in incremental economic impacts. The purpose of the screening analysis is to filter out the geographic areas in which the critical habitat designation is unlikely to result in probable incremental economic impacts. In particular, the screening analysis considers baseline costs (
Executive Orders 12866 and 13563 direct Federal agencies to assess the costs and benefits of available regulatory alternatives in quantitative (to the extent feasible) and qualitative terms. Consistent with the E.O. regulatory
In our IEM, we attempted to clarify the distinction between the effects that will result from the species being listed and those attributable to the critical habitat designation (
The proposed critical habitat designation for the Hermes copper butterfly totals approximately 14,249 ha (35,211 ac) in three units, all of which are occupied by the species. The screening memo found that incremental costs associated with section 7 consultations would likely be low for the Hermes copper butterfly for several reasons (IEc 2018, p. 9). First, the majority of the critical habitat designation is on State, private, and local lands where a Federal nexus is unlikely (although there are a few areas where the Army Corps of Engineers has jurisdiction). Secondly, given that all the proposed units are occupied, should a Federal nexus exist, any proposed projects would need to undergo some form of consultation due to the presence of the butterfly regardless of critical habitat designation.
Additionally, as previously stated, we expect that any project modifications identified to avoid jeopardy that would result from project-related effects to habitat features required by the species would be similar to those identified to avoid destruction or adverse modification of the critical habitat's physical or biological features essential to the conservation of the species. Furthermore, all critical habitat units overlap to some degree with critical habitat for other listed species or with various conservation plans, State plans, or Federal regulations. These protections may also benefit the Hermes copper butterfly, even in the absence of critical habitat for the species.
When an action is proposed in an area of occupied designated critical habitat, and the proposed activity has a Federal nexus, the need for consultation is triggered. Any incremental costs associated with consideration of potential effects to the critical habitat are a result of this consultation process. Overall, we expect that agency administrative costs for consultation, incurred by the Service and the consulting Federal agency, would be minor (less than $6,000 per consultation effort) and, therefore, would not be significant (IEc 2018, p. 10). In addition, based on the non-inclusion of lands likely to have a Federal nexus (such as riparian vegetation associations), and coordination efforts with State and local agencies, we expect the overall incremental costs will be minor.
Therefore, incremental costs would be limited to additional administrative efforts by the Service and consulting Federal agencies to include consideration of potential effects to the designated critical habitat in otherwise needed consultations. These future costs are unknown, but expected to be relatively small given the projections by affected entities and are unlikely to exceed $100,000 in any given year. Consequently, future probable incremental economic impacts are not likely to exceed $100 million in any single year and would therefore not be significant.
Section 4(b)(2) of the Act and its implementing regulations require that we consider the impact to national security that may result from a designation of critical habitat. For this proposed rule, we considered whether there are lands owned or managed by the Department of Defense within proposed critical habitat where a national security impact might exist. In this case, we are exempting under section 4(a)(3) of the Act all lands that meet the definition of critical habitat owned by the Department of Defense. Additionally, in preparing this proposal, we have determined that the lands within the proposed designation of critical habitat for Hermes copper butterfly are not owned or managed by the Department of Homeland Security. Therefore, we anticipate no impact on national security.
Section 4(b)(2) of the Act and its implementing regulations require that we also consider any other relevant impacts that may result from a designation of critical habitat. In conducting that analysis, we consider a number of factors including whether there are permitted conservation plans covering the species in the area such as HCPs, safe harbor agreements, or candidate conservation agreements with assurances, or whether there are non-permitted conservation agreements and partnerships that would be encouraged by designation of, or exclusion from, critical habitat. In addition, we look at the existence of any Tribal conservation plans and partnerships and consider the government-to-government relationship of the United States with Tribal entities. We also consider any social impacts that might occur because of the designation.
In preparing this proposal, we have determined that there are currently no HCPs or other management plans for the Hermes copper butterfly, and the proposed designation does not include any Tribal lands or trust resources. We anticipate no impact on Tribal lands, partnerships, or HCPs from this proposed critical habitat designation.
As we stated earlier, we are soliciting data and comments from the public on the draft economic analysis, as well as all aspects of the proposed rule and our required determinations. We may revise the proposed rule or supporting documents to incorporate or address information we receive during the public comment period. In particular, we may exclude an area from critical habitat if we determine that the benefits of excluding the area outweigh the benefits of including the area, provided the exclusion will not result in the extinction of this species.
At this time, the Secretary does not intend to exercise his discretion to exclude any areas from the final designation of critical habitat under section 4(b)(2) of the Act. During the development of the final designation, we will consider any additional information related to the economic impacts, national security impacts, or any other relevant impacts of specifying any particular area as critical habitat that is received through the public comment period, and as such areas may be excluded from the final critical habitat designation under section 4(b)(2) of the Act and our implementing regulations at 50 CFR 424.19.
Conservation measures provided to species listed as endangered or threatened species under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition through listing results in public awareness and in conservation by Federal, State, Tribal, and local agencies, as well as private organizations and individuals. The Act encourages cooperation with the States and other countries and calls for recovery actions to be carried out for listed species. The protection required by Federal agencies and the prohibitions against certain activities are discussed, in part, below.
The primary purpose of the Act is the conservation of endangered and threatened species and the ecosystems upon which they depend. The ultimate goal of such conservation efforts is the recovery of these listed species, so that they no longer need the protective measures of the Act. Subsection 4(f) of the Act calls for the Service to develop and implement recovery plans for the conservation of endangered and threatened species. The recovery planning process involves the identification of actions that are necessary to halt or reverse the species' decline by addressing the threats to its survival and recovery. The goal of this process is to restore listed species to a point where they are secure, self-sustaining, and functioning components of their ecosystems.
Recovery planning includes the development of a recovery outline shortly after a species is listed and preparation of a draft and final recovery plan. The recovery outline guides the immediate implementation of urgent recovery actions and describes the process to be used to develop a recovery plan. Revisions of the plan may be done to address continuing or new threats to the species, as new substantive information becomes available. The recovery plan also identifies recovery criteria for review of when a species may be ready for downlisting or delisting, and methods for monitoring recovery progress. Recovery plans also establish a framework for agencies to coordinate their recovery efforts and provide estimates of the cost of implementing recovery tasks. Recovery teams (composed of species experts, Federal and State agencies, nongovernmental organizations, and stakeholders) are often established to develop recovery plans. When completed, the recovery outline, draft recovery plan, and the final recovery plan for the Hermes copper butterfly, if listed, will be available on our website (
Implementation of recovery actions generally requires the participation of a broad range of partners, including other Federal agencies, States, Tribes, nongovernmental organizations, businesses, and private landowners. Examples of recovery actions include habitat restoration (
If this species is listed, funding for recovery actions will be available from a variety of sources, including Federal budgets, State programs, and cost share grants for non-Federal landowners, the academic community, and nongovernmental organizations. In addition, pursuant to section 6 of the Act, the State of California would be eligible for Federal funds to implement management actions that promote the protection or recovery of the Hermes copper butterfly. Information on our grant programs that are available to aid species recovery can be found at:
Although the Hermes copper butterfly is only proposed for listing under the Act at this time, please let us know if you are interested in participating in recovery efforts for this species. Additionally, we invite you to submit any new information on this species whenever it becomes available and any information you may have for recovery planning purposes (see
Section 7(a) of the Act requires Federal agencies to evaluate their actions with respect to any species that is proposed or listed as an endangered or threatened species and with respect to its critical habitat, if any is designated. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any action that is likely to jeopardize the continued existence of a species proposed for listing or result in destruction or adverse modification of proposed critical habitat. If a species is listed subsequently, section 7(a)(2) of the Act requires Federal agencies to ensure that activities they authorize, fund, or carry out are not likely to jeopardize the continued existence of the species or destroy or adversely modify its critical habitat. If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency must enter into consultation with the Service.
Federal agency actions within the species' habitat that may require conference or consultation or both as described in the preceding paragraph include activities that may affect the species, land management, and any other landscape-altering activities that may affect the physical or biological features essential to the conservation of the species.
Under section 4(d) of the Act, the Service has discretion to issue regulations that we find necessary and advisable to provide for the conservation of threatened species
As discussed above in the Summary of Factors Affecting the Species section of this proposed listing rule and the SSA (Service 2018a, pp. 15 and 16), factors limiting the distribution of Hermes copper butterfly are not entirely understood, since the species' distribution is much more restricted than its host plant. The highest magnitude threats to the Hermes copper butterfly include extirpation of populations by wildfire and loss and isolation of populations due to development.
This 4(d) rule describes how and where the prohibitions of section 9(a)(1) of the Act will be applied. As described in more detail later in this section, this proposed 4(d) rule identifies a certain portion of the species' range that would not be subject to the take prohibitions under section 9(a)(1) of the Act (Figure 1). Outside of the area delineated in Figure 1, this proposed 4(d) rule would prohibit all acts described under section 9(a)(1) of the Act, except take resulting from the activities listed below when conducted within habitats occupied by the Hermes copper butterfly. All of the activities listed below must be conducted in a manner that (1) maintains contiguity of suitable habitat for the species within and dispersal corridor connectivity among populations, allowing for maintenance of populations and recolonization of unoccupied, existing habitat; (2) does not increase the risk of wildfire in areas occupied by the Hermes copper butterfly while preventing further habitat fragmentation and isolation, or degradation of potentially suitable habitat; and (3) does not preclude efforts to augment or reintroduce populations of the Hermes copper butterfly within its historical range with management of the host plant. Some exempted activities must be coordinated with and reported to the Service in writing and approved to ensure accurate interpretation of exemptions (for example, that activities do not adversely affect the species' conservation and recovery). Questions regarding the proposed application of these requirements should be directed to the Carlsbad Ecological Services Field Office (see
This proposed 4(d) rule would exempt from the prohibitions in section 9(a)(1) of the Act take resulting from any of the following activities when conducted within habitats occupied by the Hermes copper butterfly:
(1) Survey and monitoring work in coordination with and reported to the Service as part of scientific inquiry involving quantitative data collection (such as population status determinations).
(2) Habitat management or restoration activities, including removal of nonnative, invasive plants, expected to provide a benefit to Hermes copper butterfly or other sensitive species of the chaparral and coastal sage scrub ecosystems, including removal of nonnative, invasive plants. These activities must be coordinated with and reported to the Service in writing and approved the first time an individual or agency undertakes them.
(3) Activities necessary to maintain the minimum clearance (defensible space) requirement of 30 m (100 ft) from any occupied dwelling, occupied structure, or to the property line, whichever is nearer, to provide reasonable fire safety and comply with State of California fire codes to reduce wildfire risks.
(4) Fire management actions on protected/preserve lands to maintain, protect, or enhance coastal sage scrub and chaparral vegetation. These activities must be coordinated with and reported to the Service in writing and approved the first time an individual or agency undertakes them.
(5) Maintenance of existing fuel breaks identified by local fire authorities to protect existing structures.
(6) Firefighting activities associated with actively burning fires to reduce risk to life or property.
(7) Collection, transportation, and captive-rearing of Hermes copper butterfly for the purpose of population augmentation or reintroduction, maintaining refugia, or as part of scientific inquiry involving quantitative data collection (such as survival rate, larval weights, and post-release monitoring) approved by, in coordination with, and reported to the Service. This does not include activities such as personal “hobby” collecting and rearing intended for photographic purposes and re-release.
(8) Research projects involving collection of individual fruits, leaves, or stems of the Hermes copper butterfly host plant, spiny redberry, approved by, in coordination with, and reported to the Service.
We believe these actions and activities, while they may result in some minimal level of mortality, harm, or disturbance to the Hermes copper butterfly, are not expected to adversely affect the species' conservation and recovery. In fact, we expect they would have a net beneficial effect on the species. Across the species' range, suitable habitat has been degraded or fragmented by development and wildfire, including megafires. The activities covered by this proposed 4(d) rule will address some of these problems, creating more favorable habitat conditions for the species and helping to stabilize or increase populations of the species. Like the proposed listing rule, this proposed 4(d) rule will not be finalized until we have reviewed comments from the public and peer reviewers.
Additionally, we are proposing under section 4(d) of the Act to delineate a certain portion of the species' range that would not be subject to the take prohibitions under section 9(a)(1) of the Act (Figure 1). Areas inside this portion of the species' range capture all remnant habitat areas where there is any possibility of Hermes copper butterfly occupancy and where we are confident they would not contribute significantly to species' recovery because of limited available habitat and connectivity. They are unlikely to contribute to recovery because any occupied areas within the boundary are too small and isolated to support a population in the long term. The intent is to provide regulatory relief to those who might otherwise be affected by the species being listed as threatened, and to encourage and strengthen conservation partnerships among Federal, State, and local agencies; and other partners and other public we serve.
The areas where the section 9(a)(1) prohibitions would not apply are shown in Figure 1. These areas were designed in the following way: The southern edge is the Mexican border and the western edge is the Pacific coast. The eastern and northern edges of the boundary follow the development that would isolate any extant populations found within the boundaries. We did not include areas where we believed there was any chance of future dispersal corridor connectivity among extant populations, including habitat that could potentially be managed or restored to act as suitable connecting habitat. For a more detailed map of the areas where the section 9(a)(1) prohibitions would not apply, please contact the Carlsbad Fish and Wildlife Office (see
Based on the rationale above, the provisions included in this proposed 4(d) rule are necessary and advisable to provide for the conservation of the Hermes copper butterfly. Nothing in this proposed 4(d) rule would change in any way the recovery planning provisions of section 4(f) of the Act, the consultation requirements under section 7 of the Act, or the ability of the Service to enter into partnerships for the management and protection of the Hermes copper butterfly.
We may issue permits to carry out otherwise prohibited activities involving threatened wildlife under certain circumstances. Regulations governing permits are codified at 50 CFR 17.32. There are also certain statutory exemptions from the prohibitions, which are found in sections 9 and 10 of the Act.
It is our policy, as published in the
Based on the best available information, the following actions are unlikely to result in a violation of section 9, if these activities are carried out in accordance with existing regulations and permit requirements or within the portion of the species' range
(1) Normal agricultural and silvicultural practices, including pesticide use, which are carried out in accordance with any existing regulations, permit and label requirements, and best management practices;
(2) Normal residential and urban landscape activities, such as mowing, edging, fertilizing, etc.; and
(3) Recreation and management at National Forests that is conducted in accordance with existing USFS regulations and policies.
Based on the best available information, the following activities may potentially result in violation of section 9 of the Act; this list is not comprehensive:
(1) Unauthorized collecting, handling, possessing, selling, delivering, carrying, or transporting of the species (adults, eggs, larvae, or pupae), including transport across State lines and international boundaries, except for properly documented antique specimens of these taxa at least 100 years old, as defined by section 10(h)(1) of the Act;
(2) Unauthorized modification, removal, or destruction of spiny redberry within the species' range that is known to be occupied by Hermes copper butterfly and that may result in death or injury of adults, eggs, larvae, or pupae; and
(3) Illegal pesticide applications (
Questions regarding whether specific activities would constitute a violation of section 9 of the Act should be directed to the Carlsbad Ecological Services Field Office (see
We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:
(1) Be logically organized;
(2) Use the active voice to address readers directly;
(3) Use clear language rather than jargon;
(4) Be divided into short sections and sentences; and
(5) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us comments by one of the methods listed in
We do not believe this proposed rule is an E.O. 13771 (“Reducing Regulation and Controlling Regulatory Costs”) (82 FR 9339, February 3, 2017) regulatory action because we believe this rule is not significant under E.O. 12866; however, the Office of Information and Regulatory Affairs has waived their review regarding their E.O. 12866 significance determination of this proposed rule.
Executive Order 12866 provides that the Office of Information and Regulatory Affairs (OIRA) will review all significant rules. The Office of Information and Regulatory Affairs has waived their review regarding their significance determination of this proposed rule.
Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements.
Under the Regulatory Flexibility Act (RFA; 5 U.S.C. 601
According to the Small Business Administration, small entities include small organizations such as independent nonprofit organizations; small governmental jurisdictions, including school boards and city and town governments that serve fewer than 50,000 residents; and small businesses (13 CFR 121.201). Small businesses include manufacturing and mining concerns with fewer than 500 employees, wholesale trade entities with fewer than 100 employees, retail and service businesses with less than $5 million in annual sales, general and heavy construction businesses with less than $27.5 million in annual business, special trade contractors doing less than $11.5 million in annual business, and agricultural businesses with annual sales less than $750,000. To determine if potential economic impacts to these small entities are significant, we considered the types of activities that might trigger regulatory impacts under this designation as well as types of project modifications that may result. In general, the term “significant economic impact” is meant to apply to a typical small business firm's business operations.
The Service's current understanding of the requirements under the RFA, as amended, and following recent court decisions, is that Federal agencies are only required to evaluate the potential incremental impacts of rulemaking on those entities directly regulated by the rulemaking itself, and therefore, not required to evaluate the potential impacts to indirectly regulated entities. The regulatory mechanism through which critical habitat protections are realized is section 7 of the Act, which requires Federal agencies, in consultation with the Service, to ensure that any action authorized, funded, or carried out by the Agency is not likely to destroy or adversely modify critical habitat. Therefore, under section 7, only Federal action agencies are directly subject to the specific regulatory requirement (avoiding destruction and
Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use) requires agencies to prepare Statements of Energy Effects when undertaking certain actions. In our economic analysis, we did not find that the designation of this proposed critical habitat will significantly affect energy supplies, distribution, or use. Furthermore, although it does include areas where powerlines and power facility construction and maintenance may occur in the future, it will not produce a Federal mandate of $100 million or greater in any year, that is, it is not a “significant regulatory action” under the Unfunded Mandates Reform Act. Therefore, this action is not a significant energy action, and no Statement of Energy Effects is required.
In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501
(1) This rule will not produce a Federal mandate. In general, a Federal mandate is a provision in legislation, statute, or regulation that would impose an enforceable duty upon State, local, or Tribal governments, or the private sector, and includes both “Federal intergovernmental mandates” and “Federal private sector mandates.” These terms are defined in 2 U.S.C. 658(5)-(7). “Federal intergovernmental mandate” includes a regulation that “would impose an enforceable duty upon State, local, or Tribal governments” with two exceptions. It excludes “a condition of Federal assistance.” It also excludes “a duty arising from participation in a voluntary Federal program,” unless the regulation “relates to a then-existing Federal program under which $500,000,000 or more is provided annually to State, local, and Tribal governments under entitlement authority,” if the provision would “increase the stringency of conditions of assistance” or “place caps upon, or otherwise decrease, the Federal Government's responsibility to provide funding,” and the State, local, or Tribal governments “lack authority” to adjust accordingly. At the time of enactment, these entitlement programs were: Medicaid; Aid to Families with Dependent Children work programs; Child Nutrition; Food Stamps; Social Services Block Grants; Vocational Rehabilitation State Grants; Foster Care, Adoption Assistance, and Independent Living; Family Support Welfare Services; and Child Support Enforcement. “Federal private sector mandate” includes a regulation that “would impose an enforceable duty upon the private sector, except (i) a condition of Federal assistance or (ii) a duty arising from participation in a voluntary Federal program.”
The designation of critical habitat does not impose a legally binding duty on non-Federal Government entities or private parties. Under the Act, the only regulatory effect is that Federal agencies must ensure that their actions do not destroy or adversely modify critical habitat under section 7. While non-Federal entities that receive Federal funding, assistance, or permits, or that otherwise require approval or authorization from a Federal agency for an action, may be indirectly impacted by the designation of critical habitat, the legally binding duty to avoid destruction or adverse modification of critical habitat rests squarely on the Federal agency. Furthermore, to the extent that non-Federal entities are indirectly impacted because they receive Federal assistance or participate in a voluntary Federal aid program, the Unfunded Mandates Reform Act would not apply, nor would critical habitat shift the costs of the large entitlement programs listed above onto State governments.
(2) We do not believe this rule would significantly or uniquely affect small governments because it will not produce a Federal mandate of $100 million or greater in any year, that is, it is not a “significant regulatory action” under the Unfunded Mandates Reform Act. The designation of critical habitat imposes no obligations on State or local governments and, as such, a Small Government Agency Plan is not required.
In accordance with E.O. 12630 (Government Actions and Interference with Constitutionally Protected Private Property Rights), we have analyzed the potential takings implications of designating critical habitat for the Hermes copper butterfly in a takings implications assessment. The Act does not authorize the Service to regulate private actions on private lands or confiscate private property as a result of critical habitat designation. Designation of critical habitat does not affect land ownership, or establish any closures, or restrictions on use of or access to the designated areas. Furthermore, the designation of critical habitat does not affect landowner actions that do not require Federal funding or permits, nor does it preclude development of habitat conservation programs or issuance of incidental take permits to permit actions that do require Federal funding or permits to go forward. However, Federal agencies are prohibited from carrying out, funding, or authorizing actions that would destroy or adversely modify critical habitat. A takings implications assessment has been completed and concludes that this designation of critical habitat for the Hermes copper butterfly does not pose significant takings implications for lands within or affected by the designation.
In accordance with E.O. 13132 (Federalism), this proposed rule does not have significant Federalism effects. A Federalism assessment is not required. In keeping with Department of the Interior and Department of Commerce policy, we request information from, and coordinated development of this proposed critical habitat designation with, appropriate State resource agencies in California. From a federalism perspective, the designation of critical habitat directly affects only the responsibilities of Federal agencies. The Act imposes no other duties with respect to critical habitat, either for States and local governments, or for anyone else. As a result, the rule does not have substantial direct effects either on the States, or on the relationship between the national government and the States, or on the distribution of powers and responsibilities among the various levels of government. The designation may have some benefit to these governments because the areas that contain the features essential to the conservation of the species are more clearly defined, and the physical or biological features of the habitat necessary to the conservation of the species are specifically identified. This information does not alter where and what federally sponsored activities may occur. However, it may assist these local governments in long-range planning
Where State and local governments require approval or authorization from a Federal agency for actions that may affect critical habitat, consultation under section 7(a)(2) would be required. While non-Federal entities that receive Federal funding, assistance, or permits, or that otherwise require approval or authorization from a Federal agency for an action, may be indirectly impacted by the designation of critical habitat, the legally binding duty to avoid destruction or adverse modification of critical habitat rests squarely on the Federal agency.
In accordance with Executive Order 12988 (Civil Justice Reform), the Office of the Solicitor has determined that the rule does not unduly burden the judicial system and that it meets the requirements of sections 3(a) and 3(b)(2) of the Order. We have proposed designating critical habitat in accordance with the provisions of the Act. To assist the public in understanding the habitat needs of the species, the rule identifies the elements of physical or biological features essential to the conservation of the species. The designated areas of critical habitat are presented on maps, and the rule provides several options for the interested public to obtain more detailed location information, if desired.
This rule does not contain any new collections of information that require approval by OMB under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
It is our position that, outside the jurisdiction of the U.S. Court of Appeals for the Tenth Circuit, we do not need to prepare environmental analyses pursuant to the National Environmental Policy Act (NEPA; 42 U.S.C. 4321
A complete list of references cited in this proposed rulemaking is available on the internet at
The primary authors of this proposed rule are the staff members of the Fish and Wildlife Service's Species Assessment Team and the Carlsbad Ecological Services Field Office.
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361-1407; 1531-1544; and 4201-4245; unless otherwise noted.
(h) * * *
(d) Hermes copper butterfly (
(2)
(A) Maintains contiguity of suitable habitat for the species within and dispersal corridor connectivity among populations, allowing for maintenance of populations and recolonization of unoccupied, existing habitat;
(B) Does not increase the risk of wildfire in areas occupied by the Hermes copper butterfly while preventing further habitat fragmentation and isolation, or degradation of potentially suitable habitat; and
(C) Does not preclude efforts to augment or reintroduce populations of the Hermes copper butterfly within its historical range with management of the host plant.
(ii) Take of the Hermes copper butterfly outside the area delineated in paragraph (d)(2)(iii) of this section will
(A) Survey and monitoring work in coordination with and reported to the Service as part of scientific inquiry involving quantitative data collection (such as population status determinations).
(B) Habitat management or restoration activities, including removal of nonnative, invasive plants, expected to provide a benefit to Hermes copper butterfly or other sensitive species of the chaparral and coastal sage scrub ecosystems, including removal of nonnative, invasive plants. These activities must be coordinated with and reported to the Service in writing and approved the first time an individual or agency undertakes them.
(C) Activities necessary to maintain the minimum clearance (defensible space) requirement of 30 m (100 ft) from any occupied dwelling, occupied structure, or to the property line, whichever is nearer, to provide reasonable fire safety and comply with State of California fire codes to reduce wildfire risks.
(D) Fire management actions on protected/preserve lands to maintain, protect, or enhance coastal sage scrub and chaparral vegetation. These activities must be coordinated with and reported to the Service in writing and approved the first time an individual or agency undertakes them.
(E) Maintenance of existing fuel breaks identified by local fire authorities to protect existing structures.
(F) Firefighting activities associated with actively burning fires to reduce risk to life or property.
(G) Collection, transportation, and captive-rearing of Hermes copper butterfly for the purpose of population augmentation or reintroduction, maintaining refugia, or as part of scientific inquiry involving quantitative data collection (such as survival rate, larval weights, and post-release monitoring) in coordination with and reported to the Service. This does not include activities such as personal “hobby” collecting and rearing intended for photographic purposes and re-release.
(H) Research projects involving collection of individual fruits, leaves, or stems of the Hermes copper butterfly host plant, spiny redberry, in coordination with and reported to the Service.
(iii) A portion of the range of the Hermes copper butterfly is exempt from all take prohibitions under section 9(a)(1) of the Act.
(A) The southern edge is the Mexican border, and the western edge is the Pacific coast. The eastern and northern edges of the boundary follow the development that would isolate any extant populations found within the boundaries.
(B)
(3)
(i)
(1) Critical habitat units are depicted for San Diego County, California, on the maps below.
(2) Within these areas, the physical or biological features essential to the conservation of the Hermes copper butterfly consist of the following components when found between 30 m and 1,341 m above sea level:
(i) Spiny redberry host plants.
(ii) Nectar sources for adult butterflies.
(3) Critical habitat does not include manmade structures (such as buildings, aqueducts, runways, roads, and other paved areas) and the land on which they are located existing within the legal boundaries on [EFFECTIVE DATE OF THE FINAL RULE].
(4) Critical habitat was mapped using GIS analysis tools and refined using 2016 NAIP imagery and/or the World Imagery layer from ArcGIS Online. The maps in this entry, as modified by any accompanying regulatory text, establish the boundaries of the critical habitat designation. The coordinates or plot points or both on which each map is based are available to the public at
(5)
(6) Unit 1: Lopez Canyon, San Diego County, California.
(i) Unit 1 consists of 166 ha (410 ac) in San Diego County and is composed of lands jointly owned and managed by the City and County of San Diego (88 ha (218 ac)) and private or other ownership (77 ha (191 ac)).
(ii)
(7) Unit 2: Miramar/Santee, San Diego County, California.
(i) Unit 2 consists of 2,870 ha (7,092 ac) in San Diego County and is composed of lands owned and managed by the State of California (111 ha (275 ac)), local jurisdictions (primarily the County of San Diego; 1,113 ha (2,750 ac)), and private or other ownership (1,646 ha (4,068 ac)).
(ii)
(8) Unit 3: Southeast San Diego, San Diego County, California.
(i) Unit 3 consists of 11,213 ha (27,709 ac) in San Diego County and is composed of lands owned by the Federal Government (4,213 ha (10,411 ac)), the State of California (2,074 ha (5,124 ac)), local jurisdictions (primarily the City and County of San Diego; 1,162 ha (2,871 ac)), and private or other ownership (3,765 ha (9,303 ac)).
(ii)
Office of the Comptroller of the Currency (OCC), Treasury.
Notice of proposed rulemaking.
The OCC seeks comment on a proposed rule that would implement changes recommended in the March 2017 Economic Growth and Regulatory Paperwork Reduction Act report, including the repeal of the OCC's employment contract rule for Federal savings associations, and amend the OCC's fiduciary rules. The proposed rule also would amend the OCC's rule for conversions from mutual to stock form of a savings association to reduce burden, increase flexibility, and update cross-references. Additionally, the proposed rule would update cross-references to repealed and integrated rules, remove unnecessary definitions, and make technical changes to other OCC rules.
Comments must be received on or before March 9, 2020.
Commenters are encouraged to submit comments through the Federal eRulemaking Portal or email, if possible. Please use the title “Employment Contracts, Mutual to Stock Conversions, Technical Amendments” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods:
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You may review comments and other related materials that pertain to this rulemaking action by any of the following methods:
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The docket may be viewed after the close of the comment period in the same manner as during the comment period.
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For additional information, contact Charlotte Bahin, Senior Advisor for Thrift Supervision, (202) 649-6281, Marta Stewart-Bates, Senior Attorney, (202) 649-5490, Chief Counsel's Office, for persons who are deaf or hearing impaired, TTY, (202) 649-5597, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.
The OCC continually reviews its regulations with the goal of updating them to reduce burden, increase flexibility, and provide clarity where possible. Section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires that, at least once every 10 years, the Federal Financial Institutions Examination Council (FFIEC) and each appropriate Federal banking agency (Agencies) represented on the FFIEC (the OCC, the Federal Deposit Insurance Corporation (FDIC), and the Board of Governors of the Federal Reserve System (Federal Reserve Board))
The proposed rule would amend part 192 (Federal savings association conversions from mutual to stock form) to reduce burden, increase flexibility, and replace cross-references to repealed 12 CFR 197 (Securities offerings rules for Federal savings associations) with cross-references to part 16 (Securities offering disclosure rules). The proposed amendments would clarify which forms and accounting standards savings associations must use in connection with a part 192 conversion. The proposed rule also would increase flexibility and reduce burden for Federal savings associations by encouraging electronic filing, electronic meetings, and notice by email and by reducing the number of copies of proxy materials that must be filed with the OCC.
Finally, the proposed rule contains various technical and clarifying amendments to parts 3, 4, 11, 16, 19, 23, 26, 32, 108, 112, 141, 160, 161, and 163.
Twelve CFR 163.39 sets forth requirements for Federal savings associations that enter into employment contracts with their officers and employees. Section 163.39(a) requires a Federal savings association's board of directors to approve all employment contracts with its officers and other employees and for those employment contracts to be in writing. Section 163.39(a) also prohibits a Federal savings association from entering into an employment contract with any of its officers or other employees if the employment contract would constitute an unsafe or unsound practice. Section 163.39(b) sets forth provisions that a Federal savings association must include in the contract, including the Federal savings association's right to terminate the employee at will. There are no similar requirements for national banks.
In March 2017, the FFIEC made its Joint Report to Congress under EGRPRA. One EGRPRA commenter recommended that the OCC eliminate § 163.39 in its entirety because the regulation only applies to Federal savings associations and there is no reason to distinguish Federal savings associations from national banks. Additionally, the commenter stated that it is unnecessary to require board approval of all employment contracts because there are comprehensive safety and soundness standards and interagency guidance on compensation. In the EGRPRA report, the OCC described the plan to limit the requirement for board approval of employment contracts to senior executive officers rather than all employees.
Instead of limiting the scope of § 163.39 in the proposed rule to senior executive officers, the OCC proposes to eliminate § 163.39 in its entirety. This approach would provide for consistent treatment of Federal savings associations and national banks with respect to employment contracts and compensation. The OCC believes that the current framework of rules and guidance on compensation and employment contracts, independent of § 163.39, is adequate to address and safeguard against unsafe and unsound employment and compensation practices for Federal savings associations. Federal savings associations, like national banks, are subject to the safety and soundness standards of 12 U.S.C. 1818; 12 CFR part 30, the prohibition on unsafe and unsound compensation in appendix A to part 30; the prompt corrective action restrictions on compensation to senior executive officers in 12 CFR 6.6(a)(3) and section 38 of the Federal Deposit Insurance Act (FDIA); and are informed by the 2010 Interagency Guidance on Sound Incentive Compensation Policies. Moreover, the boards of directors at national banks and Federal savings associations have oversight responsibilities for compensation, benefits arrangements, and employment contracts for their executive officers and employees.
The proposed rule also would reduce burden and increase flexibility for Federal savings associations by eliminating the requirement for written contracts that must be approved by the board of directors, although Federal savings associations would not be prohibited from voluntarily using those procedures for their employment contracts. It is a good corporate governance practice to have agreements relating to employment and compensation in writing and that the board, or committee thereof, review and approve those agreements. The proposed repeal of § 163.39 would not alter any other obligation with regard to employment agreements entered into by a Federal savings association. For example, if there are other laws and regulations that apply to Federal savings associations regarding employment contracts, the repeal of § 163.39 does not affect the application of those laws.
The OCC invites comment on whether the OCC should repeal all of § 163.39 or whether there are advantages to retaining the provisions of the rule that provide that an officer or employee has no right to receive compensation or other benefits after termination for cause. Do the safety and soundness standards in part 30, the prohibition on unsafe and unsound compensation in appendix A to part 30, the 2010 Interagency Guidance on Sound Incentive Compensation Policies, board of directors' oversight, and the prompt corrective action restrictions on compensation to senior executive officers provide appropriate safeguards regarding employment and compensation for the officers and employees of Federal savings associations? Would the repeal of § 163.39 reduce burden for Federal savings associations by removing the requirement that employment contracts be in writing and approved by the board? Would the repeal of § 163.39 reduce burden or provide flexibility for Federal savings associations for other reasons?
Part 9 sets forth the standards that apply to the fiduciary activities of national banks. Part 150 sets forth the standards that apply to the fiduciary activities of Federal savings associations. Sections 9.8 and 150.420 contain requirements for the documentation and retention of records for fiduciary accounts at national banks and Federal savings associations, respectively. Sections 9.8(b) and
To address this comment, one option would be to amend §§ 9.8(b) and 150.420 to require a national bank or Federal savings association to retain fiduciary account records for the later of three years from the termination of an account, three years from the termination of any litigation relating to the account, or the minimum period required by applicable fiduciary State law. A concern with this approach is that it would impose additional burden on national banks and Federal savings associations if it increases the number of years an institution would be required to retain records and may also require institutions to monitor changes to states' fiduciary laws.
Another option would be to decline to amend §§ 9.8(b) and 150.420, after having considered the burden related to aligning this regulation's existing three-year documentation and record retention requirement with applicable State fiduciary law. The OCC notes that nothing in §§ 9.8(b) or 150.420 prohibits financial institutions from holding fiduciary account records longer than the three-year period in order to comply with State law. The OCC invites comment on these options for §§ 9.8(b) and 150.420.
Under 12 U.S.C. 92a(d) and 12 CFR 9.10(b)(1), a national bank may deposit trust funds awaiting investment or distribution in the commercial, savings, or other department of the bank, unless prohibited by applicable law. To the extent the funds are not insured by the Federal Deposit Insurance Corporation (FDIC), the national bank must set aside U.S. bonds or other securities and assets designated by the OCC as collateral for the deposit. Sections 9.10(b)(2) and 150.320 list acceptable collateral types for national banks and Federal savings associations, respectively. During the notice and comment period for the EGRPRA report, one commenter suggested an expansion of the § 9.10(b)(2) list of acceptable collateral for fiduciary funds to allow for other instruments that provide similar protection from loss. In response to this comment, the OCC is contemplating expanding the list of acceptable collateral.
The OCC requests comment on whether to expand the list of acceptable collateral in §§ 9.10(b)(2) and 150.320 to include additional types of instruments. What other instruments should qualify as acceptable collateral and why? Do these instruments provide sufficient protection from loss to qualify as acceptable collateral under § 9.10(b)(2) and 150.320?
Twelve CFR 16.8 provides an exemption from the registration and prospectus requirements for offers and sales of national bank- or Federal savings association-issued securities that satisfy the requirements of SEC Regulation A (17 CFR part 230) (General rules and regulations, Securities Act of 1933). The SEC's Form 1-A, the offering statement required by Regulation A, requires audited financial statements for certain offerings. However, a national bank or Federal savings association in organization does not have an operating history and cannot generate detailed financial statements that require an audit. The audited financial statements of a national bank or Federal savings association in organization typically do not add materially to the information already available to the OCC through the chartering process. Therefore, the OCC is proposing to revise § 16.15(e) to clarify that a national bank or Federal savings association in organization is not required to include audited financial statements as part of its offering statement for the issuance of securities pursuant to § 16.8, unless the OCC determines otherwise.
Twelve CFR 16.17 sets forth the filing requirements and inspection of documents for securities offerings. The OCC is proposing to add a sentence to § 16.17(b) to clarify that all registration statements, offering documents, amendments, notices, or other documents relating to a mutual to stock conversion pursuant to 12 CFR part 192 must be filed with the appropriate OCC Licensing office and not the Securities and Corporate Practices Division of the OCC.
Section 36(g)(4)(A) of the FDIA (12 U.S.C. 1831m(g)(4)(A)) provides that the FDIC or an appropriate Federal banking agency may remove, suspend, or bar an independent public accountant, upon a showing of good cause, from performing audit services required by section 36. The OCC's implementing rules for insured national banks and insured Federal branches of foreign banks are set forth in subpart P to 12 CFR part 19. The former OTS implemented section 36(g)(4) with respect to insured savings associations at 12 CFR 513.8, and these rules are substantively identical to subpart P. However, when republishing the former OTS rules as OCC rules pursuant to Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the OCC inadvertently did not republish 12 CFR 513.8 nor amend subpart P of part 19 to apply to Federal savings associations. This proposed amendment would correct that error by amending subpart P to also apply to insured Federal savings associations.
The OCC also proposes clarifying amendments to subpart P. First, the proposal would make a clarifying change to § 19.243(b)(2), which provides that hearings will be conducted in the same manner as other hearings under the Uniform Rules of Practice and Procedure (12 CFR part 19, subpart A), by adding a cross-reference to the specific rules and limitations for subpart P hearings set forth in § 19.243(c)(4). Second, the OCC proposes a clarifying change to § 19.243(c)(3), which currently states that an accountant or firm immediately suspended from performing audit services may, within 10 calendar days after service of the notice of immediate suspension, file a stay of the immediate suspension with the OCC, and that if no petition is filed, the immediate suspension will remain in effect. The proposed amendment would clarify that if the accountant or firm has not filed a petition within 10 calendar days, they have waived their right to file a petition. The proposal also would add a cross-reference to § 19.243(c)(2) in § 19.243(c)(3), which sets forth the rules for when the OCC may lift a suspension. Third, the OCC proposes to amend § 19.243(c)(4), which provides that upon request of a stay petition, the Comptroller must designate a presiding officer who must fix a place and time for the hearing that is not more than 10 calendar days after receipt of
The OCC is proposing revised definitions of “small business loans” and “small farm loans or extensions of credit” in 12 CFR 32.2(cc) and (dd) of the lending limits rule to align the definitions with the language of the Call Report instructions. The revisions to § 32.2(dd) will clarify that the $500,000 limit contained within the “loans to small farms” definition in the Call Report instructions does not apply for purposes of the supplemental lending limit program.
The OCC is proposing amendments to 12 CFR part 192, which governs how a savings association may convert from mutual to stock form of ownership under standard and voluntary supervisory conversions. The proposed amendments would reduce burden and increase flexibility for savings associations and would make a number of technical and clarifying amendments. Unless otherwise noted, part 192 applies to both Federal and State savings associations.
The proposed rule also would make a technical change to this section by defining “OCC” as the Office of the Comptroller of the Currency in the text of § 192.5(b).
The proposed rule would also add a number of definitions to § 192.25 that are currently included in 12 CFR part 141 (Definition for regulations affecting Federal savings associations), and 12 CFR part 161 (Definitions for regulations affecting all savings associations). Although the definitions in parts 141 and 161 apply to part 192, the OCC believes that it is more appropriate to include these definitions in part 192 than in a separate rule. Specifically, the proposal would add the definition of: (1) “appropriate Federal banking agency” from § 161.7, which is defined as in section 3 of the FDIA (12 U.S.C. 1813(q)); (2) “demand accounts” from § 161.16, which means non-interest-bearing demand deposits that are subject to check or to withdrawal or transfer on negotiable or transferable order to the savings association and that are permitted to be issued by statute, regulation, or otherwise and are payable on demand; (3) “Federal savings association” from § 141.11, which means a Federal savings association or Federal savings bank chartered under section 5 of the Home Owners' Loan Act (HOLA) (12 U.S.C. 1464); (4) “savings account” from § 161.42, which means any withdrawable account, including a demand account, except this term does not mean a tax and loan account, a note account, a United States Treasury general account, or a United States Treasury time deposit-open account; and (5) “savings association” from § 161.43, which means a savings association as defined in section 3 of the FDIA (12 U.S.C. 1813(b)(1)). In addition, the proposed rule would add the definition of “state” to mean any State of the United States, the District of Columbia, any territory of the United
Finally, the proposed rule would add the definition of “state savings association,” defined to have the same definition as in section 3 of the FDIA (12 U.S.C. 1813(b)(3)). This definition is not included in parts 141 or 161. However, the OCC believes it would be helpful to define this term in part 192 because the proposed rule adds the definitions of other related terms.
As a corresponding change, the OCC is proposing to amend § 16.17 (Filing requirements and inspection of documents) to clarify that all registration statements, offering documents, amendments, notices, or other documents relating to a mutual to stock conversion pursuant to part 192 must be filed with the appropriate OCC Licensing office.
The proposal would amend §§ 192.305(b) and (c), 192.310(a), and 192.310(b) to clarify that the SEC, not the “appropriate Federal banking agency,” declares Federal savings association holding company offering circulars effective in mutual to stock conversions under part 192.
Section 192.460(a)(1) provides the calculation for a savings account held by an eligible account holder, which is to multiply the initial balance of the liquidation account by a fraction that has as its numerator the qualifying deposit in the savings account expressed in dollars on the eligibility record date and as its denominator the total qualifying deposits of all eligible account holders on the eligibility record date. Section 192.460(a)(2) provides the same calculation for a savings account held by a supplemental eligible account holder, except that the eligibility record date is replaced with the supplemental eligibility record date. However, the denominator used for the calculation of the initial sub-account balances for both eligible account holders and supplemental eligible account holders is incorrect because the denominator in the current regulation does not include both the deposits of eligible account holders and the deposits of the supplemental eligible account holders. This results in both eligible account holders and supplemental account holders having a greater claim than their appropriate portion of the liquidation account.
The proposed amendments would correct this error by inserting language in § 192.460 similar to that in the previous OTS regulation, renumbering the § 192.460(a)(1) and (2) calculations to be in § 192.460(a)(2) and (3), making the denominator in the fractions in § 192.460(a)(2) and (3) the total sub-account balances of eligible account holders
In addition, the 2002 OTS amendments to the liquidation account provision inadvertently removed language that addressed savings accounts that increased in value between the eligible record date and the supplemental eligibility record date.
The OCC invites comment on whether the proposed changes to § 192.460 help to clarify the computation of liquidation sub-account balances. Do commenters have any alternative methods for clarifying these computations?
Section 192.650 sets forth the information required to be included in a plan of voluntary supervisory conversion. Among other things, current § 192.650 requires the savings association's name and address; the name, address, date and place of birth, and social security number of each proposed purchaser of conversion shares. The OCC proposes to remove the personal identifying information from the plan of voluntary supervisory conversion (
Twelve CFR 192.660 specifies the information a savings association must include in its application for voluntary supervisory conversion. To assist in its review of these applications, the proposal would require the application to contain some additional information. As described in the preceding paragraph, the proposal would relocate the information contained in current § 192.650(e) (the aggregate number and percentage of shares that each director, officer, and any affiliates or associates of the director or officer will purchase) to § 192.660(d)(5). The proposal would add a new § 192.660(e)(3) to require that the voluntary supervisory conversion application include any securities offering circular and other securities disclosure materials that the savings association has prepared to use in connection with the proposed voluntary supervisory conversion. In addition, the proposal would require that the application include a statement indicating the role in the successor savings association each director, officer, and affiliate of the savings association or associate of the director or officer will have after the conversion. The OCC finds that information on the role that each director, officer, affiliate, and associate will have after the conversion to be necessary for consideration of the decision factors in § 192.670(c) and (d).
Furthermore, the proposed rule would make a number of technical changes to specific sections of part 192. First, the proposed rule would amend § 192.200 to remove the cross-reference to the FDIC's repealed capital rules in subpart Z to part 390. In addition, the proposed rule would remove from § 192.520(b) the cross-reference to part 167 and replace it with a cross-reference to integrated part 3. Finally, the proposed rule would amend § 192.660 by replacing an outdated cross-reference to the Thrift Financial Report with the Call Report.
The proposal would amend 12 CFR 4.14(a)(9) to remove cross-references to 12 CFR parts 194 (2017) and 197, which have been repealed. The requirements in former parts 194 and 197 have been added to parts 11 and 16, respectively, and the cross-references to those parts have been added to § 4.14(a)(9) accordingly.
The proposal would amend 12 CFR 4.34(c)(2), 4.37(a)(2)(ii), 108.6(d), 108.7(c) and (d), and 112.4 to change “the OCC's Enforcement and Compliance Division” to “the OCC's Law Department.” Similarly, the proposal would amend 12 CFR 11.3(a), 16.17(a) and (f), and 16.30(a) by removing the phrase “the OCC's Securities and Corporate Practices Division” and replacing it with “the OCC's Law Department.”
The proposal would amend 12 CFR 23.6 to change an incorrect singular subject and verb to the correct plural subject and verb.
The proposal would amend 12 CFR 26.6(b)(4) to correct a cross-reference. The cross-reference to § 5.51(c)(6) is incorrect; the correct cross-reference is § 5.51(c)(7).
The proposal also removes a number of definitions in the OCC's rules for Federal and State savings associations that are no longer necessary. These definitions are currently included in 12 CFR part 141 (Definition for regulations affecting Federal savings associations) and 12 CFR part 161 (Definitions for regulations affecting all savings associations). These definitions apply only to the OCC's rules in parts 100 through 195, which the former OTS originally issued and the OCC republished as OCC rules pursuant to the Dodd-Frank Act. Because the OCC has integrated and amended a number of these rules, many of the terms defined in parts 141 and 161 are no longer used in parts 100 through 195 and, therefore, these definitions are no longer necessary. Specifically, the OCC proposes to remove the definitions of “Act,” “debit card,” “improved nonresidential real estate,” “improved residential real estate,” “interim Federal savings association,” “interim state savings association,” “unimproved real estate,” “withdrawal value of a savings account,” “accountholder,” “audit period,” “land loan,” “low-rent housing,” “Money Market Deposit Accounts,” “Negotiable Order of Withdrawal (NOW) accounts,” ” nonresidential construction loan,” “nonwithdrawable account,” “parent company,” “principal office,” “service corporation,” and “subordinated debt security.”
The OCC also proposes to amend the definition of “state” in § 161.50 so that it is identical to the definition of this term in section 3 of the FDIA (12 U.S.C. 1813(a)(3)). Specifically, the proposed definition would include any territory of the United States, American Samoa, the Trust Territory of the Pacific Islands, and the Northern Mariana Islands, in addition to a State, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands.
The proposal would amend 12 CFR 160.60(b)(3) to remove a cross-reference to the repealed § 163.43 and replace with § 31.2. The proposed rule also would amend parts 160 and 163 to define “OCC” as the Office of the Comptroller of the Currency in the text of §§ 160.1 and 163.47, and to define “FDIC” as the Federal Deposit Insurance Corporation in § 163.80.
Finally, the OCC proposes to update the authority citation for 12 CFR 195.11(a) to include a citation to section 312 of the Dodd-Frank Act (12 U.S.C. 5412(b)(2)(B)).
The OCC encourages comment on any aspect of this proposal and especially on those issues noted in this preamble.
The Regulatory Flexibility Act, 5 U.S.C. 601
Consistent with the Unfunded Mandates Reform Act, the OCC's review considers whether the mandates imposed by the proposed rule may result in an expenditure of $100 million or more (adjusted for inflation) by state, local, and tribal governments, or by the private sector, in any one year. The proposed rule would place one new mandate on Federal savings associations to submit additional information to the OCC as part of their voluntary supervisory conversion applications to convert from mutual to stock form pursuant to 12 CFR 192.660. This additional requirement for Federal savings associations to submit additional information to the OCC would likely result in a
Under the Paperwork Reduction Act of 1995,
The proposal would add a new § 192.660(e)(3) to require that the voluntary supervisory conversion application include a statement indicating the role in the successor savings association each director, officer, and affiliate of the savings association or associate of the director or officer will have after the conversion. This burden for this requirement will be added to the existing information collection for OCC's Licensing Manual.
Please submit comments using the instructions in the
(a) Whether the collections of information are necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimates of the burden of the collections of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collections on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Administrative practice and procedure, Banks, banking, Federal Reserve System, Investments, National banks.
Administrative practice and procedure, Freedom of Information, Individuals with disabilities, Minority businesses, Organization and functions (Government agencies), Reporting and recordkeeping requirements, Women.
Business information, National banks, Reporting and recordkeeping requirements, Securities.
National banks, Reporting and recordkeeping requirements, Securities.
Crime, Equal access to justice, Investigations, National banks, Penalties, Securities.
Banks, Banking, National banks, Reporting and recordkeeping requirements.
Antitrust, Holding companies, National banks.
National banks, Reporting and recordkeeping requirements.
Administrative practice and procedure, Crime, Savings associations.
Administrative practice and procedure, Investigations.
Reporting and recordkeeping requirements, Savings associations.
Consumer protection, Investments, Manufactured homes, Mortgages, Reporting and recordkeeping requirements, Savings associations, Securities.
Administrative practice and procedure, Savings associations.
Accounting, Administrative practice and procedure, Advertising, Crime, Currency, Investments, Mortgages, Reporting and recordkeeping requirements, Savings associations.
Reporting and recordkeeping requirements, Savings associations, Securities.
Accordingly, the Office of the Comptroller of the Currency proposes to amend 12 CFR chapter I as follows:
12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).
(b) A directive issued under this rule, including a plan submitted under a directive, is enforceable under the provisions of 12 U.S.C. 1818(i) in the same manner and to the same extent as an effective and outstanding cease and desist order issued pursuant to 12 U.S.C. 1818(b) that has become final. Violation of a directive may result in assessment of civil money penalties in accordance with 12 U.S.C. 3909(d).
5 U.S.C. 301, 552; 12 U.S.C. 1, 93a, 161, 481, 482, 484(a), 1442, 1462a, 1463, 1464 1817(a), 1818, 1820, 1821, 1831m, 1831p-1, 1831o, 1833e, 1867, 1951
12 U.S.C. 93a, 1462a, 1463, 1464 and 5412(b)(2)(B); 15 U.S.C. 78j-1(m), 78m, 78n, 78p, 78w, 78l, 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265.
12 U.S.C. 1
The addition reads as follows:
(b) * * * All registration statements, offering documents, amendments, notices, or other documents relating to a mutual to stock conversion pursuant to 12 CFR part 192 must be filed with the appropriate OCC Licensing office at
5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 93a, 164, 481, 504, 1817, 1818, 1820, 1831m, 1831o, 1832, 1884, 1972, 3102, 3108(a), 3110, 3909, and 4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3, 78w, and 1639e; 28 U.S.C. 2461 note; 31 U.S.C. 330 and 5321; and 42 U.S.C. 4012a.
The revision reads as follows:
(c) * * *
(3) * * * If no petition is filed within 10 calendar days, the right to a petition is waived and the immediate suspension remains in effect pursuant to paragraph (c)(2).
The revision reads as follows:
12 U.S.C. 1
12 U.S.C. 1, 93a, 1462a, 1463, 1464, 3201-3208, 5412(b)(2)(B).
12 U.S.C. 1
(cc)
(dd)
12 U.S.C. 1464, 1818, 5412(b)(2)(B).
12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813, 1817(j), 1818(n), 1820(c), 5412(b)(2)(B); 15 U.S.C. 78
12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).
12 U.S.C. 1462a, 1463, 1464, 1467a, 1701j-3, 1828, 3803, 3806, 5412(b)(2)(B); 42 U.S.C. 4106.
12 U.S.C. 1462a, 1463, 1464, 1467a, 5412(b)(2)(B).
The term “State” means any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific
12 U.S.C. 1462a, 1463, 1464, 1467a, 1817, 1820, 1828, 1831o, 3806, 5101
12 U.S.C. 1462a, 1463, 1464, 1467a, 2901
(a)
(b)
(c)
(1) Specifies the requirement(s) or provision(s) the savings association wants the appropriate Federal banking agency to waive;
(2) Demonstrates that the waiver is equitable; is not detrimental to the savings association, its account holders, or other savings associations; and is not contrary to the public interest; and
(3) Includes an opinion of counsel demonstrating that applicable law does not conflict with the waiver of the requirement or provision.
(d)
For Federal savings associations, the OCC encourages the electronic filing of all applications, notices, or other documents required by this part through
In computing the period of days, the OCC excludes the day of the act or event (
A savings association may convert to the stock form of ownership as part of a transaction where the savings association organizes a holding company to acquire all of the savings association's shares upon their issuance. In this transaction, the savings association's holding company will offer rights to purchase its shares instead of the savings association's shares. Regulations of the Board of Governors of the Federal Reserve System address holding company application requirements.
When a savings association converts to the stock form, it may form a charitable organization. A savings association's contributions to the charitable organization are governed by the requirements of §§ 192.550 through 192.575.
When a savings association converts to stock form, it may acquire for cash or stock another insured depository institution that is already in the stock form of ownership.
The following definitions apply to this part and the forms prescribed under this part:
(1) A corporation or organization (other than a savings association or its majority-owned subsidiaries), if the person is a senior officer or partner, or beneficially owns, directly or indirectly, 10 percent or more of any class of equity securities of the corporation or organization.
(2) A trust or other estate, if the person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate. For purposes of §§ 192.370 through 192.395 and 192.505, a person who has a substantial beneficial interest in a savings association's tax-qualified or non-tax-qualified employee stock benefit plan, or who is a trustee or a fiduciary of the plan, is not an associate of the plan. For the purposes of § 192.370, a savings association's tax-qualified employee stock benefit plan is not an associate of a person.
(3) Any person who is related by blood or marriage to such person and:
(i) Who lives in the same home as the person; or
(ii) Who is the saving association's director or senior officer, or a director or senior officer of the saving association's holding company or its subsidiary.
(1) Every county, parish, or similar governmental subdivision in which a savings association has a home or branch office;
(2) Each county's, parish's, or subdivision's metropolitan statistical area;
(3) All zip code areas in a savings association's Community Reinvestment Act assessment area; and
(4) Any other area or category that a savings association sets out in its plan of conversion, as approved by the appropriate Federal banking agency.
(1) Eligible account holders under § 192.355;
(2) Tax-qualified employee stock ownership plans under § 192.380;
(3) Supplemental eligible account holders under § 192.355; and
(4) Other voting members under § 192.365.
(a)
(b)
(a)
(1) The savings association's projected operations and activities for three years following the conversion. These projections must include how the savings association will accomplish the following by the final year of the business plan:
(i) Deploy the conversion proceeds at the converted savings association (and holding company, if applicable);
(ii) What opportunities are available to reasonably achieve its planned deployment of conversion proceeds in the proposed market areas; and
(iii) How the deployment will provide a reasonable return on investment commensurate with investment risk, investor expectations, and industry norms. The savings association must include three years of projected financial statements. The business plan must provide that the converted savings association must retain at least 50 percent of the net conversion proceeds. The appropriate Federal banking agency may require that a larger percentage of proceeds remain in the institution.
(2) The savings association's plan for deploying conversion proceeds to meet credit and lending needs in the proposed market areas. The appropriate Federal banking agencies strongly discourage business plans that provide for a substantial investment in mortgage securities or other securities, except as an interim measure to facilitate orderly, prudent deployment of proceeds during the three years following the conversion or as part of a properly managed leverage strategy.
(3) The risks associated with the saving association's plan for deployment of conversion proceeds, and the effect of this plan on management resources, staffing, and facilities.
(4) The expertise of the savings association's management and board of directors, or plans for adequate staffing and controls to prudently manage the growth, expansion, new investment, and other operations and activities proposed in the business plan.
(b)
(a)
(b)
(a)
(b)
(c)
(a)
(b)
(c)
(1) Publicly announce that the savings association is considering a conversion;
(2) Set an eligibility record date acceptable to the appropriate Federal banking agency;
(3) Limit the subscription rights of any person who violates or aids a violation of this section; or
(4) Any other action to assure that the conversion is fair and equitable.
Prior to filing an application for conversion, a savings association's board of directors must adopt a plan of conversion that conforms to §§ 192.320 through 192.485 and 192.505. The savings association's board of directors must adopt the plan by at least a two-thirds vote. Pursuant to § 192.150, the savings association must include the plan of conversion in the application for conversion.
A savings association must include the information included in §§ 192.320 through 192.485 and 192.505 in its plan of conversion. The appropriate Federal banking agency may require the savings association to delete or revise any provision in its plan of conversion if it determines the provision is inequitable; is detrimental to the savings association, its account holders, or other savings associations; or is contrary to public interest.
(a)
(b)
(1) The savings association's board of directors adopted a proposed plan to convert from a mutual to a stock savings institution.
(2) The savings association will send its members a proxy statement with detailed information on the proposed conversion before the savings association convenes a members' meeting to vote on the conversion.
(3) The savings association's members will have an opportunity to approve or disapprove the proposed conversion at a meeting. A majority of the eligible votes must approve the conversion.
(4) The savings association will not vote existing proxies to approve or disapprove the conversion. The savings association will solicit new proxies for voting on the proposed conversion.
(5) The appropriate Federal banking agency, and in the case of a State-chartered savings association, the appropriate State regulator, must approve the conversion before the conversion will be effective. The savings association's members will have an opportunity to file written comments, including objections and materials supporting the objections, with the appropriate Federal banking agency.
(6) The IRS must issue a favorable tax ruling, or a tax expert must issue an appropriate tax opinion, on the tax consequences of the savings association's conversion before the appropriate Federal banking agency will approve the conversion. The ruling or opinion must indicate the conversion will be a tax-free reorganization.
(7) The appropriate Federal banking agency, and in the case of a State-chartered savings association, the appropriate State regulator, might not approve the conversion, and the IRS or a tax expert might not issue a favorable tax ruling or tax opinion.
(8) Savings account holders will continue to hold accounts in the converted savings association with the same dollar amounts, rates of return, and general terms as existing deposits. The FDIC will continue to insure the accounts.
(9) The savings association's conversion will not affect borrowers' loans, including the amount, rate, maturity, security, and other contractual terms.
(10) The savings association's business of accepting deposits and making loans will continue without interruption.
(11) The savings association's current management and staff will continue to conduct current services for depositors and borrowers under current policies and in existing offices.
(12) The savings association may substantively amend its proposed plan of conversion before the members' meeting.
(13) The savings association may terminate the proposed conversion.
(14) After the appropriate Federal banking agency, and in the case of a State-chartered savings association, the appropriate State regulator, approves the proposed conversion, the savings association will send proxy materials providing additional information. After the savings association sends proxy materials, members may telephone or write to the savings association with additional questions.
(15) The proposed record date for determining the eligible account holders who are entitled to receive subscription rights to purchase the savings association's shares.
(16) A brief description of the circumstances under which supplemental eligible account holders will receive subscription rights to purchase the savings association's shares.
(17) A brief description of how voting members may participate in the conversion.
(18) A brief description of how directors, officers, and employees will participate in the conversion.
(19) A brief description of the proposed plan of conversion.
(20) The par value (if any) and approximate number of shares the savings association will issue and sell in the conversion.
(c)
(2) If the savings association responds to inquiries about the conversion, it may address only the matters listed in paragraph (b) of this section.
A savings association may amend its plan of conversion before it solicits proxies. After the savings association solicits proxies, it may amend the plan of conversion only if the appropriate Federal banking agency concurs.
(a)
(1) The savings association's plan of conversion.
(2) Pricing materials meeting the requirements of § 192.200(b).
(3) Proxy soliciting materials under § 192.270, including:
(i) A preliminary proxy statement with signed financial statements;
(ii) A form of proxy meeting the requirements of § 192.255; and
(iii) Any additional proxy soliciting materials, including press releases, personal solicitation instructions, radio or television scripts that the savings association plans to use or furnish to its members, and a legal opinion indicating that any marketing materials comply with all applicable securities laws.
(4) An offering circular described in § 192.300.
(5) The documents and information required by Form AC. The savings association may obtain Form AC from the appropriate Federal banking agency.
(6) Where indicated, written consents, signed and dated, of any accountant, attorney, investment banker, appraiser, or other professional who prepared, reviewed, passed upon, or certified any statement, report, or valuation for use.
(7) The savings association's business plan, submitted as a separately bound, confidential exhibit.
(8) Any additional information that the appropriate Federal banking agency requests.
(b)
A Federal savings association must file Form AC with the appropriate OCC licensing office. A State savings association must file its application with the appropriate FDIC region.
(a)
(b)
(c)
To amend its application for conversion, a savings association must:
(a) File an amendment with an appropriate facing sheet;
(b) Number each amendment consecutively;
(c) Respond to all issues raised by the appropriate Federal banking agency; and
(d) Demonstrate that the amendment conforms to all applicable regulations.
(a)
(b)
Commenters may submit comments on a Federal savings association's application in accordance with the procedures in 12 CFR 5.10.
(a)
(1) The conversion complies with this part;
(2) The savings association will meet its regulatory capital requirements under 12 CFR part 3 or part 324, as applicable, after the conversion; and
(3) The conversion will not result in a taxable reorganization under the Internal Revenue Code of 1986, as amended.
(b)
(1) Independent persons experienced and expert in corporate appraisal, and acceptable to the appropriate Federal banking agency, must prepare the appraisal report.
(2) An affiliate of the appraiser may serve as an underwriter or selling agent, if the savings association ensures that the appraiser is separate from the underwriter or selling agent affiliate and the underwriter or selling agent affiliate does not make recommendations or affect the appraisal.
(3) The appraiser may not receive any fee in connection with the conversion other than for appraisal services.
(4) The appraisal report must include a complete and detailed description of the elements of the appraisal, a justification for the appraisal methodology, and sufficient support for the conclusions.
(5) If the appraisal is based on a capitalization of the savings association's pro forma income, it must indicate the basis for determining the income to be derived from the sale of shares, and demonstrate that the earnings multiple used is appropriate, including future earnings growth assumptions.
(6) If the appraisal is based on a comparison of the savings association's shares with outstanding shares of existing stock associations, the existing stock associations must be reasonably comparable in size, market area, competitive conditions, risk profile, profit history, and expected future earnings.
(7) The appropriate Federal banking agency may decline to process the application for conversion and deem it materially deficient or substantially incomplete if the initial appraisal report is materially deficient or substantially incomplete.
(8) A savings association may not represent or imply that the appropriate
(c)
(1) Based on this review, the appropriate Federal banking agency may approve the application, deny the application, or approve the application on the condition that the savings association will improve its CRA performance or that the savings association will address the particular credit or lending needs of the communities that it will serve.
(2) The appropriate Federal banking agency may deny the application if the savings association's business plan does not demonstrate that its proposed use of conversion proceeds will help the savings association to meet the credit and lending needs of the communities that it will serve.
(d)
(e)
(a)
(b)
(a)
(b)
(c)
(d)
A savings association determines members' eligibility to vote by setting a voting record date. The savings association must set a voting record date that is not more than 60 calendar days nor less than 20 calendar days before its meeting, unless the savings association is State-chartered and State law requires a different voting record date.
(a)
(b)
(c)
(1) If the savings association is a Federal savings association, and the name of the beneficial holder is disclosed on the savings association's records; or
(2) If the savings association is a State-chartered savings association and the beneficial holder possesses voting rights under State law.
(a)
(1) A certified copy of each adopted resolution on the conversion.
(2) The total votes eligible to be cast.
(3) The total votes represented in person or by proxy.
(4) The total votes cast in favor of and against each matter.
(5) The percentage of votes necessary to approve each matter.
(6) An opinion of counsel that the savings association conducted the members' meeting in compliance with all applicable State or Federal laws and regulations.
(b)
(a)
(b)
(1) The member solicits 50 people or fewer and does not solicit proxies on the savings association's behalf; or
(2) The member solicits proxies through newspaper advertisements after the savings association's board of directors adopts the plan of conversion. Any newspaper advertisements may include only the following information:
(i) The name of the savings association;
(ii) The reason for the advertisement;
(iii) The proposal or proposals to be voted upon;
(iv) Where a member may obtain a copy of the proxy solicitation material; and
(v) A request for the savings association's members to vote at the meeting.
The form of proxy must include all of the following:
(a) A statement in bold face type stating that management is soliciting the proxy.
(b) Blank spaces where the member must date and sign the proxy.
(c) Clear and impartial identification of each matter or group of related matters that members will vote upon. The savings association must include any proposed charitable contribution as an item to be voted on separately.
(d) The phrase “Revocable Proxy” in bold face type (at least 18 point).
(e) A description of any charter or State law requirement that restricts or conditions votes by proxy.
(f) An acknowledgment that the member received a proxy statement before he or she signed the form of proxy.
(g) The date, time, and the place of the meeting, when available.
(h) A way for the member to specify by ballot whether he or she approves or disapproves of each matter that members will vote upon.
(i) A statement that management will vote the proxy in accordance with the member's specifications.
(j) A statement in bold face type indicating how management will vote the proxy if the member does not specify a choice for a matter.
A savings association may not use previously executed proxies for the plan of conversion vote. If members consider the plan of conversion at an annual meeting, the savings association may vote proxies obtained through other proxy solicitations only on matters not related to the plan of conversion.
A savings association may vote a proxy obtained under this part on matters that are incidental to the conduct of the meeting. The savings association may not vote a proxy obtained under this subpart at any meeting other than the meeting (or any adjournment of the meeting) to vote on the plan of conversion.
(a)
(b)
(2) The savings association must provide a cleared written proxy statement to its members before or at the same time it provides any other soliciting material. The savings association must mail cleared proxy solicitation material to its members within 10 calendar days after the appropriate Federal banking agency clears the solicitation.
(a)
(b)
(1) Its revised proxy materials as required by Form PS;
(2) Its revised form of proxy, if applicable;
(3) Any additional proxy solicitation material subject to § 192.270; and
(4) A copy of the revised proxy solicitation materials marked to clearly indicate changes from the prior filing.
(c)
(d)
(a)
(1) The savings association's board of directors adopted a plan of conversion;
(2) A member requests in writing that the savings association mail the proxy solicitation material;
(3) The appropriate Federal banking agency has cleared the member's proxy solicitation; and
(4) The member agrees to defray the savings association's reasonable expenses.
(b)
(1) The approximate number of members that the savings association solicited or will solicit, or the approximate number of members of any group of account holders that the member designates; and
(2) The estimated cost of mailing the proxy solicitation material for the member.
(c)
(d)
(e)
(a)
(i) Is false or misleading with respect to any material fact;
(ii) Omits any material fact that is necessary to make the statements not false or misleading; or
(iii) Omits any material fact that is necessary to correct a statement in an earlier communication that has become false or misleading.
(2) No one may represent or imply that the appropriate Federal banking agency determined that the proxy solicitation material is accurate, complete, not false or not misleading, or passed upon the merits of or approved any proposal.
(b)
(1) An undated or post-dated proxy;
(2) A proxy that states it will be dated after the date it is signed by a member;
(3) A proxy that is not revocable at will by the member; or
(4) A proxy that is part of another document or instrument.
(a)
(1) Correction of the violation by a retraction and a new solicitation;
(2) Rescheduling the members' meeting; or
(3) Any other actions necessary to ensure a fair vote.
(b)
If a savings association amends its application for conversion, the appropriate Federal banking agency may require the savings association to re-solicit proxies for its members' meeting as a condition of approval of the amendment.
(a)
(b)
(c)
(d)
(e)
(a)
(b)
(c)
(a)
(b)
(c)
(d)
A savings association must offer to sell its shares in the following order:
(a) Eligible account holders.
(b) Tax-qualified employee stock ownership plans.
(c) Supplemental eligible account holders.
(d) Other voting members who have subscription rights.
(e) The savings association's community, its community and the general public, or the general public.
(a)
(b)
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(b)
(c)
(d)
(e)
(a)
(1) Employ any device, scheme, or artifice to defraud;
(2) Obtain money or property by means of any untrue statement of a material fact or any omission of a material fact necessary to make the statements, in light of the circumstances under which they were made, not misleading; or
(3) Engage in any act, transaction, practice, or course of business that operates or would operate as a fraud or deceit upon a purchaser or seller.
(b)
(1) Transfer, or enter into any agreement or understanding to transfer, the legal or beneficial ownership of subscription rights for the savings association's conversion shares or the underlying securities to the account of another;
(2) Make any offer, or any announcement of an offer, to purchase any of the savings association's conversion shares from anyone but the savings association; or
(3) Knowingly acquire more than the maximum purchase allowable under the savings association's plan of conversion.
(c)
(1) An underwriter or a selling group, acting on the savings association's behalf, that makes the offer with a view toward public resale; or
(2) One or more of the savings association's tax-qualified employee stock ownership plans so long as the plan or plans do not beneficially own more than 25 percent of any class of the savings association's equity securities in the aggregate.
(d)
(a)
(b)
(a)
(b)
(c)
(a)
(1) The maximum purchase limitation established for the community offering or the public offering under § 192.395;
(2) One-tenth of one percent of the total stock offering; or
(3) Fifteen times the following number: The total number of conversion shares that the savings association will issue, multiplied by the following fraction. The numerator is the total qualifying deposit of the eligible account holder. The denominator is the total qualifying deposits of all eligible account holders. The savings association must round down the product of this multiplied fraction to the next whole number.
(b)
A savings association's officers, directors, and their associates may be eligible account holders. However, if an officer, director, or his or her associate receives subscription rights based on increased deposits in the year before the eligibility record date, the savings association must subordinate subscription rights for these deposits to subscription rights exercised by other eligible account holders.
(a)
(1) The maximum purchase limitation established for the community offering and the public offering under § 192.395; or
(2) One-tenth of one percent of the total stock offering.
(b)
(a)
(b)
(a)
(b)
(c)
(d)
(e)
(a)
(b)
(c)
(d)
(a)
(b)
(c)
(d)
(a)
(b)
A savings association must offer and sell its stock to achieve a widespread distribution of the stock. If a savings association offers shares in a community offering, a public offering, or both, it must first fill orders for its stock up to a maximum of two percent of the conversion stock on a basis that will promote a widespread distribution of stock. The savings association must allocate any remaining shares on an equal number of shares per order basis until it fills all orders.
A savings association must complete all sales of its stock within 45 calendar days after the last day of the subscription period, unless the offering is extended under § 192.405.
(a)
(b)
In its plan of conversion, a savings association must set a date by which the conversion must be completed. This date must not be more than 24 months from the date that the savings association's members approve the plan of conversion. The date, once set, may not be extended by the savings association or by the appropriate Federal banking agency. The savings association must terminate the conversion if it is not completed by that date. The conversion is complete on the date that the savings association accepts the offers for its stock.
A conversion may be terminated by:
(a) A savings association's members failing to approve the conversion at its members' meeting;
(b) A savings association before its members' meeting; or
(c) A savings association after the members' meeting, but only if the appropriate Federal banking agency concurs.
(a)
(b)
(c)
(d)
In any situation in which the priority of the accounts of the association is in controversy, all such accounts must, to the extent of their withdrawable value, be debts of the association having the same priority as the claims of general creditors of the association not having priority (other than any priority arising or resulting from consensual subordination) over other general creditors of the association.
(e)
A savings association's corporate existence will continue following its conversion, unless it converts to a State-chartered stock savings association and State law prescribes otherwise.
A savings association must provide its stockholders with exclusive voting rights, except as provided in § 192.445(c).
(a)
(b)
(c)
(1) Limit these voting rights to the minimum required by State law; and
(2) Require the savings association to solicit proxies from the savings account holders and borrowers in the same manner that the savings association solicits proxies from its stockholders.
(a)
(b)
(c)
The initial balance of the liquidation account is the savings association's net worth in the statement of financial condition included in the final offering circular.
(a)
(2) The initial liquidation sub-account balance for a savings account held by an eligible account holder, for a savings account not held by the eligible account holder on the supplemental eligibility record date, is calculated by multiplying the initial liquidation account balance by the following fraction: The numerator is the qualifying deposit in the savings account on the eligibility record date and the denominator is the calculation in paragraph (a)(5) of this section.
(3) The initial liquidation sub-account balance for a savings account held by a supplemental eligible account holder, for a savings account not held by the supplemental eligible account holder on the eligibility record date, is calculated by multiplying the initial liquidation account balance by the following fraction: The numerator is the qualifying deposit in the savings account on the supplemental eligibility record date and the denominator is the calculation in paragraph (a)(5) of this section.
(4) For a savings account held on both the eligibility record date and the supplemental eligibility record date, the amount of the qualifying deposit for calculating the initial liquidation sub-account is the higher account balance of the savings account on either the eligibility record date or the supplemental eligibility record date. The initial liquidation sub-account balance is calculated by multiplying the liquidation account balance by the following fraction: The numerator is the higher amount of the qualifying deposit in the savings account on either the eligibility record date or the supplemental eligibility record date and the denominator is the calculation in paragraph (a)(5) of this section.
(5) The denominator for calculating the initial liquidation sub-account balance of each eligible and supplemental eligible account holder is the sum of the numerator calculations in paragraphs (a)(2) through (4) of this section.
(b)
Eligible account holders or supplemental eligible account holders do not retain any voting rights based on their liquidation sub-accounts.
(a)
(i) The deposit balance in the account holder's savings account at the close of business on any other annual closing date after the relevant eligibility record date; or
(ii) The qualifying deposits in the account holder's savings account on the relevant eligibility record date.
(2) The reduction must be proportionate to the reduction in the deposit balance.
(b)
(c)
(d)
(e)
(a)
(b)
The liquidation account does not affect a saving association's net worth.
If a savings association converts to Federal stock form, it must include the following provision in its new charter: “Liquidation Account. Under appropriate Federal banking agency regulations, the association must establish and maintain a liquidation account for the benefit of its savings account holders as of __. If the association undergoes a complete liquidation, it must comply with appropriate Federal banking agency regulations with respect to the amount and priorities on liquidation of each of the savings account holder's interests in the liquidation account. A savings account holder's interest in the liquidation account does not entitle the savings account holder to any voting rights.”
(a)
(1) The savings association discloses the plans in its proxy statement and offering circular and indicates in its offering circular that there will be a separate shareholder vote on the Option Plan and the MRP at least six months after the conversion. No shareholder vote is required to implement the ESOP. The savings association's ESOP must be tax-qualified.
(2) The savings association's Option Plan does not encompass more than 10 percent of the number of shares that the
(3)(i) The savings association's ESOP and MRP do not encompass, in the aggregate, more than 10 percent of the number of shares that the savings association issued in the conversion. If the savings association has tangible capital of 10 percent or more following the conversion, the appropriate Federal banking agency may permit the ESOP and MRP to encompass, in the aggregate, up to 12 percent of the number of shares issued in the conversion; and
(ii) The savings association's MRP does not encompass more than three percent of the number of shares that the savings association issued in the conversion. If the savings association has tangible capital of 10 percent or more after the conversion, the appropriate Federal banking agency may permit the MRP to encompass up to four percent of the number of shares that the savings association issued in the conversion.
(4) No individual receives more than 25 percent of the shares under any plan.
(5) The savings association's directors who are not officers of the savings association do not receive more than five percent of the shares of the MRP or Option Plan individually, or 30 percent of any such plan in the aggregate.
(6) The savings association's shareholders approve each of the Option Plan and the MRP by a majority of the total votes eligible to be cast at a duly called meeting before the savings association establishes or implements the plan. The savings association may not hold this meeting until six months after its conversion.
(7) When the savings association distributes proxies or related material to shareholders in connection with the vote on a plan, the savings association states that the plan complies with the appropriate Federal banking agency's regulations and that the appropriate Federal banking agency does not endorse or approve the plan in any way. The savings association may not make any written or oral representations to the contrary.
(8) The savings association does not grant stock options at less than the market price at the time of grant.
(9) The savings association does not fund the Option Plan or the MRP at the time of the conversion.
(10) The savings association's plan does not begin to vest earlier than one year after shareholders approve the plan, and does not vest at a rate exceeding 20 percent per year.
(11) The savings association's plan permits accelerated vesting only for disability or death, or if the savings association undergoes a change of control.
(12) The saving association's plan provides that its executive officers or directors must exercise or forfeit their options in the event the institution becomes critically undercapitalized (as defined in 12 CFR 6.4 or 324.403, as applicable), is subject to appropriate Federal banking agency enforcement action, or receives a capital directive under 12 CFR part 6, subpart B or 12 CFR 308.201, as applicable.
(13) The savings association files a copy of the proposed Option Plan or MRP with the appropriate Federal banking agency and certify to such agency that the plan approved by the shareholders is the same plan that the savings association filed with, and disclosed in, the proxy materials distributed to shareholders in connection with the vote on the plan.
(14) The savings association files the plan and the certification with the appropriate Federal banking agency within five calendar days after its shareholders approve the plan.
(b)
(c)
(a)
(b)
(c)
(d)
(a)
(1) In extraordinary circumstances, a savings association may make open market repurchases of up to five percent of its outstanding stock in the first year after the conversion if the savings association files a notice under § 192.515(a) and the appropriate Federal banking agency does not disapprove the repurchase. The appropriate Federal banking agency will not approve such repurchases unless the repurchase meets the standards in § 192.515(c), and the repurchase is consistent with paragraph (c) of this section.
(2) A savings association may repurchase qualifying shares of a director or conduct an appropriate Federal banking agency-approved repurchase pursuant to an offer made to all shareholders of the savings association.
(3) Repurchases to fund management recognition plans that have been ratified by shareholders do not count toward the repurchase limitations in this section. Repurchases in the first year to fund such plans require prior written notification to the appropriate Federal banking agency.
(4) Purchases to fund tax qualified employee stock benefit plans do not count toward the repurchase limitations in this section.
(b)
(c)
(1) A savings association may not repurchase its shares if the repurchase will reduce the savings association's regulatory capital below the amount required for its liquidation account under § 192.450. The savings association must comply with the capital distribution requirements at 12 CFR 5.55.
(2) The restrictions on share repurchases apply to a charitable organization under § 192.550. A savings association must aggregate purchases of shares by the charitable organization with the savings association's repurchases.
(a)
(1) The proposed repurchase program;
(2) The effect of the repurchases on the savings association's regulatory capital; and
(3) The purpose of the repurchases and, if applicable, an explanation of the extraordinary circumstances necessitating the repurchases.
(b)
(c)
(1) The repurchase program will not adversely affect the savings association's financial condition;
(2) The savings association submits sufficient information to evaluate the proposed repurchases;
(3) The savings association demonstrates extraordinary circumstances and a compelling and valid business purpose for the share repurchases; and
(4) The repurchase program would not be contrary to other applicable regulations.
A savings association may declare or pay a dividend on its shares after the conversion if:
(a) The dividend will not reduce the savings association's regulatory capital below the amount required for the liquidation account under § 192.450;
(b) The savings association complies with all capital requirements under 12 CFR part 3 after it declares or pays dividends;
(c) The savings association complies with the capital distribution requirements under 12 CFR 5.55; and
(d) The savings association does not return any capital, other than ordinary dividends, to purchasers during the term of the business plan submitted with the conversion.
(a)
(b)
(c)
(1) Paragraphs (a) and (b) of this section do not apply to any offer with a view toward public resale made exclusively to the savings association, to the underwriters, or to a selling group acting on the savings association's behalf.
(2) Unless the appropriate Federal banking agency objects in writing, any person may offer or announce an offer to acquire up to one percent of any class of shares. In computing the one percent limit, the person must include all of his or her acquisitions of the same class of shares during the prior 12 months.
(3) A corporation whose ownership is, or will be, substantially the same as the savings association's ownership may acquire or offer to acquire more than 10 percent of the savings association's common stock, if it makes the offer or acquisition more than one year after the saving association's conversion.
(4) One or more of the savings association's tax-qualified employee stock benefit plans may acquire the savings association's shares, if the plan or plans do not beneficially own more than 25 percent of any class of the savings association's shares in the aggregate.
(5) An acquiror does not have to file a separate application to obtain the appropriate Federal banking agency's approval under paragraph (a) of this section if the acquiror files an application under 12 CFR 5.50 that specifically addresses the criteria listed under paragraph (d) of this section and the savings association does not oppose the proposed acquisition.
(d)
(1) Is contrary to the purposes of this part;
(2) Is manipulative or deceptive;
(3) Subverts the fairness of the conversion;
(4) Is likely to injure the savings association;
(5) Is inconsistent with the savings association's plan to meet the credit and lending needs of its proposed market area;
(6) Otherwise violates laws or regulations; or
(7) Does not prudently deploy the savings association's conversion proceeds.
After a savings association converts, it must:
(a) Promptly register its shares under the Securities Exchange Act of 1934 (15 U.S.C. 78a-78jj, as amended). The savings association may not deregister the shares for three years.
(b) Encourage and assist a market maker to establish and to maintain a market for its shares. A market maker for a security is a dealer who:
(1) Regularly publishes bona fide competitive bid and offer quotations for
(2) Furnishes bona fide competitive bid and offer quotations for the security on request; or
(3) May effect transactions for the security in reasonable quantities at quoted prices with other brokers or dealers.
(c) Use its best efforts to list its shares on a national or regional securities exchange or on the National Association of Securities Dealers Automated Quotation system.
(d) File all post-conversion reports that the appropriate Federal banking agency requires.
A savings association may contribute some of its conversion shares or proceeds to a charitable organization if:
(a) The savings association's plan of conversion provides for the proposed contribution;
(b) The savings association's members approve the proposed contribution; and
(c) The IRS either has approved, or approves within two years after formation, the charitable organization as a tax-exempt charitable organization under the Internal Revenue Code.
At the meeting to consider the conversion, a savings association's members must separately approve, by a majority of the total eligible votes, a charitable contribution of conversion shares or proceeds. If the savings association is in mutual holding company form and adding a charitable contribution as part of a second step stock conversion, the savings association must also have its minority shareholders separately approve the charitable contribution by a majority of their total eligible votes.
A savings association may contribute a reasonable amount of conversion shares or proceeds to a charitable organization if such contribution will not exceed limits for charitable deductions under the Internal Revenue Code and the appropriate Federal banking agency does not object on supervisory grounds. If the savings association is well-capitalized, the appropriate Federal banking agency generally will not object if the savings association contributes an aggregate amount of eight percent or less of the conversion shares or proceeds.
The charitable organization's charter (or trust agreement) and gift instrument must provide that:
(a) The charitable organization's primary purpose is to serve and make grants in the savings association's local community;
(b) As long as the charitable organization controls shares, it must vote those shares in the same ratio as all other shares voted on each proposal considered by the savings association's shareholders;
(c) For at least five years after its organization, one seat on the charitable organization's board of directors (or board of trustees) is reserved for an independent director (or trustee) from the savings association's local community. This director may not be an officer, director, or employee of the savings association or of an affiliate of the savings association, and should have experience with local community charitable organizations and grant making; and
(d) For at least five years after its organization, one seat on the charitable organization's board of directors (or board of trustees) is reserved for a director from the savings association's board of directors or the board of directors of an acquiror or resulting institution in the event of a merger or acquisition of the savings association.
(a)
(1) Is a director, officer, or employee of the savings association; has the power to direct the savings association's management or policies; or otherwise owes a fiduciary duty to the savings association (for example, holding company directors); and
(2) Will serve as an officer, director, or employee of the charitable organization.
(b)
(a)
(1) The appropriate Federal banking agency may examine the charitable organization at the charitable organization's expense;
(2) The charitable organization must comply with all supervisory directives that the appropriate Federal banking agency imposes;
(3) The charitable organization must operate according to written policies adopted by its board of directors (or board of trustees), including a conflict of interest policy;
(4) The charitable organization must not engage in self-dealing; and
(5) The charitable organization must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code.
(b)
(c)
(d)
(1) The charitable organization's charter and bylaws (or trust agreement);
(2) The charitable organization's operating plan (within six months after the savings association's stock offering);
(3) The charitable organization's conflict of interest policy; and
(4) The gift instrument for the contributions of either stock or cash to the charitable organization.
(a)
(b)
A savings association may conduct a voluntary supervisory conversion through one of the following methods:
(a) A savings association may sell its shares or the shares of a holding company to the public under the requirements of subpart A of this part.
(b) A savings association may convert to stock form by merging into an interim Federal- or State-chartered stock association.
(c) A savings association may sell its shares directly to an acquiror, who may be a person, company, depository institution, or depository institution holding company.
(d) A savings association may merge or consolidate with an existing or newly created depository institution. The merger or consolidation must be authorized by, and is subject to, other applicable laws and regulations.
Savings association members do not have the right to approve or participate in a voluntary supervisory conversion, and will not have any legal or beneficial ownership interests in the converted association, unless the appropriate Federal banking agency provides otherwise. Savings association members may have interests in a liquidation account, if one is established.
(a)
(1) The savings association is significantly undercapitalized (or undercapitalized and a standard conversion that would make the savings association adequately capitalized is not feasible) and the savings association will be a viable entity following the conversion;
(2) Severe financial conditions threaten the savings association's stability and a conversion is likely to improve its financial condition;
(3) The FDIC will assist the savings association under section 13 of the Federal Deposit Insurance Act, 12 U.S.C. 1823; or
(4) The savings association is in receivership and a conversion will assist the savings association.
(b)
(1) The savings association will be adequately capitalized as a result of the conversion;
(2) The savings association, its proposed conversion, and its acquiror(s) comply with applicable supervisory policies;
(3) The transaction is in the savings association's best interest, and the best interest of the Deposit Insurance Fund and the public; and
(4) The transaction will not injure or be detrimental to the savings association, the Deposit Insurance Fund, or the public interest.
A State-chartered savings bank may be eligible to convert to a Federal stock savings bank under this subpart if:
(a) The FDIC certifies under section 5(o)(2)(C) of the HOLA that severe financial conditions threaten the savings bank's stability and that the voluntary supervisory conversion is likely to improve its financial condition; or
(b) The savings bank meet the following conditions:
(1) The savings bank's liabilities exceed its assets, as calculated under generally accepted accounting principles, assuming the savings bank is a going concern; and
(2) The savings bank will issue a sufficient amount of permanent capital stock to meet its applicable FDIC capital requirement immediately upon completion of the conversion, or the FDIC determines that the savings bank will achieve an acceptable capital level within an acceptable time period.
A majority of the board of directors of the savings association must adopt a plan of voluntary supervisory conversion. The savings association must include all of the following information in its plan of voluntary supervisory conversion.
(a) The savings association's name and address.
(b) A complete description of the proposed voluntary supervisory conversion transaction that also describes plans for any liquidation account.
(c) Certified copies of all resolutions relating to the conversion adopted by the board of directors of the savings association.
A savings association must include all of the following information and documents in a voluntary supervisory conversion application to the appropriate OCC licensing office if it is a Federal savings association and to the appropriate FDIC region if it is a State savings association under this subpart:
(a)
(2) An opinion of qualified, independent counsel or an independent, certified public accountant regarding the tax consequences of the conversion, or an IRS ruling indicating that the transaction qualifies as a tax-free reorganization.
(3) An opinion of independent counsel indicating that applicable State law authorizes the voluntary supervisory conversion, if the conversion involves a State-chartered savings association converting to State stock form.
(b)
(c)
(d)
(2) A description of the savings association's estimated conversion expenses.
(3) Evidence supporting the value of any non-cash asset contributions. Appraisals must be acceptable to the appropriate Federal banking agency and the non-cash assets must meet all other appropriate Federal banking agency policy guidelines.
(4) Pro forma financial statements that reflect the effects of the transaction. The savings association must identify its tangible, core, and risk-based capital levels and show the adjustments necessary to compute the capital levels. The savings association must prepare its pro forma statements in conformance with the appropriate Federal banking agency's regulations and the applicable accounting requirements.
(5) A statement describing the aggregate number and percentage of shares that each director, officer, and any affiliates or associates of the director or officer will purchase.
(e)
(2) The savings association's proposed stock certificate form.
(3) Any securities offering circular and other securities disclosure materials to be used in connection with the proposed voluntary supervisory conversion.
(f)
(2) A copy and description of all existing and proposed employment contracts. The savings association must describe the term, salary, and severance provisions of the contract, the identity and background of the officer or employee to be employed, and the amount of any conversion shares to be purchased by the officer or employee or his or her affiliates or associates.
(g)
(2) Any required Change in Bank Control Act notice and rebuttal of control submissions under 12 U.S.C. 1817(j) and 12 CFR 5.50, or copies of any Holding Company Act applications, including prior-conduct certifications listed under the appropriate Federal banking agency's regulatory guidance.
(3) A subordinated debt application, if applicable.
(4) Applications for permission to organize a stock association and for approval of a merger, if applicable, and a copy of any application for FDIC insurance of accounts, if applicable.
(5) A statement describing any other applications required under Federal or State banking laws for all transactions related to the conversion, copies of all dispositive documents issued by regulatory authorities relating to the applications, and, if requested by the appropriate Federal banking agency, copies of the applications and related documents.
(h)
(2) Any additional information requested by the OCC, as authorized by law.
(i)
The appropriate Federal banking agency will generally approve a savings association's application to engage in a voluntary supervisory conversion unless it determines:
(a) The savings association does not meet the eligibility requirements for a voluntary supervisory conversion under § 192.625 or § 192.630 or because the proceeds from the sale of conversion stock, less the expenses of the conversion, would be insufficient to satisfy any applicable viability requirement;
(b) The transaction is detrimental to or would cause potential injury to the savings association or the Deposit Insurance Fund or is contrary to the public interest;
(c) The savings association or its acquiror, or the controlling parties or directors and officers of the savings association or its acquiror, have engaged in unsafe or unsound practices in connection with the voluntary supervisory conversion; or
(d) The savings association fails to justify an employment contract incidental to the conversion, or the employment contract will be an unsafe or unsound practice or represent a sale of control. In a voluntary supervisory conversion, the appropriate Federal banking agency generally will not approve employment contracts of more than one year for existing management.
(a)
(1) The savings association must complete the conversion stock sale within three months after the appropriate Federal banking agency approves the application. The appropriate Federal banking agency may grant an extension for good cause.
(2) The savings association must comply with all filing requirements of this part, and 12 CFR part 16.
(3) The savings association must submit an opinion of independent legal counsel indicating that the sale of its shares complies with all applicable State securities law requirements.
(4) The savings association must comply with all applicable laws, rules, and regulations.
(5) The savings association must satisfy any other requirements or conditions the appropriate Federal banking agency may impose.
(b)
(1) The savings association must satisfy any conditions and restrictions the appropriate Federal banking agency imposes to prevent unsafe or unsound practices, to protect the Deposit Insurance Fund and the public interest, and to prevent potential injury or detriment to the savings association before and after the conversion. The appropriate Federal banking agency may impose these conditions and restrictions on the savings association (before and after the conversion) or, as appropriate, the savings association's acquiror, controlling parties, or its directors and officers; or
(2) The savings association must infuse a larger amount of capital, if necessary, for safety and soundness reasons.
If a savings association converts under this subpart, it must offer and sell its shares in accordance with the applicable requirements of 12 CFR parts 16 and 192.
For three years after the completion of a voluntary supervisory conversion, neither the savings association nor its controlling shareholder(s) may acquire shares from minority shareholders without the appropriate Federal banking agency's prior approval.
12 U.S.C. 1462a, 1463, 1464, 1814, 1816, 1828(c), 2901 through 2908, and 5412(b)(2)(B).
(a)
Commodity Futures Trading Commission.
Notice of proposed rulemaking.
The Commodity Futures Trading Commission (“Commission” or “CFTC”) is publishing for public comment a proposed rule (“Proposed Rule”) addressing the cross-border application of certain swap provisions of the Commodity Exchange Act (“CEA or “Act”), as added by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Specifically, the Proposed Rule addresses the cross-border application of the registration thresholds and certain requirements applicable to swap dealers (“SDs”) and major swap participants (“MSPs”), and establishes a formal process for requesting comparability determinations for such requirements from the Commission. The Commission is proposing a risk-based approach that, consistent with section 2(i) of the CEA, and with due consideration of international comity principles and the Commission's interest in focusing its authority on potential significant risks to the U.S. financial system, would advance the goals of the Dodd-Frank Act's swap reform, while fostering greater liquidity and competitive markets, promoting enhanced regulatory cooperation, and advancing the global harmonization of swap regulation.
Comments must be received on or before March 9, 2020.
You may submit comments, identified by RIN 3038-AE84, by any of the following methods:
•
•
•
Please submit your comments using only one of these methods. To avoid possible delays with mail or in-person deliveries, submissions through the CFTC Comments Portal are encouraged.
All comments must be submitted in English, or if not, accompanied by an English translation. Comments will be posted as received to
The Commission reserves the right, but shall have no obligation, to review, pre-screen, filter, redact, refuse, or remove any or all of your submission from
Joshua Sterling, Director, (202) 418-6056,
In 2010, the Dodd-Frank Act
In May 2012, the CFTC and Securities and Exchange Commission (“SEC”) jointly issued an adopting release that, among other things, further defined and provided registration thresholds for SDs and MSPs in § 1.3 of the CFTC's regulations (“Entities Rule”).
In July 2013, the Commission published interpretive guidance and a policy statement regarding the cross-border application of certain swap provisions of the CEA (“Guidance”).
On November 14, 2013, DSIO issued a staff advisory (“ANE Staff Advisory”) stating that a non-U.S. SD that regularly uses personnel or agents located in the United States to arrange, negotiate, or execute a swap with a non-U.S. person (“ANE Transactions”) would generally be required to comply with “Transaction-Level Requirements,” as the term was used in the Guidance (discussed in section VI.A).
In May 2016, the Commission issued a final rule on the cross-border application of the Commission's margin requirements for uncleared swaps (“Cross-Border Margin Rule”).
In October 2016, the Commission proposed regulations regarding the cross-border application of certain requirements under the Dodd-Frank Act regulatory framework for SDs and MSPs (“2016 Proposal”).
The Commission is today withdrawing the 2016 Proposal. The Proposed Rule reflects the Commission's current views on the matters addressed in the 2016 Proposal, which have evolved since the 2016 Proposal as a result of market and regulatory developments in the swap markets and in the interest of international comity, as discussed in this release.
The regulatory landscape is far different now than it was when the Dodd-Frank Act was enacted. Even when the CFTC published the Guidance in 2013, very few jurisdictions had made significant progress in implementing the global swap reforms to which the G20 leaders agreed at the Pittsburgh G20 Summit. Today, however, as a result of the cumulative implementation efforts by regulators throughout the world, significant progress has been made by regulators in the world's primary swap trading jurisdictions to implement the G20 commitments.
Many swaps involve at least one counterparty that is located in the United States or another jurisdiction that has adopted comprehensive swap regulations.
The approach described below is informed by the Commission's understanding of current market practices of global financial institutions under the Guidance. Driven by business and regulatory reasons, a financial group that is active in the swap market often operates in multiple market centers around the world and carries out swap activity with geographically-diverse counterparties using a number of different operational structures.
In this sense, a global financial enterprise effectively operates as a single business, with a highly integrated network of business lines and services conducted through various branches or affiliated legal entities that are under the control of the parent entity.
The Commission's interpretation of CEA section 2(i) in this release mirrors the approach that the Commission took in the Guidance. However, in light of the passage of time since the publication of the Guidance, the Commission is restating its interpretation of section 2(i) of the CEA with the Proposed Rule.
CEA section 2(i) provides that the swap provisions of Title VII shall not apply to activities outside the United States unless those activities—
• have a direct and significant connection with activities in, or effect on, commerce of the United States; or
• contravene such rules or regulations as the Commission may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision of the CEA that was enacted by the Dodd-Frank Act.
The Commission believes that section 2(i) provides it express authority over swap activities outside the United States when certain conditions are met, but it does not require the Commission to extend its reach to the outer bounds of that authorization. Rather, in exercising its authority with respect to swap activities outside the United States, the Commission will be guided by international comity principles and will focus its authority on potential significant risks to the U.S. financial system.
In interpreting the phrase “direct and significant,” the Commission has examined the plain language of the statutory provision, similar language in other statutes with cross-border application, and the legislative history of section 2(i).
The statutory language in CEA section 2(i) is structured similarly to the statutory language in the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”),
It is appropriate, therefore, to read section 2(i) of the CEA as a clear expression of congressional intent that the swap provisions of Title VII of the Dodd-Frank Act apply to activities beyond the borders of the United States when certain circumstances are present.
An examination of the language in the FTAIA, however, does not provide an unambiguous roadmap for the Commission in interpreting section 2(i) of the CEA because there are both similarities, and a number of significant differences, between the language in CEA section 2(i) and the language in the FTAIA. Further, the Supreme Court has not provided definitive guidance as to the meaning of the direct, substantial, and reasonably foreseeable test in the FTAIA, and the lower courts have interpreted the individual terms in the FTAIA differently.
Although a number of courts have interpreted the various terms in the FTAIA, only the term “direct” appears in both CEA section 2(i) and the FTAIA.
Other terms in the FTAIA differ from the terms used in section 2(i) of the CEA. First, the FTAIA test explicitly requires that the effect on U.S. commerce be a “reasonably foreseeable” result of the conduct,
As the foregoing textual analysis of the relevant statutory language indicates, section 2(i) differs from its analogue in the antitrust laws. Congress delineated the cross-border scope of the Sherman Act in section 6a of the FTAIA as applying to conduct that has a “direct” and “substantial” and “reasonably foreseeable” “effect” on U.S. commerce. In section 2(i), on the other hand, Congress did not include a requirement that the effects or connections of the activities outside the United States be “reasonably foreseeable” for the Dodd-Frank Act swap provisions to apply. Further, Congress included language in section 2(i) to apply the Dodd-Frank Act swap provisions in circumstances in which there is a direct and significant connection with activities in U.S. commerce, regardless of whether there is an effect on U.S. commerce. The different words that Congress used in paragraph (1) of section 2(i), as compared to its closest statutory analogue in section 6a of the FTAIA, inform the Commission in construing the boundaries of its cross-border authority over swap activities under the CEA.
One of the principal rationales for the Dodd-Frank Act was the need for a comprehensive scheme of systemic risk regulation. More particularly, a primary purpose of Title VII of the Dodd-Frank Act is to address risk to the U.S. financial system created by interconnections in the swap market.
In global markets, the source of such risk is not confined to activities within U.S. borders. Due to the interconnectedness between firms, traders, and markets in the U.S. and abroad, a firm's failure, or trading losses overseas, can quickly spill over to the United States and affect activities in U.S. commerce and the stability of the U.S. financial system. Accordingly, Congress explicitly provided for cross-border application of Title VII to activities outside the United States that pose risks to the U.S. financial system.
Further, the Commission does not read section 2(i) to require a transaction-by-transaction determination that a specific swap outside the United States has a direct and significant connection with activities in, or effect on, commerce of the United States to apply the swap provisions of the CEA to such transaction. Rather, it is the connection of swap activities, viewed as a class or in the aggregate, to activities in commerce of the United States that must be assessed to determine whether application of the CEA swap provisions is warranted.
This conclusion is bolstered by similar interpretations of other federal statutes regulating interstate commerce. For example, the Supreme Court has long supported a similar “aggregate effects” approach when analyzing the reach of U.S. authority under the Commerce Clause.
Principles of international comity counsel the government in one country to act reasonably in exercising its jurisdiction with respect to activity that takes place in another country. Statutes should be construed to “avoid unreasonable interference with the sovereign authority of other nations.”
The Restatement (Third) of Foreign Relations Law of the United States,
As a general matter, the Fourth Restatement has indicated that the concept of reasonableness as it relates to foreign relations law is “a principle of statutory interpretation” that “operates in conjunction with other principles of statutory interpretation.”
Consistent with the Restatement, the Commission has carefully considered, among other things, the level of the foreign jurisdiction's supervisory interests over the subject activity and the extent to which the activity takes place within the foreign territory. In doing so, the Commission has strived to minimize conflicts with the laws of other jurisdictions while seeking, pursuant to section 2(i), to apply the swaps requirements of Title VII to activities outside the United States that have a direct and significant connection with activities in, or effect on, U.S. commerce.
The Commission believes the Proposed Rule strikes an appropriate balance between these competing factors to ensure that the Commission can discharge its responsibilities to protect the U.S. markets, market participants, and financial system,
The Proposed Rule addresses which cross-border swaps or swap positions a person would need to consider when determining whether it needs to register with the Commission as an SD or MSP, as well as related classifications of swap market participants and swaps (
The Proposed Rule takes into account the Commission's experience implementing the Dodd-Frank Act reforms, including its experience with the Guidance and the Cross-Border Margin Rule, comments submitted in connection with the ANE Request for Comment, as well as discussions that the Commission and its staff have had with market participants, other domestic
The Commission has also sought to target those classes of entities whose activities—due to the nature of their relationship with a U.S. person or U.S. commerce—most clearly present the risks addressed by the Dodd-Frank Act provisions, and related regulations covered by the Proposed Rule. The Proposed Rule is designed to limit opportunities for regulatory arbitrage by applying the registration thresholds in a consistent manner to differing organizational structures that serve similar economic functions or have similar economic effects. At the same time, the Commission is mindful of the impact of its choices on market efficiency and competition, as well as the importance of international comity when exercising the Commission's authority. The Commission believes that the Proposed Rule reflects a measured approach that advances the goals underlying SD and MSP regulation, consistent with the Commission's statutory authority, while mitigating market distortions and inefficiencies, and avoiding fragmentation.
The Commission is proposing to define certain terms for the purpose of applying the Dodd-Frank Act swap provisions addressed by the Proposed Rule to cross-border transactions. If adopted, certain of these definitions would be relevant in assessing whether a person's activities have the requisite “direct and significant” connection with activities in, or effect on, U.S. commerce within the meaning of CEA section 2(i). Specifically, the definitions would be relevant in determining whether certain swaps or swap positions would need to be counted toward a person's SD or MSP threshold and in addressing the cross-border application of certain Dodd-Frank Act requirements (as discussed below in sections III through VI).
The Commission acknowledges that the information necessary for a swap counterparty to accurately assess whether its counterparty or a specific swap meet one or more of the definitions discussed below may be unavailable, or available only through overly burdensome due diligence. For this reason, the Commission believes that a market participant should generally be permitted to reasonably rely on written counterparty representations in each of these
Under the Proposed Rule, a “U.S. person” would be defined as set forth below, consistent with the definition of “U.S. person” adopted by the SEC in the context of its regulations regarding cross-border securities-based swap activities.
(1) A natural person resident in the United States;
(2) A partnership, corporation, trust, investment vehicle, or other legal person organized, incorporated, or established under the laws of the United States or having its principal place of business in the United States;
(3) An account (whether discretionary or non-discretionary) of a U.S. person;
(4) An estate of a decedent who was a resident of the United States at the time of death.
The Commission believes that this definition offers a clear, objective basis for determining which individuals or entities should be identified as U.S. persons for purposes of the swap requirements addressed by the Proposed Rule. Specifically, the various prongs, as discussed in more detail below, are intended to identify persons whose activities have a significant nexus to the United States by virtue of their organization or domicile in the United States. In addition, harmonizing with the definition in the SEC Cross-Border Rule is not only consistent with section 2(i) of the CEA,
Proposed § 23.23(a)(22)(i) identifies certain persons as a “U.S. person” by virtue of their domicile or organization within the United States. The Commission has traditionally looked to where a legal entity is organized or incorporated (or in the case of a natural person, where he or she resides) to determine whether it is a U.S. person.
More specifically, proposed §§ 23.23(a)(22)(i)(
In addition, the Commission is of the view that proposed § 23.23(a)(22)(i)(
Finally, the Commission is of the view that proposed § 23.23(a)(22)(i)(
As noted in the Cross-Border Margin Rule,
However, determining the principal place of business of a collective investment vehicle (“CIV”), such as an investment fund or commodity pool, may require consideration of additional factors beyond those applicable to operating companies. The Commission is of the view that with respect to an externally managed investment vehicle, this location is the office from which the manager of the vehicle primarily directs, controls, and coordinates the investment activities of the vehicle.
The Commission notes that under the Cross-Border Margin Rule,
With respect to proposed § 23.23(a)(22)(i)(
Proposed § 23.23(a)(22)(i)(
Unlike the Cross-Border Margin Rule, the proposed definition of “U.S. person” would not include certain legal entities that are owned by one or more U.S. person(s) and for which such person(s) bear unlimited responsibility for the obligations and liabilities of the legal entity (“unlimited U.S. responsibility prong”).
The Commission is declining at this time to revisit its interpretation of “guarantee,” discussed below, and is not including an “unlimited U.S. responsibility prong” in the “U.S. person” definition in the Proposed Rule. The Commission is of the view that the corporate structure that this prong is designed to capture is not one that is commonly in use in the marketplace. As noted below, the Commission requests comments on whether this understanding is correct, and if not, whether the Commission should add this prong to the proposed “U.S. person” definition or reassess its proposed interpretation of a “guarantee.” In addition, the Commission notes that the treatment of the unlimited U.S. liability prong in the Proposed Rule would not impact an entity's obligations with respect to the Cross-Border Margin Rule. To the extent that entities are considered U.S. persons for purposes of the Cross-Border Margin Rule as a result of the unlimited U.S. liability prong, the Commission believes that the different purpose of the registration-related rules justifies this potentially different treatment.
The proposed “U.S. person” definition is generally consistent with the “U.S. person” interpretation set forth in the Guidance, with certain exceptions.
Unlike the non-exhaustive “U.S. person” definition provided in the Guidance, the proposed definition of “U.S. person” is limited to persons enumerated in the rule, consistent with the Cross-Border Margin Rule and the SEC Cross-Border Rule.
Further, in consideration of the discretionary and appropriate exercise of international comity-based doctrines, proposed § 23.23(a)(22)(iii) states that the term “U.S. person” would not include international financial institutions, as defined below. Specifically, consistent with the SEC's definition,
Consistent with the Entities Rule and the Guidance, the Commission is of the view that the term “international financial institutions” includes the “international financial institutions” that are defined in 22 U.S.C. 262r(c)(2) and institutions defined as “multilateral development banks” in the European Union's regulation on “OTC derivatives, central counterparties and trade repositories.”
As described above, the Commission is of the view that the proposed “U.S. person” definition is largely similar to the definition in the Cross-Border Margin Rule. Specifically, the Commission believes that any person designated as a “U.S. person” under the Proposed Rule would also be designated as such under the Cross-Border Margin Rule. Therefore, the Commission believes any inconsistencies do not raise significant concerns regarding the practical application of the “U.S. person” definitions. Further, the Commission believes that having a definition that is harmonized with the SEC allows for more efficient application of the definitions by market participants, including entities that may engage in dealing activity with respect to both swaps and security-based swaps. Therefore, the Commission may also consider amending the “U.S. person” definition in the Cross-Border Margin Rule in the future. However, to provide certainty to market participants, proposed § 23.23(a)(22)(iv) would permit reliance, until December 31, 2025, on any U.S. person-related representations that were obtained to comply with the Cross-Border Margin Rule. This time-limited relief is appropriate so that market participants do not have to immediately obtain new representations from their counterparties. The Commission also believes that any person designated as a “U.S. person” under the Proposed Rule would also be a “U.S. person” under the Guidance definition, since the Proposed Rule's definition is narrower in scope. Therefore, the Commission is of the view that market participants would also be able to rely on representations previously obtained using the “U.S. person” definition in the Guidance.
The term “non-U.S. person” would be defined to mean any person that is not a U.S. person.
Under the Proposed Rule, consistent with the Cross-Border Margin Rule,
Consistent with the Cross-Border Margin Rule, the proposed term “guarantee” would apply regardless of whether such right of recourse is conditioned upon the non-U.S. person's insolvency or failure to meet its obligations under the relevant swap, and regardless of whether the counterparty seeking to enforce the guarantee is required to make a demand for payment or performance from the non-U.S. person before proceeding against the U.S. guarantor.
The proposed term “guarantee” would also encompass any arrangement pursuant to which the counterparty to the swap has rights of recourse, regardless of the form of the arrangement, against at least one U.S. person (either individually, jointly, and/or severally with others) for the non-U.S. person's obligations under the swap.
Further, the Commission's proposed definition of guarantee would not be affected by whether the U.S. guarantor is an affiliate of the non-U.S. person because, in each case, regardless of affiliation, the swap counterparty has a conditional or unconditional legally enforceable right, in whole or in part, to receive payments from, or otherwise collect from, the U.S. person in connection with the non-U.S. person's obligations.
The Commission also notes that the proposed “guarantee” definition would not apply when a non-U.S. person has a right to be compensated by a U.S. person with respect to the non-U.S. person's own obligations under the swap. For example, consider a swap between two non-U.S. persons (“Party E” and “Party F”), where Party E enters into a back-to-back swap with a U.S. person (“Party G”), or enters into an agreement with Party G to be compensated for any payments made by Party E under the swap in return for passing along any payments received. In such an arrangement, a guarantee would not exist because Party F would not have a right to collect payments from Party G with respect to Party E's obligations under the swap (assuming no other agreements exist).
As with the Cross-Border Margin Rule, the definition of “guarantee” in the Proposed Rule is narrower in scope than the one used in the Guidance.
For discussion purposes in this release, a non-U.S. person would be considered a “Guaranteed Entity” with respect to swaps that are guaranteed by a U.S. person. A non-U.S. person may be a Guaranteed Entity with respect to swaps with certain counterparties because the non-U.S. person's swaps with those counterparties are guaranteed, but would not be a Guaranteed Entity with respect to swaps with other counterparties if the non-U.S. person's swaps with the other counterparties are not guaranteed by a U.S. person. In other words, depending on the nature of the trading relationship, a single entity could be a Guaranteed Entity with respect to some of its swaps, but not others. This release uses the term “Other Non-U.S. Person” to refer to a non-U.S. person that is neither a Guaranteed Entity nor a significant risk subsidiary. Depending on an entity's corporate structure and financial relationships, a single entity could be both, for example, a Guaranteed Entity and an Other Non-U.S. Person.
In the Proposed Rule, the Commission is proposing a new category of person termed a significant risk subsidiary (“SRS”). A non-U.S. person would be considered an SRS if: (1) The non-U.S. person is a “significant subsidiary” of an “ultimate U.S. parent entity,” as those terms are proposed to be defined; (2) the “ultimate U.S. parent entity” has more than $50 billion in global consolidated assets, as determined in accordance with U.S. GAAP at the end of the most recently completed fiscal year; and (3) the non-U.S. person is not subject to either: (a) Consolidated supervision and regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) as a subsidiary of a U.S. bank holding company (“BHC”); or (b) capital standards and oversight by the non-U.S. person's home country regulator that are consistent with the Basel Committee on Banking Supervision's “International Regulatory Framework for Banks” (“Basel III”) and margin requirements for uncleared swaps in a jurisdiction for which the Commission has issued a comparability determination (“CFTC Margin Determination”) with respect to uncleared swap margin requirements.
In addition to the U.S. persons described above in section II.A, the Commission understands that U.S. persons may organize the operations of their businesses through the use of one or more subsidiaries that are organized and operated outside the United States. Through consolidation, non-U.S. subsidiaries of U.S. persons may permit U.S. persons to accrue risk through the swap activities of their non-U.S. subsidiaries that, in aggregate, may have a significant effect on the U.S. financial system. Therefore, the Commission believes that consolidated non-U.S. subsidiaries of U.S. persons may appropriately be subject to Commission regulation due to their direct and significant relationship to their U.S. parent entities. Thus, the Commission believes that consolidated non-U.S. subsidiaries of U.S. parent entities present a greater supervisory interest to the CFTC, relative to Other Non-U.S. Persons. Moreover, because U.S. persons have regulatory obligations under the CEA that Other Non-U.S. Persons may not have, the Commission also believes that consolidated non-U.S. subsidiaries of U.S. parent entities present a greater supervisory interest to the CFTC relative to Other Non-U.S. Persons due to the Commission's interest in preventing the evasion of obligations under the CEA.
Pursuant to the consolidation requirements of U.S. GAAP, the financial statements of a U.S. parent entity reflect the financial position and results of operations of that parent entity, together with the network of branches and subsidiaries in which the U.S. parent entity has a controlling interest, including non-U.S. subsidiaries, which is an indication of connection and potential risk to the U.S. parent entity. Consolidation under U.S. GAAP is predicated on the financial control of the reporting entity. Therefore, an entity within a financial group that is consolidated with its parent entity for accounting purposes in accordance with U.S. GAAP is subject to the financial control of that parent entity. By virtue of consolidation then, a non-U.S. subsidiary's swap activity creates direct risk to the U.S. parent. That is, as a result of consolidation and financial control, the financial position, operating results, and statement of cash flows of a non-U.S. subsidiary are included in the financial statements of its U.S. parent and therefore affect the financial condition, risk profile, and market value of the parent. Because of that relationship, risks taken by a non-U.S. subsidiary can have a direct effect on the U.S. parent entity. Furthermore, a non-U.S. subsidiary's counterparties may generally look to both the subsidiary and its U.S. parent for fulfillment of the subsidiary's obligations under a swap, even without any explicit guarantee. In many cases, the Commission believes that counterparties would not enter into the transaction with the subsidiary (or would not do so on the same terms), and the subsidiary would not be able to engage in a swap business, absent this close relationship with a parent entity. In addition, the Commission notes that a non-U.S. subsidiary may enter into offsetting swaps or other arrangements with its U.S. parent entity or other affiliate(s) to transfer the risks and benefits of swaps with non-U.S. persons to its U.S. affiliates, which could also lead to risk for the U.S. parent entity. Because such swap activities may have a direct impact on the financial position, risk profile, and market value of a U.S. parent entity, they can lead to spill-over effects on the U.S. financial system.
However, the Commission preliminarily believes the principles of international comity counsel against applying its swap regulations to all non-U.S. subsidiaries of U.S. parent entities. Rather, the Commission believes that it is consistent with such principles to apply a risk-based approach to determining which of such entities should be required to comply with the Commission's swap requirements. The Commission believes that its approach in the Proposed Rule makes that determination in a manner that accounts for the risk that non-U.S. subsidiaries may pose to the U.S. financial system and the ability of large global entities to efficiently operate outside the United States.
The Commission's risk-based approach is embodied in the proposed definition of an SRS. SRSs are entities whose obligations under swaps may not be guaranteed by U.S. persons, but which nonetheless raise particular supervisory concerns in the United States due to the possible negative impact on their ultimate U.S. parent entities and thus the U.S. financial system.
For purposes of the SRS definition, the term “subsidiary” would mean a subsidiary of a specified person that is an affiliate controlled by such person directly, or indirectly through one or
Notably, a U.S. parent entity for purposes of the definition of SRS need not be a non-U.S. subsidiary's ultimate parent entity. The SRS definition would encompass U.S. parent entities that may be intermediate entities in a consolidated corporate family with an ultimate parent entity located outside the U.S. To differentiate between multiple possible U.S. parent entities, the Proposed Rule defines an “ultimate U.S. parent entity” for purposes of the significant subsidiary test. A non-U.S. person's “ultimate U.S. parent entity” would be the U.S. parent entity that is not a subsidiary of any other U.S. parent entity.
In addition to the definitions discussed above, whether an entity would be considered an SRS depends on the size of its ultimate U.S. parent entity, the significance of the subsidiary to its ultimate U.S. parent entity, and the regulatory oversight of its ultimate U.S. parent entity or the regulatory oversight of the non-U.S. subsidiary in the jurisdiction in which it is regulated.
Under the Proposed Rule, the ultimate U.S. parent entity must exceed a $50 billion consolidated asset threshold. The Commission is proposing the $50 billion threshold in order to balance the Commission's interest in adequately overseeing those non-U.S. persons that may have a significant impact on their ultimate U.S. parent entity and, by extension, the U.S. financial system, with its interest in avoiding unnecessary burdens on those non-U.S. persons that would not have such an impact. The $50 billion threshold has been used in other contexts as a measure of large, complex institutions that may have systemic impacts on the U.S. financial system. For example, the Financial Stability Oversight Council (“FSOC”) initially used a $50 billion total consolidated assets quantitative test as one threshold to apply to nonbank financial entities when assessing risks to U.S. financial stability.
In addition, before a non-U.S. subsidiary of an ultimate U.S. parent entity that meets the $50 billion consolidated asset threshold would be an SRS, the subsidiary would need to constitute a significant part of its ultimate U.S. parent entity. This concept of a “significant subsidiary” borrows from the SEC's definition of “significant subsidiary” in Regulation S-X, as well as the Federal Reserve Board in its financial statement filing requirements for foreign subsidiaries of U.S. banking organizations.
Under the Proposed Rule, the term “significant subsidiary” would mean a subsidiary, including its subsidiaries, where: (1) The three year rolling average of the subsidiary's equity capital is equal to or greater than five percent of the three year rolling average of its ultimate U.S. parent entity's consolidated equity capital, as determined in accordance with U.S. GAAP at the end of the most recently completed fiscal year (the “equity capital significance test”); (2) the three year rolling average of the subsidiary's revenue is equal to or greater than ten percent of the three year rolling average of its ultimate U.S. parent entity's consolidated revenue, as determined in accordance with U.S. GAAP at the end of the most recently completed fiscal year (the “revenue significance test”); or (3) the three year rolling average of the subsidiary's assets are equal to or greater than ten percent of the three year rolling average of its ultimate U.S. parent entity's consolidated assets, as determined in accordance with U.S. GAAP at the end of the most recently completed fiscal year (the “asset significance test”). For the proposed equity capital significance test, equity capital would include perpetual
The Proposed Rule would cause an entity to be a significant subsidiary only if it passes at least one of these significance tests. The Commission preliminarily believes that the equity capital test is an appropriate measure of a subsidiary's significance to its ultimate U.S. parent entity and notes its use in the context of financial statement reporting of foreign subsidiaries.
As indicated above, under the Proposed Rule, a non-U.S. person would not be an SRS to the extent the entity is subject to prudential regulation as a subsidiary of a U.S. BHC or is subject to comparable capital and margin standards. An entity that meets either of those two exceptions, in the Commission's preliminary view, would be subject to a level of regulatory oversight that is sufficiently comparable to the Dodd-Frank Act swap regime with respect to prudential oversight. Non-U.S. subsidiaries that are part of BHCs are already subject to consolidated supervision and regulation by the Federal Reserve Board,
Similarly, in the case of entities that are subject to capital standards and oversight by their home country regulators that are consistent with Basel III and subject to a CFTC Margin Determination, the Commission preliminarily believes that it is appropriate for the Commission to defer to the home country regulator.
As noted above, if a non-U.S. subsidiary of an ultimate U.S. parent entity does not fall into either of the exceptions in proposed §§ 23.23(a)(12)(i)-(ii), the Proposed Rule would classify the subsidiary as a SRS only if its ultimate U.S. parent entity has more than $50 billion in global consolidated assets and if the subsidiary meets the definition of a significant subsidiary, set forth in proposed § 23.23(a)(13).
The Commission is requesting comment below on the proposed definitions discussed in this section.
Under the Proposed Rule, the term “foreign branch” would mean an office of a U.S. person that is a bank that: (1)
The Commission believes that the factors listed in the proposed definition are appropriate for determining when an entity would be considered a foreign branch for purposes of the Proposed Rule.
The proposed definition of “foreign branch” is also consistent with the SEC's approach, which, for purposes of security-based swap dealer regulation, defined foreign branch as any branch of a U.S. bank that: (1) Is located outside the United States; (2) operates for valid business reasons; and (3) is engaged in the business of banking and is subject to substantive banking regulation in the jurisdiction where located.
The Commission notes that a foreign branch would not include an affiliate of a U.S. bank that is incorporated or organized as a separate legal entity.
Under the Proposed Rule, the term “swap conducted through a foreign branch” would mean a swap entered into by a foreign branch where: (1) The foreign branch or another foreign branch is the office through which the U.S. person makes and receives payments and deliveries under the swap pursuant to a master netting or similar trading agreement, and the documentation of the swap specifies that the office for the U.S. person is such foreign branch; (2) the swap is entered into by such foreign branch in its normal course of business; and (3) the swap is reflected in the local accounts of the foreign branch.
The Commission believes that this definition identifies the type of swap activity for which the foreign branch performs key dealing functions outside the United States. Because a foreign branch of a U.S. bank is not a separate legal entity, the first prong of the definition clarifies that the foreign branch must be the office of the U.S. bank through which payments and deliveries under the swap must be made. This approach is consistent with the standard ISDA Master Agreement, which requires that each party specify an “office” for each swap, which is where a party “books” a swap and/or the office through which the party makes and receives payments and deliveries.
The second prong of the definition (whether the swap is entered into by such foreign branch in the normal course of business) is intended as an anti-evasion measure to prevent a U.S. bank from simply routing swaps for booking in a foreign branch so that the swap would be treated as a swap conducted through a foreign branch for purposes of the SD and MSP registration thresholds or for purposes of certain regulatory requirements applicable to registered SDs or MSPs. To satisfy this prong, it must be the normal course of business for employees located in the branch (or another foreign branch of the U.S. bank) to enter into the type of swap in question. The Commission preliminarily believes that this requirement would not prevent personnel of the U.S. bank located in the U.S. from participating in the negotiation or execution of the swap so long the swaps that are booked in the foreign branch are primarily entered into by personnel located in the branch (or another foreign branch of the U.S. bank).
With respect to the third prong, the Commission believes that where a swap is with the foreign branch of a U.S. bank, it generally would be reflected in the foreign branch's accounts.
Under the Proposed Rule, the term “swap entity” would mean a person that is registered with the Commission as a SD or MSP pursuant to the CEA.
Under the Proposed Rule, the term “U.S. branch” would mean a branch or agency of a non-U.S. banking organization where such branch or agency: (1) Is located in the United States; (2) maintains accounts independently of the home office and other U.S. branches, with the profit or loss accrued at each branch determined as a separate item for each U.S. branch; and (3) engages in the business of banking and is subject to substantive banking regulation in the state or district where located.
Similar to how the terms “foreign branch” and “conducted through a foreign branch” are used under the Proposed Rule to identify swap activity of U.S. entities that is taking place outside the United States and, thus, may be eligible for certain relief from the Commission's requirements under the Proposed Rule, these definitions would be used to identify swap activity that the Commission believes should be considered to take place in the United States and, thus, remain subject to the Commission's requirements addressed in the Proposed Rule, as discussed below with respect to the definitions of “foreign-based swap” and “foreign counterparty.” In particular, these proposed definitions are intended to address the concern that an entity would operate outside the United States to evade Dodd-Frank Act requirements and CFTC regulations for a swap while still benefiting from the swap taking place in the United States. The Commission preliminarily believes that the requirements listed in the proposed definitions are appropriate to identify swaps of a non-U.S. banking organization operating through a foreign branch in the United States that should remain subject to Commission requirements addressed in the Proposed Rule.
Consistent with the Commission's proposed approach to foreign branches, a U.S. branch of a non-U.S. banking organization would not include a U.S. affiliate of the organization that is incorporated or organized as a separate legal entity. Also consistent with this approach, the Commission declines in the Proposed Rule to recognize U.S. branches of non-U.S. banking organization separately from their non-U.S. principal for purposes of registration.
Under the Proposed Rule, the term “foreign-based swap” would mean: (1) A swap by a non-U.S. swap entity, except for a swap conducted through a U.S. branch; or (2) a swap conducted through a foreign branch.
As the Commission has previously stated, it has a strong supervisory interest in regulating swap activities that occur in the United States.
The Commission also notes that its approach in the Proposed Rule for U.S. branches of non-U.S. swap entities is parallel to the Commission's approach in the Proposed Rule to provide certain exceptions from Commission requirements or substituted compliance for transactions of foreign branches of U.S. swap entities to take into account the supervisory interest of local regulators, as discussed below in section VI.
The Commission invites comment on all aspects of the Proposed Rule, including each of the definitions discussed above, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to the relevant portions of the Proposed Rule, where applicable.
(1) The “U.S. person” definition the Commission is proposing here aligns with the definition of that term adopted by the SEC in the context of its cross-border swap regulations. Should the Commission instead adopt the U.S. person definition used in its Cross-Border Margin Rule? Alternatively, should the Commission instead harmonize the “U.S. person” definition in the Proposed Rule to the interpretation of U.S. person included in the Guidance?
(2) Is it appropriate, as proposed, that commodity pools, pooled accounts, investment funds, or other CIVs that are majority-owned by U.S. persons not be included in the proposed definition of “U.S. person”? Would a majority of such funds or CIVs be subject to margin requirements of foreign jurisdictions? Is it accurate to assume that the exposure of investors to losses in CIVs is generally capped at their investment amount? Does tracking a CIV's beneficial ownership pose challenges in certain circumstances?
(3) When determining the principal place of business for a CIV, should the Commission consider including as a factor whether the senior personnel responsible for the formation and promotion of the CIV are located in the United States, similar to the approach in the Cross-Border Margin Rule?
(4) Should the Commission include an unlimited U.S. responsibility prong in the definition of “U.S. person”? If not, should the Commission revise its interpretation of “guarantee” in a manner consistent with the SEC to ensure that persons that would otherwise be considered U.S. persons pursuant to the unlimited U.S. responsibility prong would nonetheless be considered entities with guarantees from a U.S. person? Are there any persons that would be captured under the unlimited U.S. responsibility prong?
(5) Should the “U.S. person” definition include a catch-all provision? What types of entities would be expected to fall under such a provision?
(6) Should the Commission consider providing an exemption from the “U.S. person” definition for pension plans organized in the U.S. that are primarily for the benefit of the foreign employees of U.S.-based entities, consistent with the Cross-Border Margin Rule's “U.S. person” definition?
(7) Should the catch-all provision for international financial institutions be restricted to organizations in which the U.S. government is a shareholder?
(8) Does the proposed SRS definition appropriately capture persons that raise greater supervisory concerns relative to Other Non-U.S. Persons whose swap obligations are not guaranteed by a U.S. person? If not, how should the definition be revised? Is $50 billion an appropriate threshold to determine when an ultimate U.S. parent entity may have a significant impact on the U.S. financial system?
(9) Should the Commission consider alternative or additional tests for whether a person would be a significant subsidiary or an SRS? Would an alternate approach to the use of a three year rolling average throughout the proposed significance tests more effectively mitigate the risk of an entity frequently varying between being a significant subsidiary and not being a significant subsidiary?
(10) Should the exclusion set out in proposed § 23.23(a)(12)(i) include any entity that is subject to consolidated supervision and regulation by the Federal Reserve Board rather than being limited to subsidiaries of BHCs (for example, intermediate holding companies of foreign banking organizations that are subject to supervision by the Federal Reserve Board)?
(11) Does the proposed definition of ultimate U.S. parent entity adequately account for affiliated entity structures with multiple U.S. parent entities? Are there situations where the proposed ultimate U.S. parent entity definition would result in more than one ultimate U.S. person entity being identified?
(12) Are the proposed tests for compliance with Basel III capital standards and compliance with margin requirements in a comparable jurisdiction appropriate? What are alternative ways for a person to confirm it is compliant with Basel III capital standards?
(13) In the interests of harmonizing with the SEC, should the Commission use the concept of “conduit affiliate,” as in 17 CFR 240.3a71-3(a)(1), instead of the concept of SRS?
(14) Should the definition of “foreign branch” include the requirement that the branch be “subject to substantive regulation in banking or financing in the jurisdiction where it is located,” given that the definition of “foreign branch” under Regulation K does not contain such a requirement? Similarly, should the definition of “U.S. branch” include the requirement that the branch be “subject to substantive banking regulation in the state or district where located”?
(15) Should the definitions of “foreign branch” and “swap conducted through a foreign branch” be further harmonized with the definition of “foreign branch” by the SEC in rule 3a71-3(a)(2) under the Exchange Act and the definition of “transaction conducted through a foreign branch” by the SEC in rule 3a71-3(a)(3) under the Securities Exchange Act?
(16) Should the definitions of “foreign branch” and “U.S. branch” be restricted to entities engaged in the business of banking and/or finance and subject to substantive regulation in banking and/or finance? If not, what other types of entities should be considered branches?
(17) Are the definitions of “U.S. branch” and “swap conducted through a U.S. branch” effective to appropriately capture transactions that should be considered to be domestic rather than foreign, such that they are ineligible for certain exceptions from the group B and group C requirements and substituted compliance for the group B requirements (discussed in section VI below)? If not, what changes should be made to the definitions?
(18) Are the definitions of “foreign-based swap,” “foreign branch,” “foreign counterparty,” and “swap conducted through a foreign branch” effective to appropriately capture transactions that should be considered to be foreign rather than domestic, such that they are eligible for certain exceptions from the group B and group C requirements and substituted compliance for the group B requirements (discussed in section VI below)? If not, what changes should be made to the definitions?
CEA section 1a(49) defines the term “swap dealer” to include any person that: (1) Holds itself out as a dealer in swaps; (2) makes a market in swaps; (3) regularly enters into swaps with counterparties as an ordinary course of business for its own account; or (4) engages in any activity causing the person to be commonly known in the trade as a dealer or market maker in swaps (collectively referred to as “swap dealing,” “swap dealing activity,” or “dealing activity”).
In accordance with CEA section 1a(49), the Commission issued the Entities Rule,
The Commission is now proposing rules to address how the de minimis threshold should apply to the cross-border swap dealing transactions of U.S. and non-U.S. persons. Specifically, the Proposed Rule identifies when a potential SD's cross-border dealing activities should be included in its de minimis threshold calculation and when they may properly be excluded. As discussed below, whether a potential SD would include a particular swap in its de minimis threshold calculation would depend on how the entity is classified (
Under the Proposed Rule, consistent with the Guidance,
Under the Proposed Rule, whether a non-U.S. person would need to include a swap in its de minimis threshold calculation would depend on the non-U.S. person's status, the status of its counterparty, and, in some cases, the jurisdiction in which the non-U.S. person is regulated. Specifically, the Proposed Rule would require a person that is a Guaranteed Entity or an SRS to count all of its dealing swaps towards the de minimis threshold.
Under the Proposed Rule, an SRS would include all of its dealing swaps in its de minimis threshold calculation without exception.
The Commission believes that treating an SRS differently from a U.S. person could create a substantial regulatory loophole, incentivizing U.S. persons to conduct their dealing business with non-U.S. persons through significant non-U.S. subsidiaries to avoid application of the Dodd-Frank Act SD requirements. Allowing swaps entered into by SRSs, which have the potential to impact the ultimate U.S. parent entity and U.S. commerce, to be treated differently depending on how the parties structure their transactions could undermine the effectiveness of the Dodd-Frank Act swaps provisions and related Commission regulations addressed by the Proposed Rule. Applying the same standard to similar transactions helps to limit those incentives and regulatory implications.
However, under the Proposed Rule, an Other Non-U.S. Person would not be required to count a dealing swap with an SRS toward its de minimis threshold calculation, unless the SRS was also a Guaranteed Entity (and no exception applied). As noted above, an SRS would be required to count all of its dealing swaps. However, where an Other Non-U.S. Person is entering into a dealing swap with an SRS, requiring the Other Non-U.S. Person to count the swap towards the de minimis threshold could cause the Other Non-U.S. Person to stop engaging in swap activities with the SRS. The Commission believes it is important to ensure that an SRS, particularly a commercial entity, continues to have access to swap liquidity from Other Non-U.S. Persons for hedging or other non-dealing purposes.
In addition, a person's status as an SRS would be determined at the entity level and, thus, an SRS would include the swap dealing activity of operations that are part of the same legal person, including those of its branches. Therefore, an SRS would include in its SD de minimis threshold calculation dealing swaps entered into by a branch of the SRS.
The Proposed Rule would require a non-U.S. person to count all dealing swaps with a counterparty that is a U.S. person toward its de minimis threshold calculation, except for swaps with a counterparty that is a foreign branch of a registered U.S. SD and such swap meets the definition of being “conducted through a foreign branch” of such registered SD.
The Proposed Rule's approach in allowing a non-U.S. person to exclude swaps conducted through a foreign branch of a registered SD from its de minimis threshold calculation is consistent with the Guidance.
In an approach that is generally consistent with the Guidance,
Further, the Commission believes that treating a Guaranteed Entity differently from a U.S. person could create a substantial regulatory loophole, incentivizing U.S. persons to conduct their dealing business with non-U.S. persons through non-U.S. affiliates, with a U.S. guarantee, to avoid application of the Dodd-Frank Act SD requirements. Allowing transactions that have a similar economic reality with respect to U.S. commerce to be treated differently depending on how the parties structure their transactions could undermine the effectiveness of the Dodd-Frank Act swap provisions and related Commission regulations addressed by the Proposed Rule. Applying the same standard to similar transactions helps to limit those incentives and regulatory implications.
The Commission is also proposing that a non-U.S. person must count dealing swaps with a Guaranteed Entity in its SD de minimis threshold calculation, except when: (1) The Guaranteed Entity is registered as an SD; or (2) the Guaranteed Entity's swaps are subject to a guarantee by a U.S. person that is a non-financial entity.
Where a non-U.S. person (that itself is not a Guaranteed Entity or an SRS) enters into swap dealing transactions with a Guaranteed Entity that is a registered SD, the Commission preliminarily believes it is appropriate to permit the non-U.S. person not to count its dealing transactions with the Guaranteed Entity against the non-U.S. person's de minimis threshold for two principal reasons. First, requiring the non-U.S. person to count such swaps may incentivize them to not engage in dealing activity with Guaranteed Entities, thereby contributing to market fragmentation and competitive disadvantages for entities wishing to access foreign markets. Second, one counterparty to the swap is a registered SD, and therefore is subject to comprehensive swap regulation under the oversight of the Commission.
In addition, a non-U.S. person that is not a Guaranteed Entity or an SRS would not include in its de minimis threshold calculation its swap dealing transactions with a Guaranteed Entity where the Guaranteed Entity is guaranteed by a non-financial entity. In these circumstances, systemic risk to U.S. financial markets is mitigated because the U.S. guarantor is a non-financial entity whose primary business activities are not related to financial products and such activities primarily occur outside the U.S. financial sector.
Paragraph (4) of the SD definition in § 1.3 requires that, in determining whether its swap dealing transactions exceed the de minimis threshold, a person must include the aggregate notional value of any swap dealing transactions entered into by its affiliates under common control.
Stated in general terms, the Commission's approach allows both U.S. persons and non-U.S. persons in an affiliated group to engage in swap dealing activity up to the de minimis threshold. When the affiliated group meets the de minimis threshold in the aggregate, one or more affiliate(s) (a U.S. affiliate or a non-U.S. affiliate) would have to register as an SD so that the relevant swap dealing activity of the unregistered affiliates remains below the threshold. The Commission recognizes the borderless nature of swap dealing activities, in which a dealer may conduct swap dealing business through its various affiliates in different jurisdictions, and believes that its approach would address the concern that an affiliated group of U.S. and non-U.S. persons engaged in swap dealing transactions with a significant connection to the United States may not be required to register solely because such swap dealing activities are divided among affiliates that all individually fall below the de minimis threshold.
The Proposed Rule, in an approach that is generally consistent with the Guidance, would allow a non-U.S. person that is not a Guaranteed Entity or SRS to exclude from its de minimis threshold calculation any swap that it anonymously enters into on a designated contract market (“DCM”), a swap execution facility (“SEF”) that is registered with the Commission or exempted by the Commission from SEF registration pursuant to section 5h(g) of the CEA, or a foreign board of trade (“FBOT”) that is registered with the Commission pursuant to part 48 of its regulations,
When a non-U.S. person enters into a swap that is executed anonymously on a registered or exempt SEF, DCM, or registered FBOT, the Commission recognizes that the non-U.S. person would not have the necessary information about its counterparty to determine whether the swap should be included in its de minimis threshold calculation. The Commission therefore believes that in this case the practical difficulties make it reasonable for the swap to be excluded altogether.
The Proposed Rule is consistent with the Guidance but would expand the exception to include SEFs and DCOs that are exempt from registration under the CEA, and also states that SRSs do not qualify for this exception. The CEA provides that the Commission may grant an exemption from registration if it finds that a foreign SEF or DCO is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in the SEF's or DCO's home country.
The Commission invites comment on all aspects of the cross-border application of the SD registration threshold described in sections III.A through III.D, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to the relevant portions of the Proposed Rule, where applicable.
(19) Should a non-U.S. person be permitted to exclude from its de minimis threshold calculation swap dealing transactions conducted through a foreign branch of a registered SD?
(20) As discussed in section II.F, under the Proposed Rule, the term “U.S. branch” would mean a branch or agency of a non-U.S. banking organization where such branch or agency: (1) Is located in the United States; (2) maintains accounts independently of the home office and other U.S. branches, with the profit or loss accrued at each branch determined as a separate item for each U.S. branch; and (3) engages in the business of banking and is subject to substantive banking regulation in the state or district where located. Given that definition, would it be appropriate to require a U.S. branch to include in its SD de minimis threshold calculation all of its swap dealing transactions, as if they were swaps entered into by a U.S. person? Would it be appropriate to require an Other Non-U.S. Person to include in its SD de minimis threshold calculation dealing swaps conducted through a U.S. branch?
(21) Under the Proposed Rule, an Other Non-U.S. Person would not be required to include its dealing swaps with an SRS or an Other Non-U.S. Person in its SD de minimis threshold. The Commission invites comment as to whether, and in what circumstances, a non-U.S. person should be required to include dealing swaps with a non-U.S. person in its SD de minimis threshold calculation if any of the risk of such swaps is transferred to an affiliated U.S. SD through one or more inter-affiliate swaps, and as to whether it would be too complex or costly to monitor and implement such a rule.
(22) With respect to proposed § 23.23(b)(2)(iii), should the Commission follow the SEC's approach, which does not require a non-U.S. person that is not a conduit affiliate nor guaranteed by a U.S. person to count dealing swaps with a non-U.S. person whose security-based swap transactions are guaranteed by a U.S. person. The SEC noted that “concerns regarding the risk posed to the United States by such security-based swaps, and regarding the potential use of such guaranteed affiliates to evade the Dodd-Frank Act . . . are addressed by the requirement that guaranteed affiliates count their own dealing activity against the de minimis thresholds when the counterparty has recourse to a U.S. person.”
CEA section 1a(33) defines the term “major swap participant” to include persons that are not SDs but that nevertheless pose a high degree of risk to the U.S. financial system by virtue of the “substantial” nature of their swap positions.
The Commission is now proposing rules to address the cross-border application of the MSP thresholds to the swap positions of U.S. and non-U.S. persons.
Under the Proposed Rule, all of a U.S. person's swap positions would apply toward the MSP registration thresholds without exception.
Under the Proposed Rule, whether a non-U.S. person would include a swap position in its MSP threshold calculation would depend on its status, the status of its counterparty, or the characteristics of the swap. Specifically, the Proposed Rule would require a person that is a Guaranteed Entity or an SRS to count all of its swap positions. In addition, an Other Non-U.S. Person would be required to count all swap positions with a U.S. person, except for swaps conducted through a foreign branch of a registered SD. Subject to certain exceptions, the Proposed Rule would also require an Other Non-U.S. Person to count all swap positions if the counterparty to such swaps is a Guaranteed Entity.
Under the Proposed Rule, an SRS would include all of its swap positions in its MSP threshold calculation.
The Commission believes that treating an SRS differently from a U.S. person could create a substantial regulatory loophole by incentivizing U.S. persons to conduct their swap business with non-U.S. persons through significant non-U.S. subsidiaries to avoid application of the Dodd-Frank Act MSP requirements. Allowing swaps entered into by SRSs, which have the potential to impact the ultimate U.S. parent entity and U.S. commerce, to be treated differently depending on how the parties structure their transactions could undermine the effectiveness of the Dodd-Frank Act swap provisions and related Commission regulations addressed by the Proposed Rule. Applying the same standard to similar
In addition, a person's status as an SRS would be determined at the entity level and, thus, an SRS would include the swap positions that are part of the same legal person, including those of its branches. Therefore, an SRS would include in its MSP threshold calculation swap positions entered into by a branch of the SRS.
Under the Proposed Rule, a non-U.S. person would include all of its swap positions with U.S. persons, unless the transaction is a swap conducted through a foreign branch of a registered SD.
The Proposed Rule's approach in allowing a non-U.S. person to exclude swap positions conducted through a foreign branch of a registered SD is consistent with the approach described in section III.B.2 for cross-border treatment with respect to SDs. A swap conducted through a foreign branch of a registered SD would trigger the Dodd-Frank Act transactional requirements (or comparable requirements) and therefore mitigate concern that this exclusion could be used to engage in swap activities outside the Dodd-Frank Act regime.
The Proposed Rule would require a non-U.S. person to include in its MSP calculation each swap position with respect to which it is a Guaranteed Entity.
The Commission is also proposing that a non-U.S. person must count swap positions with a Guaranteed Entity counterparty, except when the counterparty is registered as an SD.
However, similar to the discussion regarding SDs in section III.B.3, where a non-U.S. person (that itself is not a Guaranteed Entity or an SRS) enters into a swap with a Guaranteed Entity that is a registered SD, it is appropriate to permit the non-U.S. person not to count its swap position with the Guaranteed Entity against the non-U.S. person's MSP thresholds,
In the Entities Rule, the Commission and the SEC provided a joint interpretation that an entity's swap positions in general would be attributed to a parent, other affiliate, or guarantor for purposes of the MSP analysis to the extent that the counterparties to those positions have recourse to the parent, other affiliate, or guarantor in connection with the position, such that no attribution would be required in the absence of recourse.
The Commission is proposing to address the cross-border application of the attribution requirement in a manner consistent with the Entities Rule and CEA section 2(i) and generally comparable to the approach adopted by the SEC.
If a guarantee is present, however, and the entity being guaranteed is not subject to capital regulation (as described above), whether the attribution requirement would apply would depend on the U.S. person status of the person to whom there is recourse under the guarantee (
A non-U.S. person would attribute to itself any swap position of an entity for which the counterparty to the swap has recourse against the non-U.S. person unless all relevant persons (
In addition, the Commission believes that entities subject to a guarantee would be able to enter into significantly more swap positions (and take on significantly more risk) as a result of the guarantee than they would otherwise, amplifying the risk of the non-U.S. person guarantor's inability to carry out its obligations under the guarantee. Given the types of risk that MSP regulation is intended to address, the Commission has a strong regulatory interest in ensuring that the attribution requirement applies to non-U.S. persons that provide guarantees to U.S. persons and Guaranteed Entities. Accordingly, the Commission preliminarily believes that a non-U.S. person should be required to attribute to itself the swap positions of any entity for which it provides a guarantee unless it, the entity subject to the guarantee, and its counterparty are all non-U.S. persons that are not Guaranteed Entities.
The Proposed Rule, consistent with its approach for SDs discussed above in section III.D, would allow a non-U.S. person that is not a Guaranteed Entity or an SRS to exclude from its MSP calculation any swap position that it anonymously enters into on a DCM, a registered SEF or a SEF exempted from registration by the Commission pursuant to section 5h(g) of the CEA, or an FBOT registered with the Commission pursuant to part 48 of its regulations,
When a non-U.S. person enters into a swap position that is executed anonymously on a registered or exempt SEF, DCM, or registered FBOT, the Commission recognizes that the non-U.S. person would not have the necessary information about its counterparty to determine whether the swap position should be included in its MSP calculation. The Commission therefore believes that in this case the practical difficulties make it reasonable for the swap position to be excluded altogether.
The Proposed Rule is consistent with the Guidance, but would expand the exception to include SEFs and DCOs that are exempt from registration under the CEA, and also states that SRSs may not qualify for this exception. The CEA provides that the Commission may grant an exemption from registration if it finds that a foreign SEF or DCO is subject to comparable, comprehensive supervision and regulation by the appropriate governmental authorities in the SEF or DCO's home country.
The Commission invites comment on all aspects of the proposed cross-border application of the MSP registration threshold calculation described in sections IV.A through IV.D, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to
(23) Should the Commission modify its interpretation with regard to the attribution requirement to provide that attribution of a person's swap positions to a parent, other affiliate, or guarantor would not be required if the person is subject to capital standards that are comparable to and as comprehensive as the capital regulations and oversight by the Commission, SEC, or a U.S. prudential regulator? If so, should the home country capital standards be deemed comparable and comprehensive if they are consistent in all respects with Basel III?
(24) Would it be appropriate to require a U.S. branch to include in its MSP threshold calculation all of its swap positions, as if they were swap positions of a U.S. person? Would it be appropriate to require an Other Non-U.S. Person to include in its MSP de minimis threshold calculation swaps conducted through a U.S. branch?
The ANE Staff Advisory provided that a non-U.S. SD would generally be required to comply with transaction-level requirements for SDs for ANE Transactions.
The Commission received seventeen comment letters in response to the ANE Request for Comment.
A few commenters, however, supported the ANE Staff Advisory.
In addition to consideration of the foregoing comments, the Commission also considered a report the U.S. Treasury Department issued in October 2017, which expressed the view that the SEC and the CFTC should “reconsider the implications” of applying the Dodd-Frank Act requirements to certain transactions “merely on the basis that U.S.-located personnel arrange, negotiate, or execute the swap, especially for entities in comparably regulated jurisdictions.”
Based on the Commission's consideration of its experience under the Guidance, the comments it has received, respect for international comity, and the Commission's desire to focus its authority on potential significant risks to the U.S. financial system, the Commission has determined that ANE Transactions will not be considered a relevant factor for purposes of applying the Proposed Rule. Accordingly, under the Proposed Rule, all foreign-based swaps entered into between a non-U.S. swap entity and a non-U.S. person are treated the same regardless of whether the swap is an ANE Transaction. To the extent the Proposed Rule is finalized, this treatment would effectively supersede the ANE Staff Advisory with respect to the application of the group B and C requirements (discussed below) to ANE Transactions.
With respect to its experience, the Commission notes that the ANE No-Action Relief, which went into effect immediately after issuance of the ANE Staff Advisory, generally relieved non-U.S. swap entities from the obligation to comply with most transaction-level requirements when entering into swaps with most non-U.S. persons.
In the interest of international comity, under the Proposed Rule, as under the Guidance, swaps between certain non-U.S. persons would qualify for an exception from application of certain CFTC requirements.
As a preliminary matter, the Commission notes that the consequences of disapplication of the Dodd-Frank Act swap requirements would be mitigated in two respects. First, persons engaging in any aspect of swap transactions within the U.S. remain subject to the CEA and Commission regulations prohibiting the employment, or attempted employment, of manipulative, fraudulent, or deceptive devices, such as section 6(c)(1) of the CEA,
Second, with respect to more specific regulation of swap dealing in accordance with the Commission's swap regime, the Commission notes that, in most cases, non-U.S. persons entering into ANE Transactions would be subject to regulation and oversight in their home jurisdictions similar to the Commission's transaction-level requirements as most of the major swap trading centers have implemented similar risk mitigation requirements.
With respect to market distortion, the Commission gives weight to commenters that argued that application of transaction-level requirements to ANE Transactions would cause non-U.S. SDs to relocate personnel to other countries (or otherwise terminate agency contracts with U.S.-based agents) in order to avoid Dodd-Frank Act swap regulation or having to interpret and apply what the commenters considered a challenging ANE analysis, thereby potentially increasing market fragmentation.
The Commission also gives weight to the regulatory interests of the home jurisdictions of non-U.S. persons engaged in ANE Transactions. Because the risk of the resulting swaps lies in those home countries and not the U.S. financial system, the Commission recognizes that, with the exception of enforcing the prohibition on fraudulent or manipulative conduct taking place in the United States, non-U.S. regulators will have a greater incentive to regulate the swap dealing activities of such non-U.S. persons—such as, for example, with respect to business conduct standards with counterparties, appropriate documentation, and recordkeeping. In these circumstances, where the risk lies outside the U.S. financial system, the Commission recognizes the greater supervisory interest of the authorities in the home jurisdictions of the non-U.S. persons. The Commission is also not aware of any major swap regulatory jurisdiction that applies its regulatory regime to U.S. entities engaging in ANE Transactions within its territory.
In sum, the Commission has determined that the mitigating effect of the anti-fraud and anti-manipulation authority retained by the Commission and the prevalence of applicable regulatory requirements similar to the Commission's own, the likelihood of disruptive avoidance, the Commission's respect for the regulatory interests of the foreign jurisdictions where the actual
The Commission invites comment on all aspects of the proposed treatment of ANE Transactions described in section V, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to the Proposed Rule, where applicable.
(25) Should the Commission apply certain transaction-level requirements (
(26) Should the Commission consider adopting a territorial approach similar to the SEC, where non-US counterparties engaging in ANE Transactions would count such transactions towards their de minimis thresholds and be subject to certain transaction-level requirements,
Title VII of the Dodd-Frank Act and Commission regulations thereunder establish a broad range of requirements applicable to SDs and MSPs, including requirements regarding risk management and internal and external business conduct. These requirements are designed to reduce systemic risk, increase counterparty protections, and increase market efficiency, orderliness, and transparency.
However, consistent with section 2(i) of the CEA, in the interest of international comity, and for other reasons discussed in this release, the Commission is proposing exceptions from, and a substituted compliance process for, certain regulations applicable to registered SDs and MSPs, as appropriate.
The Guidance applied a bifurcated approach to the classification of certain regulatory requirements applicable to SDs and MSPs, based on whether the requirement applies to the firm as a whole (“Entity-Level Requirement” or “ELR”) or to the individual swap or trading relationship (“Transaction-Level Requirement” or “TLR”).
The Guidance categorized the following regulatory requirements as ELRs: (1) Capital adequacy; (2) chief compliance officer; (3) risk management; (4) swap data recordkeeping; (5) swap data repository (“SDR”) reporting; and (6) large trader reporting.
The Guidance categorized the following regulatory requirements as TLRs: (1) Required clearing and swap processing; (2) margin (and segregation) for uncleared swaps; (3) mandatory trade execution; (4) swap trading relationship documentation; (5) portfolio reconciliation and compression; (6) real-time public reporting; (7) trade confirmation; (8) daily trading records; and (9) external business conduct standards.
To avoid confusion that may arise from using the ELR/TLR classification in the Proposed Rule, given that the Proposed Rule does not address the same set of Commission regulations as the Guidance, the Commission is proposing to classify certain of its regulations as group A, group B, and group C requirements for purposes of determining the availability of certain exceptions from, and/or substituted compliance for, such regulations. A description of each of the group A requirements, group B requirements, and group C requirements is below.
The group A requirements include: (1) Chief compliance officer; (2) risk management; (3) swap data recordkeeping; and (4) antitrust considerations. Specifically, the group A requirements consist of the requirements set forth in §§ 3.3, 23.201, 23.203, 23.600, 23.601, 23.602, 23.603, 23.605, 23.606, 23.607, and 23.609,
Section 4s(k) of the CEA requires that each SD and MSP designate an individual to serve as its chief compliance officer (“CCO”) and specifies certain duties of the CCO.
Section 4s(j) of the CEA requires each SD and MSP to establish internal policies and procedures designed to, among other things, address risk management, monitor compliance with position limits, prevent conflicts of interest, and promote diligent supervision, as well as maintain business continuity and disaster recovery programs.
CEA section 4s(f)(1)(B) requires SDs and MSPs to keep books and records for all activities related to their swap business.
Pursuant to these provisions, the Commission promulgated final rules that set forth certain reporting and recordkeeping for SDs and MSPs.
Section 4s(j)(6) of the CEA prohibits an SD or MSP from adopting any process or taking any action that results in any unreasonable restraint of trade or imposes any material anticompetitive burden on trading or clearing, unless necessary or appropriate to achieve the purposes of the CEA.
The group B requirements include: (1) Swap trading relationship documentation; (2) portfolio reconciliation and compression; (3) trade confirmation; and (4) daily trading records. Specifically, the group B requirements consist of the requirements set forth in §§ 23.202, 23.501, 23.502, 23.503, and 23.504,
CEA section 4s(i) requires each SD and MSP to conform to Commission standards for the timely and accurate confirmation, processing, netting, documentation, and valuation of swaps.
CEA section 4s(i) directs the Commission to prescribe regulations for the timely and accurate processing and netting of all swaps entered into by SDs and MSPs.
Section 4s(i) of the CEA requires that each SD and MSP must comply with the Commission's regulations prescribing timely and accurate confirmation of swaps.
Pursuant to CEA section 4s(g),
Pursuant to CEA section 4s(h),
In the Commission's view, the group C requirements focus on customer protection and have a more attenuated link to, and are therefore distinguishable from, systemic and market-oriented protections in the group A and group B requirements. Additionally, as discussed below, the Commission believes that the foreign jurisdictions in which non-U.S. persons and foreign branches of U.S. swap entities are located are likely to have a significant interest in the type of business conduct standards that would be applicable to transactions with such non-U.S. persons and foreign branches within their jurisdiction, and, consistent with section 2(i) of the CEA and in the interest of international comity, it is generally appropriate to defer to such jurisdictions in applying, or not applying, such standards to foreign-based swaps with foreign counterparties.
The Commission invites comment on all aspects of the Proposed Rule, including the classifications of Title VII requirements discussed above, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to the relevant portions of the Proposed Rule, where applicable.
(27) On the classification of group A, group B, and group C requirements, should the Commission use these classifications, revert to the ELR and TLR classifications used in the Guidance, or otherwise classify the relevant Title VII requirements?
(28) To the extent that you agree with the Commission's proposed use of the group A, group B, and group C requirements classification, should any of the requirements be re-classified or removed from such groups? Should requirements not included of any of the groups be added to any of them? If so, which requirements?
Consistent with section 2(i) of the CEA, the Commission is proposing four exceptions from certain Commission regulations for foreign-based swaps in the Proposed Rule.
First, the Commission is proposing an exception from certain group B and C requirements for certain anonymous, exchange-traded, and cleared foreign-based swaps (“Exchange-Traded Exception”).
Second, the Commission is proposing an exception from the group C requirements for certain foreign-based swaps with foreign counterparties (“Foreign Swap Group C Exception”).
Third, the Commission is proposing an exception from the group B requirements for the foreign-based swaps of certain non-U.S. swap entities with certain foreign counterparties (“Non-U.S. Swap Entity Group B Exception”).
Fourth, the Commission is proposing an exception from the group B requirements for certain foreign-based swaps of foreign branches of U.S. swap entities with certain foreign counterparties, subject to certain limitations, including a quarterly cap on the amount of such swaps (“Foreign Branch Group B Exception”).
While these exceptions each have different eligibility requirements discussed below, a common requirement is that they would be available only to foreign-based swaps. As discussed in section II.G above, under the Proposed Rule, a foreign-based swap would mean: (1) A swap by a non-U.S. swap entity, except for a swap conducted through a U.S. branch; or (2) a swap conducted through a foreign branch. Under the Proposed Rule, swaps that do not meet these requirements would be treated as domestic swaps for purposes of applying the group B and group C requirements and, therefore, would not be eligible for the above exceptions.
Pursuant to the Proposed Rule, swap entities that avail themselves of these exceptions for their foreign-based swaps would only be required to comply with the applicable laws of the foreign jurisdiction(s) to which they are subject, rather than the relevant Commission requirements, for such swaps. However, the Commission notes that, notwithstanding these exceptions, swap entities would remain subject to the CEA and Commission regulations not covered by the exceptions, including the prohibition on the employment, or attempted employment, of manipulative and deceptive devices in § 180.1 of the Commission's regulations.
The Commission is proposing that, with respect to its foreign-based swaps, each non-U.S. swap entity and foreign branch of a U.S. swap entity would be excepted from the group B requirements (other than the daily trading records requirements in §§ 23.202(a) through 23.202(a)(1))
With respect to the group B trade confirmation requirement, the Commission notes that where a cleared swap is executed anonymously on a DCM or SEF (as discussed above), independent requirements that apply to DCM and SEF transactions pursuant to the Commission's regulations should ensure that these requirements are met.
Of the remaining group B requirements, the portfolio reconciliation and compression and swap trading relationship documentation requirements would not apply to cleared DCM, SEF, or FBOT transactions described above because the Commission regulations that establish those requirements make clear that they do not apply to cleared transactions.
Additionally, given that this exception is predicated on anonymity, many of the group C requirements would be inapplicable.
The Commission is also proposing that each non-U.S. swap entity and foreign branch of a U.S. swap entity would be excepted from the group C requirements with respect to its foreign-based swaps with a foreign counterparty.
As used herein, the term swap includes transactions in swaps as well as swaps that are offered but not entered into, as applicable.
The Commission notes that, just as the Commission has a strong supervisory interest in regulating and enforcing the group C requirements associated with swaps taking place in the United States, foreign regulators would have a similar interest in overseeing sales practices for swaps occurring within their jurisdictions. Further, given the scope of section 2(i) of the CEA with respect to the Commission's regulation of swap activities outside the United States, the Commission believes that imposing its group C requirements on a foreign-based swap between a non-U.S. swap entity or foreign branch of a U.S. swap entity, on
On the other hand, whenever a swap involves at least one party that is a U.S. person (other than a foreign branch where the swap is conducted through such foreign branch) or is a swap that is conducted through a U.S. branch, the Commission believes it has a strong supervisory interest in regulating and enforcing the group C requirements. A major purpose of Title VII is to control the potential harm to U.S. markets that can arise from risks that are magnified or transferred between parties via swaps. Exercise of U.S. jurisdiction with respect to the group C requirements over such swaps is a reasonable exercise of jurisdiction because of the strong U.S. interest in minimizing the potential risks that may flow to the U.S. economy as a result of such swaps.
The Commission is also proposing that each non-U.S. swap entity that is an Other Non-U.S. Person would be excepted from the group B requirements with respect to any foreign-based swap with a foreign counterparty that is also an Other Non-U.S. Person.
The Commission is also proposing that each foreign branch of a U.S. swap entity would be excepted from the group B requirements, with respect to any foreign-based swap with a foreign counterparty that is an Other Non-U.S. Person, subject to certain limitations.
The Commission is proposing the Foreign Branch Group B Exception to allow the foreign branches of U.S. swap entities to continue to access swap markets for which substituted compliance may not be available under limited circumstances.
The Commission invites comment on all aspects of the Proposed Rule, including each of the proposed exceptions discussed above, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to the relevant portions of the Proposed Rule, where applicable.
(29) In light of the Commission's supervisory interests, are the proposed exceptions appropriate? Should they be broadened or narrowed? For example, should the Exchange-Traded Exception be available to swaps other than foreign-based swaps? Should U.S. swap entities (other than their foreign branches) be eligible for any of the exceptions and under what circumstances? Should there be further limitations on the types of exchanges on which swaps eligible for the Exchange-Traded Exception may occur? With respect to foreign-based swaps with foreign branches, should the Foreign Swap Group C Exception be limited to swaps with foreign branches of a swap entity? Should the Non-U.S. Swap Entity Group B Exception and/or Foreign Branch Group B Exception be expanded to apply to foreign-based swaps with foreign counterparties that are foreign branches and/or to SRSs that are commercial entities? Should the Commission increase, decrease, or otherwise change the cap under the Foreign Branch Group B Exception?
(30) With respect to the Non-U.S. Swap Entity Group B Exception, the Commission considered as an alternative allowing for substituted compliance for swaps that would be eligible for the exception. Would allowing for substituted compliance in these circumstances be a better approach than providing the Non-U.S. Swap Entity Group B Exception?
Substituted compliance is a fundamental component of the Commission's cross-border framework.
The Commission believes that in order to achieve the important policy goals of the Dodd-Frank Act, all U.S. swap entities must be fully subject to the Dodd-Frank Act requirements addressed by the Proposed Rule, without regard to whether their counterparty is a U.S. or non-U.S. person.
In light of the interconnectedness of the global swap market and consistent with CEA section 2(i) and international comity, the Commission is proposing a substituted compliance regime with respect to the group A and group B requirements that builds upon the Commission's current substituted compliance framework and aims to promote diverse markets without compromising the central tenets of the Dodd-Frank Act. As discussed below, the Proposed Rule outlines the circumstances in which a non-U.S. swap entity or foreign branch of a U.S. swap entity would be permitted to comply with the group A and/or group B requirements by complying with comparable standards in its home jurisdiction.
The group A requirements, which relate to compliance programs, risk management, and swap data recordkeeping, are generally implemented on a firm-wide basis in order to effectively address enterprise risk. Accordingly, it is not practical to limit substituted compliance for the group A requirements to only those transactions involving non-U.S. persons. Further, the Commission recognizes that foreign regulators maintain the primary relationships with, and may have the strongest supervisory interests over, non-U.S. swap entities. Therefore, given that the group A requirements cannot be effectively applied on a fragmented jurisdictional basis, and in furtherance of international comity, the Commission is proposing to permit a non-U.S. swap entity to avail itself of substituted compliance with respect to the group A requirements where the non-U.S swap entity is subject to comparable regulation in its home jurisdiction.
Unlike the group A requirements, the group B requirements, which relate to counterparty relationship documentation, portfolio reconciliation and compression, trade confirmation, and daily trading records, are more closely tied to local market conventions and can be effectively implemented on a transaction-by-transaction or relationship basis. It is therefore practicable to allow substituted compliance for group B requirements for transactions with non-U.S. persons. The Commission also recognizes that foreign regulators may have strong supervisory interests in transactions that take place in their jurisdiction. Accordingly, the Commission is proposing to permit a non-U.S. swap entity or foreign branch of a U.S. swap entity to avail itself of substituted compliance for the group B requirements in certain circumstances, depending on the nature of its counterparty.
As discussed above, the Commission believes that swaps involving U.S. persons are one of the types of swaps that have a direct and significant connection with activities in, or effect on, U.S. commerce. Accordingly, the Proposed Rule would generally not permit substituted compliance for the group B requirements for swaps where one of the counterparties is a U.S. person.
Given that group B requirements can be effectively applied on a transaction-by-transaction basis, and the Commission's interest in promoting international comity and market liquidity, the Commission is proposing to allow a non-U.S. swap entity (unless transacting though a U.S. branch), or a U.S. swap entity transacting through a foreign branch, to avail itself of substituted compliance with respect to the group B requirements for swaps with foreign counterparties.
The Commission invites comment on all aspects of the Proposed Rule, including its proposed approach to substituted compliance for the group A and group B requirements, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to the relevant portions of the Proposed Rule, where applicable.
(31) Should the Commission continue to treat group A requirements differently than group B requirements for purposes of substituted compliance? Should the Commission adopt a universal entity-wide or transaction-by-transaction approach?
(32) Should the Commission expand or narrow the availability of substituted compliance for swaps involving U.S. persons?
(33) Is it practicable for non-U.S. swap entities to utilize substituted compliance for transactions with non-U.S. persons?
(34) Given that the Guidance did not apply the group B requirements to swaps between certain non-U.S. persons, should the Commission consider a phase-in period for the application of the group B requirements for swaps between SDs that are Guaranteed Entities or SRSs with counterparties that are Other Non-U.S. Persons where substituted compliance is not currently available?
(35) To what extent do foreign branches of U.S. swap entities enter into swaps with U.S. persons or affiliates of U.S. persons?
(36) Should the Commission treat foreign branches differently than the rest of the U.S. swap entity for purposes of substituted compliance?
(37) How did/does the approach to substituted compliance in the Guidance positively and negatively impact market practices? Please provide any data in support of your comment.
The Commission is proposing to implement a process pursuant to which it would, in connection with certain requirements addressed by the Proposed Rule, conduct comparability determinations regarding a foreign jurisdiction's regulation of swap entities. The proposed approach builds upon the Commission's existing substituted compliance regime and aims to promote international comity and market liquidity without compromising the Commission's interests in reducing systemic risk, increasing market transparency, enhancing market integrity, and promoting counterparty protections. Specifically, the Proposed Rule outlines procedures for initiating comparability determinations, including eligibility and submission requirements, with respect to certain requirements addressed by the Proposed Rule. The Proposed Rule would establish a standard of review that the Commission would apply to such comparability determinations that emphasizes a holistic, outcomes-based approach. The Proposed Rule, if adopted, is not intended to have any impact on the effectiveness of any existing Commission comparability determinations that were issued consistent with the Guidance, which would remain effective pursuant to their terms.
As discussed above, the Commission is proposing to permit a non-U.S. swap entity or foreign branch of a U.S. swap entity to comply with a foreign jurisdiction's swap standards in lieu of the Commission's corresponding requirements in certain cases, provided that the Commission determines that such foreign standards are comparable to the Commission's requirements. All swap entities, regardless of whether they rely on such a comparability determination, would remain subject to the Commission's examination and enforcement authority.
The Commission is proposing to establish a standard of review pursuant to which the Commission would determine whether a foreign jurisdiction's regulatory standards are comparable to the group A and group B requirements. The Commission is proposing a flexible outcomes-based approach that emphasizes comparable regulatory outcomes over identical regulatory approaches.
While the Commission has historically taken a similar outcomes-based approach to comparability determinations, the Proposed Rule would allow the Commission to take an even more holistic view of a foreign jurisdiction's regulatory regime. Specifically, the Proposed Rule would allow the Commission to consider all relevant elements of a foreign jurisdiction's regulatory regime, thereby allowing the Commission to tailor its assessment to a broad range of foreign regulatory approaches.
Although, when assessed against the relevant Commission requirements, the Commission may find comparability with respect to some, but not all, of a foreign jurisdiction's regulatory standards, it may also make a holistic finding of comparability that considers the broader context of a foreign jurisdiction's related regulatory standards. Accordingly, under the Proposed Rule, a comparability determination need not contain a standalone assessment of comparability for each relevant regulatory requirement, so long as it clearly indicates the scope of regulatory requirements that are covered by the determination. Further, the Commission may impose any terms and conditions on a comparability determination that it deems appropriate.
Under the Proposed Rule, the Commission could undertake a comparability determination on its own initiative in furtherance of international comity.
In connection with a comparability determination with respect to some or all of the group A and group B requirements, applicants would be required to furnish certain information to the Commission that provides a comprehensive understanding of the foreign jurisdiction's relevant swap standards, including how they might differ from the corresponding requirements in the CEA and Commission regulations.
The Commission invites comment on all aspects of the Proposed Rule, including its proposed approach to comparability determinations, and specifically requests comments on the following questions. Please explain your responses and provide alternatives to the relevant portions of the Proposed Rule, where applicable.
(38) Please provide comments regarding the Commission's proposal regarding its standard of review for comparability determinations. Should the Commission limit the factors it may consider when issuing a comparability determination?
(39) Should comparability determinations contain an element-by-element assessment of comparability?
(40) How should the Commission address inconsistencies or conflicts between U.S. and non-U.S. regulatory standards?
(41) How have the Commission's approaches to comparability determinations in the Guidance and the Cross-Border Margin rule positively and negatively impacted market practices? Please provide any data in support of your comment.
Under the Proposed Rule, a SD or MSP would be required to create a record of its compliance with all provisions of the Proposed Rule, and retain those records in accordance with § 23.203.
The Regulatory Flexibility Act (“RFA”) requires that agencies consider whether the regulations they propose will have a significant economic impact on a substantial number of small entities.
The Commission previously determined that SDs and MSPs are not small entities for purposes of the RFA.
To the extent that there are any affected small entities under the Proposed Rule, they would need to assess how they are classified under the Proposed Rule (
Accordingly, for the foregoing reasons, the Commission finds that there will not be a substantial number of small entities impacted by the Proposed Rule. Therefore, the Chairman, on behalf of the Commission, hereby certifies pursuant to 5 U.S.C. 605(b) that the proposed regulations will not have a significant economic impact on a substantial number of small entities. The Commission invites comment on the impact of the Proposed Rule on small entities.
The Paperwork Reduction Act of 1995 (“PRA”)
Proposed §§ 23.23(b) and (c), which address the cross-border application of the SD and MSP registration thresholds, respectively, potentially could lead to non-U.S. persons that are currently not registered as SDs or MSPs to exceed the relevant registration thresholds, therefore requiring the non-U.S. persons to register as SDs or MSPs. However, the Commission preliminarily believes that, if adopted, the Proposed Rule will not result in any new registered SDs or MSPs or the deregistration of registered SDs,
Similarly, proposed § 23.23(h) contains collection of information requirements within the meaning of the PRA as it would require that swap entities create a record of their compliance with § 23.23 and retain records in accordance with § 23.203; however, the Commission believes that records suitable to demonstrate compliance are already required to be created and maintained under the collections related to the Commission's swap entity registration, group B, and group C requirements. Specifically, existing collections of information, “Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants,” OMB Control No. 3038-0068; “Registration of Swap Dealers and Major Swap Participants,” OMB Control No. 3038-0072; “Swap Dealer and Major Swap Participant Conflicts of Interest and Business Conduct Standards with Counterparties,” OMB Control No. 3038-0079; “Confirmation, Portfolio Reconciliation, Portfolio Compression, and Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants,” OMB Control No. 3038-0083; “Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Participants,” OMB Control No. 3038-0087; and “Confirmation, Portfolio Reconciliation, Portfolio Compression, and Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants,” OMB Control No. 3038-0088 relate to these requirements.
Proposed § 23.23(g) would result in collection of information requirements within the meaning of the PRA, as discussed below. The Proposed Rule contains collections of information for which the Commission has not previously received control numbers from the Office of Management and Budget (“OMB”). If adopted, responses to this collection of information would be required to obtain or retain benefits. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. The Commission has submitted to OMB an information collection request to create a new information collection under OMB control number 3038-0072 (Registration of Swap Dealers and Major Swap Participants) for the collections contained in the Proposed Rule.
As discussed in section VI.C above, the Commission is proposing to permit a non-U.S. swap entity or foreign branch of a U.S. swap entity to comply with a foreign jurisdiction's swap standards in lieu of the Commission's corresponding group A and group B requirements in certain cases, provided that the Commission determines that such foreign standards are comparable to the Commission's requirements. Proposed § 23.23(g) would implement a process pursuant to which the Commission would conduct these comparability determinations, including outlining procedures for initiating such determinations. As discussed in section VI.D above, a comparability determination could be requested by swap entities that are eligible for substituted compliance, their trade associations, and foreign regulatory authorities meeting certain requirements.
Though under the Proposed Rule many entities would be eligible to request a comparability determination,
The frequency of responses and total new burden associated with OMB control number 3038-0072, in the aggregate, reflecting the new burden associated with all the amendments proposed by the rulemaking and current burden not affected by this rulemaking,
Comments may be submitted directly to the Office of Information and Regulatory Affairs, by fax at (202) 395-6566, or by email at
As detailed above, the Commission is proposing rules that would define certain key terms for purposes of certain Dodd-Frank Act swap provisions and address the cross-border application of the SD and MSP registration thresholds and the Commission's group A, group B, and group C requirements.
The baseline against which the costs and benefits of the Proposed Rule are considered is, in principle, current law: In other words, applicable Dodd-Frank Act swap provisions in the CEA and regulations promulgated by the Commission to date, as made applicable to cross-border transactions by Congress in CEA section 2(i), in the absence of a Commission rule establishing more precisely the application of that provision in particular situations. However, in practice, use of this baseline poses important challenges, for a number of reasons.
First, there are intrinsic difficulties in sorting out costs and benefits of the Proposed Rule from costs and benefits intrinsic to the application of Dodd-Frank Act requirements to cross-border transactions directly pursuant to section 2(i), given that statute sets forth general principles for the cross-border application of Dodd-Frank Act swap requirements but does not attempt to address particular business situations in detail.
Second, the Guidance established a general, non-binding framework for the cross-border application of many substantive Dodd-Frank Act requirements. In doing so, the Guidance considered, among other factors, the regulatory objectives of the Dodd-Frank Act and principles of international comity. As is apparent from the text of the Proposed Rule and the discussion in this preamble, the Proposed Rule is in certain respects consistent with the Guidance. The Commission understands that, while the Guidance is non-binding, many market participants have developed policies and practices that take into account the views expressed therein. At the same time, some market participants may currently apply CEA section 2(i), the regulatory objectives of the Dodd-Frank Act, and principles of international comity in ways that vary from the Guidance, for example because of circumstances not contemplated by the general, non-binding framework in the Guidance.
Third, in addition to the Guidance, the Commission has issued comparability determinations finding that certain provisions of the laws and regulations of other jurisdictions are comparable in outcome to certain requirements under the CEA and regulations thereunder.
Fourth, the Commission staff has issued several interpretive and no-action letters that are relevant to cross-border issues.
Fifth, as noted above, the international regulatory landscape is far different now than it was when the Dodd-Frank Act was enacted in 2010.
Because of these complicating factors, as well as limitations on available information, the Commission believes that a direct comparison of the costs and benefits of the Proposed Rule with those of a hypothetical cross-border regime based directly on section 2(i)—while theoretically the ideal approach—is infeasible in practice. As a further complication, the Commission recognizes that the Proposed Rule's costs and benefits would exist, regardless of whether a market participant: (1) First realized some of those costs and benefits when it conformed its business practices to provisions of the Guidance or Commission staff action that would now become binding legal requirements under the Proposed Rule; (2) does so now for the first time; or (3) did so in stages as international requirements evolved.
In light of these considerations, the Commission will consider costs and benefits by focusing primarily on two types of information and analysis.
First, the Commission will compare the Proposed Rule with current business practice, on the understanding that many market participants are now conducting business taking into account the Guidance, applicable CFTC staff letters, and existing comparability determinations. This approach will, for example, compare expected costs and benefits of conducting business under the Proposed Rule with those of conducting business in conformance with analogous provisions of the Guidance. In effect, this inquiry will examine
Second, to the extent feasible, the Commission will consider relevant information on costs and benefits that industry has incurred
The Commission invites comments regarding all aspects of the baselines applied in this consideration of costs and benefits. In particular, the Commission would like commenters to address any variances or different circumstances they have experienced that affect the baseline for those commenters. Please be as specific as possible and include quantitative information where available.
The costs associated with the key elements of the Commission's proposed cross-border approach to the SD and MSP registration thresholds—requiring market participants to classify themselves as U.S. persons, Guaranteed Entities, or SRSs
Entities required to register as SDs or MSPs as a result of the Proposed Rule would also incur costs associated with complying with the relevant Dodd-Frank Act requirements applicable to registrants, such as the capital (when promulgated), margin, and business conduct requirements (“programmatic costs”).
In developing the Proposed Rule, the Commission took into account the potential for creating or accentuating competitive disparities between market participants, which could contribute to market deficiencies, including market fragmentation or decreased liquidity, as more fully discussed below. Notably, competitive disparities may arise between U.S.-based financial groups and non-U.S. based financial groups as a result of differences in how the SD and MSP registration thresholds apply to the various classifications of market participants. For instance, an SRS must count all dealing swaps toward its SD de minimis calculation. Therefore, SRSs would be more likely to trigger the SD registration threshold relative to Other Non-U.S. Persons, and may therefore be at a competitive disadvantage compared
Other factors also create inherent challenges associated with attempting to assess costs and benefits of the Proposed Rule. To avoid the prospect of being regulated as an SD or MSP, or otherwise falling within the Dodd-Frank Act swap regime, some market participants may restructure their businesses or take other steps (
In the sections that follow, the Commission discusses the costs and benefits associated with the Proposed Rule.
The Commission invites comment regarding the nature and extent of any costs and benefits that could result from adoption of the Proposed Rule and, to the extent they can be quantified, monetary and other estimates thereof.
As discussed above, in applying the proposed cross-border approach to the SD and MSP registration thresholds, market participants would be required to first classify themselves as a U.S. person, an SRS, a Guaranteed Entity, or an Other Non-U.S. Person.
With respect to Baseline A, the Commission expects that the costs to affected market participants of assessing which classification they fall into would generally be small and incremental. In most cases, the Commission believes an entity will have performed an initial determination or assessment of its status under either the Cross-Border Margin Rule (which uses substantially similar definitions of “U.S. person” and “guarantee”) or the Guidance (which interprets “U.S. person” in a manner that is similar but not identical to the proposed definition of “U.S. person”). Additionally, the Proposed Rule would allow market participants to rely on representations from their counterparties with regard to their classifications.
With respect to Baseline B, wherein only certain market participants would have previously determined their status under the similar, but not identical, Cross-Border Margin Rule (and not the Guidance), the Commission believes that their assessment costs would nonetheless be small as a result of the Proposed Rule's reliance on clear, objective definitions of the terms “U.S. person,” “substantial risk subsidiary,” and “guarantee.” Further, with respect to the determination of whether a market participant falls within the “significant risk subsidiary” definition,
Additionally, the Proposed Rule relies on the definition of “guarantee” provided in the Cross-Border Margin Rule, which is limited to arrangements in which one party to a swap has rights of recourse against a guarantor with respect to its counterparty's obligations under the swap.
Under the Proposed Rule, a U.S. person would include all of its swap dealing transactions in its de minimis calculation, without exception.
The Proposed Rule would also require Guaranteed Entities to include all of their dealing transactions in their de minimis threshold calculation without exception.
Under the Proposed Rule, an SRS would include all swap dealing transactions in its de minimis threshold calculation.
However, as noted in sections II.C and III.B, the Commission believes that it would be appropriate to distinguish SRSs from Other Non-U.S. Persons in determining the cross-border application of the SD de minimis threshold to such entities. As discussed above, SRS, as a class of entities, presents a greater supervisory interest to the CFTC relative to an Other Non-U.S. Person, due to the nature and extent of the their relationships with their ultimate U.S. parent entities. Of the 60 non-U.S. SDs that were provisionally registered with the Commission as of December 2019, the Commission believes that few, if any, would be classified as SRSs pursuant to the Proposed Rule. With respect to Baseline A, the Commission notes that any potential SRSs would have likely classified themselves as conduit affiliates or Other Non-U.S. Persons pursuant to the Guidance. Accordingly, some may incur incremental costs associated with assessing and implementing the additional counting requirements for SRSs. With respect to Baseline B, the Commission believes that most potential SRSs would have interpreted section 2(i) to require them to count their dealing swaps with U.S. persons, but acknowledges that some may not have interpreted section 2(i) so as to require them to count swaps with non-U.S. persons toward their de minimis calculation. Accordingly, such non-U.S. persons would incur the incremental costs of associated with the additional SRS counting requirements contained in the Proposed Rule. The Commission believes that the proposed SRS de minimis calculation requirements would prevent regulatory arbitrage by ensuring that certain entities do not simply book swaps through a non-U.S. affiliate to avoid CFTC registration. Accordingly, the Commission believes that such provisions would benefit the swap market by ensuring that the Dodd-Frank Act swap provisions addressed by the Proposed Rule are applied specifically to entities whose activities, in the aggregate, have a direct and significant connection to, and impact on, U.S. commerce.
Under the Proposed Rule, non-U.S. persons that are neither Guaranteed Entities nor SRSs would be required to include in their de minimis threshold calculations swap dealing activities with U.S. persons (other than swaps conducted through a foreign branch of a registered SD) and certain swaps with Guaranteed Entities.
The Commission believes that requiring all non-U.S. persons to
Given that these requirements are consistent with the Guidance in most respects, the Commission believes that the Proposed Rule would have a negligible impact on Other Non-U.S. Persons, as measured against Baseline A. With respect to Baseline B, the Commission believes that most non-U.S. persons would have interpreted CEA section 2(i) to require them to count their dealing swaps with U.S. persons, but acknowledges that some non-U.S. persons may not have interpreted 2(i) so as to require them to count such swaps with non-U.S. persons toward their de minimis calculation. Accordingly, such non-U.S. persons would incur the incremental costs associated with the counting requirements for Other Non-U.S. Persons contained in the Proposed Rule.
The Commission recognizes that the Proposed Rule's cross-border approach to the de minimis threshold calculation could contribute to competitive disparities arising between U.S.-based financial groups and non-U.S. based financial groups. Potential SDs that are U.S. persons, SRSs, or Guaranteed Entities would be required to include all of their swap dealing transactions in their de minimis threshold calculations. In contrast, Other Non-U.S. Persons would be permitted to exclude certain dealing transactions from their de minimis calculations. As a result, Guaranteed Entities and SRSs may be at a competitive disadvantage, as more of their swap activity would apply toward the de minimis threshold (and thereby trigger SD registration) relative to Other Non-U.S. Persons.
The Proposed Rule's approach to the cross-border application of the MSP registration threshold closely mirrors the proposed approach for the SD registration threshold. Under the Proposed Rule, a U.S. person would include all of its swap positions in its MSP threshold, without exception.
The Proposed Rule would also require Guaranteed Entities to include all of their swap positions in their MSP threshold calculation without exception.
Under the Proposed Rule, an SRS would also include all of its swap positions in its MSP threshold calculation.
As noted in sections II.C and IV.B, the Commission believes that it would be appropriate to distinguish SRSs from Other Non-U.S. Persons in determining the cross-border application of the MSP threshold to such entities, as well as with respect to the Dodd-Frank Act swap provisions addressed by the Proposed Rule more generally. As discussed above, SRSs, as a class of entities, present a greater supervisory interest to the CFTC relative to Other Non-U.S. Persons, due to the nature and extent of the their relationships with their ultimate U.S. parent entities. Therefore, the Commission believes that it is appropriate to require SRSs to include more of their swap positions in their MSP threshold calculation than Other Non-U.S. Persons would. Additionally, allowing an SRS to exclude all of its non-U.S. swap positions from its calculation could incentivize U.S. financial groups to book their non-U.S. positions into a non-U.S. subsidiary to avoid MSP registration requirements. Given that this requirement was not included in the Guidance or the Cross-Border Margin Rule, the Commission believes that this aspect of the Proposed Rule would have a similar impact on market participants when measured against Baseline A and Baseline B. The Commission notes that there are no MSPs registered with the Commission, and expects that few entities would be required to undertake an assessment to determine whether they would qualify as an MSP under the Proposed Rule. Any such entities would likely have classified themselves as Other Non-U.S. Persons pursuant to the Guidance. Accordingly, they may incur incremental costs associated with assessing and implementing the additional counting requirements for SRSs. With respect to Baseline B, the Commission believes that most potential SRSs would have interpreted CEA section 2(i) to require them to count their swap positions with U.S. persons, but acknowledges that some may not have interpreted CEA section 2(i) so as to require them to count swap positions with non-U.S. persons toward their MSP threshold calculation. Accordingly, such SRSs would incur the incremental costs associated with the additional SRS counting requirements contained in the Proposed Rule. The Commission believes that these proposed SRS calculation requirements would mitigate regulatory arbitrage by ensuring that U.S. entities do not simply book swaps through an SRS affiliate to avoid CFTC registration. Accordingly, the Commission believes that such provisions would benefit the swap market by ensuring that the Dodd-Frank Act swap requirements that are addressed by the Proposed Rule are applied to entities whose activities have a direct and significant connection to, and impact on, the U.S. markets.
Under the Proposed Rule, Other Non-U.S. Persons would be required to include in their MSP calculations swap positions with U.S. persons (other than swaps conducted through a foreign branch of a registered SD) and certain swaps with Guaranteed Entities.
Given that these requirements are consistent with the Guidance in most respects, the Commission believes that the Proposed Rule would have a minimal impact on Other Non-U.S. Persons, as measured against Baseline A. With respect to Baseline B, the Commission believes that most non-U.S. persons would have interpreted CEA section 2(i) to require them to count their swap positions with U.S. persons, but acknowledges that some non-U.S. persons may not have interpreted CEA section 2(i) so as to require them to count swaps with non-U.S. persons toward their MSP threshold calculation. Accordingly, such non-U.S. persons would incur the incremental costs of associated with the counting requirements for Other Non-U.S. Persons contained in the Proposed Rule.
The Commission recognizes that the Proposed Rule's cross-border approach to the MSP threshold calculation could contribute to competitive disparities arising between U.S.-based financial groups and non-U.S. based financial groups. Potential MSPs that are U.S. persons, SRSs, or Guaranteed Entities would be required to include all of their swap positions. In contrast, Other Non-U.S. Persons would be permitted to exclude certain swap positions from their MSP threshold calculations. As a result, SRSs and Guaranteed Entities may be at a competitive disadvantage, as more of their swap activity would apply toward the MSP calculation and trigger MSP registration relative to Other Non-U.S. Persons. While the Commission does not believe that any additional Other Non-U.S. Persons would be required to register as an MSP under the Proposed Rule, the Commission acknowledges that to the extent that a currently unregistered non-U.S. person would be required to register as an MSP under the Proposed Rule, its non-U.S. persons may possibly cease transacting with it in order to operate outside the Dodd-Frank Act swap regime.
Under the Proposed Rule, market participants would need to continue to monitor their swap activities in order to determine whether they are, or continue to be, required to register as an SD or MSP. With respect to Baseline A, the Commission believes that market participants have developed policies and practices consistent with the cross-border approach to the SD and MSP registration thresholds expressed in the Guidance. Therefore the Commission believes that market participants would only incur incremental costs in modifying their existing systems and policies and procedures in response to the Proposed Rule (
For example, the Commission notes that SRSs may have adopted policies and practices in line with the Guidance's approach to non-U.S. persons that are not guaranteed or conduit affiliates and therefore may only be currently counting (or be provisionally registered by virtue of) their swap dealing transactions with U.S. persons, other than foreign branches of U.S. SDs. Although an SRS would be required under the Proposed Rule to include all dealing swaps in its de minimis calculation, the Commission believes that any increase in monitoring costs for SRSs would be negligible, both initially and on an ongoing basis, because they already have systems that track swap dealing transactions with certain counterparties in place, which includes an assessment of their counterparties' status.
With respect to Baseline B, the Commission believes that, absent the Guidance, most market participants would have interpreted CEA section 2(i) to require them, at a minimum, to monitor their swap activities with U.S. persons to determine whether they are, or continue to be, required to register as an SD or MSP. Therefore, the Commission believes that certain market participants may incur incremental costs in modifying their existing systems and policies and procedures in response to the Proposed Rule to monitor their swap activity with non-U.S. persons.
With respect to Baseline A, the Commission believes that few, if any, additional non-U.S. persons would be required to register as a SD pursuant to the Proposed Rule. With respect to Baseline B, the Commission acknowledges that, absent the Guidance, some non-U.S. persons may not have interpreted CEA section 2(i) so as to require them to register with the Commission. Accordingly, a subset of such entities may be required to register with the Commission pursuant to the Proposed Rule, if adopted.
The Commission acknowledges that if a market participant were required to register, it may incur registration costs. The Commission previously estimated registration costs in its rulemaking on registration of SDs;
With respect to Baseline A, as noted above, the Commission believes that few, if any, additional non-U.S. persons would be required to register as a SD under the Proposed Rule. With respect to Baseline B, the Commission acknowledges that, absent the Guidance, some non-U.S. persons may not have interpreted CEA section 2(i) so as to require them to register with the Commission. Accordingly, a subset of such entities may be required to register with the Commission pursuant to the Proposed Rule, if adopted.
To the extent that the Proposed Rule acts as a “gating” rule by affecting which entities engaged in cross-border swap activities must comply with the SD requirements, the Proposed Rule, if adopted, could result in increased costs for particular entities that otherwise would not register as an SD and comply with the swap provisions.
As discussed in section VI above, the Commission, consistent with section 2(i) of the CEA, is proposing exceptions from, and substituted compliance for, certain group A, group B, and group C requirements applicable to swap entities, as well as the creation of a framework for comparability determinations.
Specifically, as discussed above in section VI, the Proposed Rule includes: (1) The Exchange-Traded Exception from certain group B and group C requirements for certain anonymously executed, exchange-traded, and cleared foreign-based swaps; (2) the Foreign Swap Group C Exception for certain foreign-based swaps with foreign counterparties; (3) the Non-U.S. Swap Entity Group B Exception for foreign-based swaps of certain non-U.S. swap entities with certain foreign counterparties; and (4) the Foreign Branch Group B Exception for certain foreign-based swaps of foreign branches of U.S. swap entities with certain foreign counterparties.
Under the Proposed Rule, U.S. swap entities (other than their foreign branches) would not be excepted from, or eligible for substituted compliance for, the Commission's group A, group B, and group C requirements. This reflects the Commission's view that these requirements should apply fully to registered SDs and MSPs that are U.S. persons because their swap activities are particularly likely to affect the integrity of the swap market in the United States and raise concerns about the protection of participants in those markets. With respect to both baselines, the Commission does not expect that this would impose any additional costs on market participants given that the Commission's relevant business conduct requirements already apply to U.S. SDs and MSPs pursuant to existing Commission regulations.
Pursuant to the Exchange-Traded Exception, non-U.S. swap entities and foreign branches of non-U.S. swap entities would generally be excluded from the group B and group C requirements with respect to their foreign-based swaps that are anonymously executed, exchange-traded, and cleared.
Further, pursuant to the Foreign Swap Group C Exception, non-U.S. swap entities and foreign branches of U.S. swap entities would be excluded from the group C requirements with respect to their foreign-based swaps with foreign counterparties.
In addition, pursuant to the Non-U.S. Swap Entity Group B Exception, non-U.S. swap entities that are neither SRSs nor Guaranteed Entities would be excepted from the group B requirements with respect to any foreign-based swap with foreign counterparties that are neither SRSs nor Guaranteed Entities.
Finally, pursuant to the Foreign Branch Group B Exception, foreign branches of U.S. swap entities would be excepted from the group B requirements, with respect to any foreign-based swap with a foreign counterparty that is an Other Non-U.S. Person, subject to certain limitations. Specifically, the exception would not be available with respect to any group B requirement for which substituted compliance is available for the relevant swap, and in any calendar quarter, the aggregate gross notional amount of swaps conducted by a U.S. swap entity in reliance on the exception may not exceed five percent of the aggregate gross notional amount of all its swaps.
The Commission acknowledges that the group B requirements may apply more broadly to swaps between non-U.S. persons than as contemplated in the Guidance. Specifically, the Proposed Rule would require swap entities that are either Guaranteed Entities or SRSs to comply with the group B requirements for swaps with Other Non-U.S. Persons, whereas the Guidance stated that all non-U.S. swap entities (other than their U.S. branches) were excluded from the group B requirements with respect to swaps with a non-U.S. person that is not a guaranteed or conduit affiliate. However, the Commission believes that the proposed exceptions, coupled with the availability of substituted compliance, would help to alleviate any additional burdens that may arise from such application. Notwithstanding the availability of these exceptions and substituted compliance, the Commission acknowledges that some non-U.S. swap entities may incur costs to the extent that a comparability determination has not yet been issued for certain jurisdictions. Further, the Commission expects that swap entities that avail themselves of the proposed exceptions would be able to reduce their costs of compliance with respect to the excepted requirements (which, to the extent they are similar to requirements in the jurisdiction in which they are based, may be potentially duplicative or conflicting). The Commission notes that swap entities are not required to take any additional action to avail themselves of these exceptions (
As described in section VI.C, the extent to which substituted compliance is available under the Proposed Rule would depend on the classification of the swap entity or branch and, in certain cases the counterparty, to a particular swap. The Commission recognizes that the decision to offer any substituted compliance carries certain trade-offs. Given the global and highly-interconnected nature of the swap market, where risk is not bound by national borders, market participants are likely to be subject to the regulatory interest of more than one jurisdiction. Allowing compliance with foreign swap requirements as an alternative to compliance with the Commission's requirements can therefore reduce the application of duplicative or conflicting requirements, resulting in lower compliance costs and potentially facilitating a more efficient regulatory framework over time as regulatory regimes compete to have swap transactions occur in their respective jurisdictions. Substituted compliance also helps preserve the benefits of an integrated, global swap market by fostering and advancing efforts among U.S. and foreign regulators to collaborate in establishing robust regulatory standards. If not properly implemented, however, the Commission's swap regime could lose some of its effectiveness. Accordingly, the ultimate costs and benefits of substituted compliance are affected by the standard under which it is granted and the extent to which it is applied. The Commission was mindful of this dynamic in structuring a proposed substituted compliance regime for the group A and group B requirements and believes the Proposed Rule strikes an appropriate balance, enhancing market efficiency and fostering global coordination of these requirements while ensuring that swap entities (wherever located) are subject to comparable regulation.
The Commission also understands that by not offering substituted compliance equally to all swap entities, the Proposed Rule, if adopted, could lead to certain competitive disparities between swap entities. For example, to the extent that a non-U.S. swap entity can rely on substituted compliance that is not available to a U.S. swap entity, it may enjoy certain cost advantages (
Nevertheless, the Commission does not believe it is appropriate to make substituted compliance broadly available to all swap entities. As discussed above, the Commission has a strong supervisory interest in the swap activity of all swap entities, including non-U.S. swap entities, by virtue of their registration with the Commission. Further, U.S. swap entities are particularly key swap market participants and their safety and soundness is critical to a well-functioning U.S. swap market and the stability of the U.S. financial system. The Commission believes that losses arising from the default of a U.S. entity are more likely to be borne by other U.S. entities (including parent companies); therefore a U.S. entity's risk to the U.S. financial system is more acute than that of a similarly situated non-U.S. entity. Accordingly, in light of the Commission's supervisory interest in the activities of U.S. persons and its statutory obligation to ensure the safety and soundness of swap entities and the
As noted in section VI.D above, under the Proposed Rule, a comparability determination may be requested by: (1) Eligible swap entities; (2) trade associations whose members are eligible swap entities; or (3) foreign regulatory authorities that have direct supervisory authority over eligible swap entities and are responsible for administering the relevant foreign jurisdiction's swap requirements.
The Proposed Rule includes a standard of review that allows for a holistic, outcomes-based approach that enables the Commission to consider any factor it deems relevant in assessing comparability. Further, in determining whether a foreign regulatory requirement is comparable to a corresponding Commission requirement, the Proposed Rule would allow the Commission to consider the broader context of a foreign jurisdiction's related regulatory requirements. Allowing for a comparability determination to be made based on comparable outcomes and objectives, notwithstanding potential differences in foreign jurisdictions' relevant standards, helps to ensure that substituted compliance is made available to the fullest extent possible. While the Commission recognizes that, to the extent that a foreign swap regime is not deemed comparable in all respects, swap entities eligible for substituted compliance may incur costs from being required to comply with more than one set of specified swap requirements, the Commission believes that this approach is preferable to an all-or-nothing approach, in which market participants may be forced to comply with both regimes in their entirety.
The Proposed Rule would also require swap entities to create and retain records of their compliance with the Proposed Rule. Given that swap entities are already subject to robust recordkeeping requirements, the Commission believes that, if the Proposed Rule is adopted, swap entities would only incur incremental costs, which are expected to be minor, in modifying their existing systems and policies and procedures resulting from changes to the status quo made by the Proposed Rule.
Section 15(a) of the CEA requires the Commission to consider the costs and benefits of its actions before promulgating a regulation under the CEA or issuing certain orders. Section 15(a) further specifies that the costs and benefits shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. The Commission considers the costs and benefits resulting from its discretionary determinations with respect to the section 15(a) factors.
The Commission believes the Proposed Rule would support protection of market participants and the public. By focusing on and capturing swap dealing transactions and swap positions involving U.S. persons, SRSs, and Guaranteed Entities, the Proposed Rule's approach to the cross-border application of the SD and MSP registration threshold calculations would work to ensure that, consistent with CEA section 2(i) and the policy objectives of the Dodd-Frank Act, significant participants in the U.S. market are subject to these requirements. The proposed cross-border approach to the group A, group B, and group C requirements similarly ensures that these requirements would apply to swap activities that are particularly likely to affect the integrity of and raise concerns about the protection of participants in the U.S. market while, consistent with principles of international comity, recognizing the supervisory interests of the relevant foreign jurisdictions in applying their own requirements to transactions involving non-U.S. swap entities and foreign branches of U.S. swap entities with non-U.S. persons and foreign branches of U.S. swap entities.
To the extent that the Proposed Rule leads additional entities to register as SDs or MSPs, the Commission believes that the Proposed Rule could enhance the financial integrity of the markets by bringing significant U.S. swap market participants under Commission oversight, which may reduce market disruptions and foster confidence and transparency in the U.S. market. The Commission recognizes that, if adopted, the Proposed Rule's cross-border approach to the SD and MSP registration thresholds may create competitive disparities among market participants, based on the degree of their connection to the United States, that could contribute to market deficiencies, including market fragmentation and decreased liquidity, as certain market participants may reduce their exposure to the U.S. market. As a result of reduced liquidity, counterparties may pay higher prices, in terms of bid-ask spreads. Such competitive effects and market deficiencies may, however, be mitigated by global efforts to harmonize approaches to swap regulation and by the large inter-dealer market, which may link the fragmented markets and enhance liquidity in the overall market. The Commission believes that the Proposed Rule's approach is necessary and appropriately tailored to ensure that the purposes of the Dodd-Frank Act swap regime and its registration requirements are advanced while still establishing a workable approach that recognizes foreign regulatory interests and reduces competitive disparities and market deficiencies to the degree possible. The Commission further believes that the Proposed Rule's cross-border approach to the group A, group B, and group C requirements would promote the financial integrity of the markets by fostering transparency and
The Commission recognizes that, if adopted, the Proposed Rule's approach to the cross-border application of the SD and MSP registration thresholds and group A, group B, and group C requirements could also have an effect on liquidity, which may in turn influence price discovery. As liquidity in the swap market is lessened and fewer dealers compete against one another, bid-ask spreads (cost of swap and cost to hedge) may widen and the ability to observe an accurate price of a swap may be hindered. However, as noted above, these negative effects would be mitigated as jurisdictions harmonize their swap initiatives and global financial institutions continue to manage their swap books (
The Commission believes that, if adopted, the Proposed Rule's approach could promote the development of sound risk management practices by ensuring that significant participants in the U.S. market are subject to Commission oversight (via registration), including in particular important counterparty disclosure and recordkeeping requirements that will encourage policies and practices that promote fair dealing while discouraging abusive practices in U.S. markets. On the other hand, to the extent that a registered SD or MSP relies on the exceptions proposed in this release, and is located in a jurisdiction that does not have comparable swap requirements, the Proposed Rule could lead to weaker risk management practices for such entities.
The Commission believes that the Proposed Rule is consistent with the principles of international comity.
The Commission invites comment on all aspects of the costs and benefits associated with the Proposed Rule, and specifically requests comments on the following questions. Please explain your responses.
(42) Would additional market participants be required to register as SDs (compared to the status quo) as a result of the Proposed Rule being adopted? If so, please provide an estimate for the number of such market participants. Please include an explanation for the basis of the estimate, and associated costs and benefits of the Proposed Rule's provisions for SDs (including potential SDs).
(43) Would any market participants be required to register as an MSP as a result of the Proposed Rule being adopted? If so, please provide an estimate for the number of such market participants. Please include an explanation for the basis of the estimate, and associated costs and benefits of the Proposed Rule's provisions for potential MSPs.
(44) The Proposed Rule would not provide relief to swap entities that are SRSs or Guaranteed Entities from the group B requirements for transactions facing Other Non-U.S. Persons. Thus, under the Proposed Rule, SRSs and Guaranteed Entities would generally be required to comply with the group B requirements for all of their swaps, rely on existing substituted compliance determinations, or seek additional substituted compliance determinations. Please provide an estimate for the number of swap entities that would be likely to incur compliance costs as a result of this aspect of the Proposed Rule, as well as an estimate of the associated costs and benefits of such provision. To what extent would the proposed availability of substituted compliance in such instances affect these costs and benefits?
(45) The Commission invites information regarding whether and the extent to which specific foreign requirement(s) may affect the costs and benefits of the Proposed Rule, including information identifying the relevant foreign requirement(s) and any monetary or other quantitative estimates of the potential magnitude of those costs and benefits.
(46) Would the proposed recordkeeping provision cause registrants to incur more than a minor incremental cost to implement? If so, please provide an estimate for such costs. Please include an explanation for the basis of the estimate, and associated costs and benefits of the Proposed Rule's recordkeeping provisions.
Section 15(b) of the CEA
The Commission believes that the public interest to be protected by the antitrust laws is generally to protect competition. The Commission requests comment on whether the Proposed Rule implicates any other specific public interest to be protected by the antitrust laws.
The Commission has considered the Proposed Rule to determine whether it is anticompetitive and has preliminarily identified no anticompetitive effects. The Commission requests comment on whether the Proposed Rule is anticompetitive and, if it is, what the anticompetitive effects are.
Because the Commission has preliminarily determined that the Proposed Rule is not anticompetitive and has no anticompetitive effects, the Commission has not identified any less anticompetitive means of achieving the purposes of the CEA. The Commission requests comment on whether there are less anticompetitive means of achieving the relevant purposes of the CEA that would otherwise be served by adopting the Proposed Rule.
Table A should be read in conjunction with the text of the Proposed Rule.
Table B should be read in conjunction with the text of the Proposed Rule.
Table C
Table D
Business conduct standards, Counterparties, Cross-border, Definitions, De minimis exception, Major swap participants, Swaps, Swap Dealers.
For the reasons stated in the preamble, the Commodity Futures Trading Commission proposes to amend 17 CFR part 23 as follows:
7 U.S.C. 1a, 2, 6, 6a, 6b, 6b-1, 6c, 6p, 6r, 6s, 6t, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21.
Section 23.160 also issued under 7 U.S.C. 2(i); Sec. 721(b), Public Law 111-203, 124 Stat. 1641 (2010).
(a)
(1)
(2)
(i) Is located outside the United States;
(ii) Operates for valid business reasons;
(iii) Maintains accounts independently of the home office and of the accounts of other foreign branches, with the profit or loss accrued at each branch determined as a separate item for each foreign branch; and
(iv) Is engaged in the business of banking and is subject to substantive regulation in banking or financing in the jurisdiction where it is located.
(3)
(i) A non-U.S. person, except with respect to a swap conducted through a U.S. branch of that non-U.S. person; or
(ii) A foreign branch where it enters into a swap in a manner that satisfies the definition of a swap conducted through a foreign branch.
(4)
(i) A swap by a non-U.S. swap entity, except for a swap conducted through a U.S. branch; or
(ii) A swap conducted through a foreign branch.
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(i) Subject to consolidated supervision and regulation by the Board of Governors of the Federal Reserve System as a subsidiary of a U.S. bank holding company; or
(ii) Subject to capital standards and oversight by the subsidiary's home country supervisor that are consistent with the Basel Committee on Banking Supervision's “International Regulatory Framework for Banks” and subject to margin requirements for uncleared swaps in a jurisdiction for which the Commission has issued a comparability determination.
(13)
(i) The three year rolling average of the subsidiary's equity capital is equal to or greater than five percent of the three year rolling average of the ultimate U.S. parent entity's consolidated equity capital, as determined in accordance with U.S. GAAP as of the end of the most recently completed fiscal year;
(ii) The three year rolling average of the subsidiary's total revenue is equal to or greater than ten percent of the three year rolling average of the ultimate U.S. parent entity's total consolidated revenue, as determined in accordance with U.S. GAAP as of the end of the most recently completed fiscal year; or
(iii) The three year rolling average of the subsidiary's total assets is equal to or greater than ten percent of the three year rolling average of the ultimate U.S. parent entity's total consolidated assets, as determined in accordance with U.S. GAAP as of the end of the most recently completed fiscal year.
(14)
(15)
(16)
(i) The foreign branch or another foreign branch is the office through which the U.S. person makes and receives payments and deliveries under the swap pursuant to a master netting or similar trading agreement, and the documentation of the swap specifies that the office for the U.S. person is such foreign branch;
(ii) The swap is entered into by such foreign branch in its normal course of business; and
(iii) The swap is reflected in the local accounts of the foreign branch.
(17)
(i) The U.S. branch is the office through which the non-U.S. person makes and receives payments and deliveries under the swap pursuant to a master netting or similar trading agreement, and the documentation of the swap specifies that the office for the non-U.S. person is such U.S. branch; or
(ii) The swap is reflected in the local accounts of the U.S. branch.
(18)
(19)
(20)
(i) Is located in the United States;
(ii) Maintains accounts independently of the home office and other U.S. branches, with the profit or loss accrued at each branch determined as a separate item for each U.S. branch; and
(iii) Engages in the business of banking and is subject to substantive banking regulation in the state or district where located.
(21)
(22)
(A) A natural person resident in the United States;
(B) A partnership, corporation, trust, investment vehicle, or other legal person organized, incorporated, or established under the laws of the United States or having its principal place of business in the United States;
(C) An account (whether discretionary or non-discretionary) of a U.S. person; or
(D) An estate of a decedent who was a resident of the United States at the time of death.
(ii) For purposes of this section, principal place of business means the location from which the officers, partners, or managers of the legal person primarily direct, control, and coordinate the activities of the legal person. With respect to an externally managed investment vehicle, this location is the office from which the manager of the vehicle primarily directs, controls, and coordinates the investment activities of the vehicle.
(iii) The term U.S. person does not include the International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies and pension plans, and any other similar international organizations, their agencies and pension plans.
(iv) Notwithstanding paragraph (a)(22)(i) of this section, until December 31, 2025, a person may continue to classify counterparties as U.S. persons based on representations that were previously made pursuant to the “U.S. person” definition in § 23.160(a)(10).
(23)
(b)
(1) If such person is a U.S. person or a significant risk subsidiary, all swaps connected with the dealing activity in which such person engages.
(2) If such person is a non-U.S. person (other than a significant risk subsidiary), all of the following swaps connected with the dealing activity in which such person engages:
(i) Swaps with a counterparty that is a U.S. person, other than swaps conducted through a foreign branch of a registered swap dealer.
(ii) Swaps where the obligations of such person under the swaps are subject to a guarantee by a U.S. person.
(iii) Swaps with a counterparty that is a non-U.S. person where the counterparty's obligations under the swaps are subject to a guarantee by a U.S. person, except when:
(A) The counterparty is registered as a swap dealer; or
(B) The counterparty's swaps are subject to a guarantee by a U.S. person that is a non-financial entity.
(c)
(1) If such person is a U.S. person or a significant risk subsidiary, all swap positions that are entered into by the person.
(2) If such person is a non-U.S. person (other than a significant risk subsidiary), all of the following swap positions of such person:
(i) Swap positions where the counterparty is a U.S. person, other than swaps conducted through a foreign branch of a registered swap dealer.
(ii) Swap positions where the obligations of such person under the swaps are subject to a guarantee by a U.S. person.
(iii) Swap positions with a counterparty that is a non-U.S. person where the counterparty's obligations under the swaps are subject to a guarantee by a U.S. person, except when the counterparty is registered as a swap dealer.
(d) Notwithstanding any other provision of § 23.23, for purposes of determining whether a non-U.S. person (other than a significant risk subsidiary or a non-U.S. person whose performance under the swap is subject to a guarantee by a U.S. person) engages in more than a de minimis quantity of swap dealing activity under paragraph (4)(i) of the swap dealer definition in § 1.3 of this chapter or for determining the non-U.S. person's status as a major swap participant as defined in § 1.3 of this chapter, such non-U.S. person does not need to count any swaps or swap positions, as applicable, that are entered into by such non-U.S. person on a designated contract market, a registered swap execution facility or a swap execution facility exempted from registration by the Commission pursuant to section 5h(g) of the Act, or a registered foreign board of trade, and cleared through a registered derivatives clearing organization or a clearing organization that has been exempted from registration by the Commission pursuant to section 5b(h) of the Act, where the non-U.S. person does not know the identity of the counterparty to the swap prior to execution.
(e)
(i) The group B requirements (other than §§ 23.202(a) through 23.202(a)(1)) and the group C requirements with respect to any swap (i) entered into on a designated contract market, a registered swap execution facility or a swap execution facility exempted from registration by the Commission pursuant to section 5h(g) of the Act, or a registered foreign board of trade; (ii) cleared through a registered derivatives clearing organization or a clearing organization that has been exempted from registration by the Commission pursuant to section 5b(h) of the Act; and (iii) where the swap entity does not know the identity of the counterparty to the swap prior to execution; and
(ii) The group C requirements with respect to any swap with a foreign counterparty.
(2) With respect to its foreign-based swaps, each non-U.S. swap entity that is neither a significant risk subsidiary nor a person whose performance under the swap is subject to a guarantee by a U.S. person shall be excepted from the group B requirements with respect to any swap with a foreign counterparty (other than a foreign branch) that is neither a significant risk subsidiary nor a person whose performance under the swap is subject to a guarantee by a U.S. person.
(3) With respect to its foreign-based swaps, each foreign branch of a U.S. swap entity shall be excepted from the group B requirements with respect to any swap with a foreign counterparty (other than a foreign branch) that is neither a significant risk subsidiary nor a person whose performance under the swap is subject to a guarantee by a U.S. person, provided that:
(i) This exception shall not be available with respect to any group B requirement for a swap that is eligible for substituted compliance for such group B requirement pursuant to a comparability determination issued by the Commission prior to the execution of the swap; and
(ii) In any calendar quarter, the aggregate gross notional amount of swaps conducted by a swap entity in reliance on this exception shall not exceed five percent of the aggregate gross notional amount of all its swaps.
(f)
(2) With respect to its foreign-based swaps, a non-U.S. swap entity or foreign branch of a U.S. swap entity may satisfy any applicable group B requirement for a swap with a foreign counterparty by complying with the corresponding requirement of a foreign jurisdiction for which the Commission has issued a comparability determination under paragraph (g) of this section.
(g)
(2)
(i) A swap entity that is eligible, in whole or in part, for substituted compliance under this section or a trade association or other similar group on behalf of its members who are such swap entities; or
(ii) A foreign regulatory authority that has direct supervisory authority over one or more swap entities subject to the group A requirements and/or group B requirements and that is responsible for administering the relevant foreign jurisdiction's swap standards.
(3)
(i) A description of the objectives of the relevant foreign jurisdiction's standards and the products and entities subject to such standards;
(ii) A description of how the relevant foreign jurisdiction's standards address, at minimum, each element of the Commission's corresponding requirements. Such description should identify the specific legal and regulatory provisions that correspond to each element and, if necessary, whether the relevant foreign jurisdiction's standards do not address a particular element;
(iii) A description of the differences between the relevant foreign jurisdiction's standards and the Commission's corresponding requirements, and an explanation regarding how such differing approaches achieve comparable outcomes;
(iv) A description of the ability of the relevant foreign regulatory authority or authorities to supervise and enforce compliance with the relevant foreign jurisdiction's standards. Such description should discuss the powers of the foreign regulatory authority or authorities to supervise, investigate, and discipline entities for compliance with the standards and the ongoing efforts of the regulatory authority or authorities to detect and deter violations of, and ensure compliance with, the standards;
(v) Copies of the foreign jurisdiction's relevant standards (including an English translation of any foreign language document); and
(vi) Any other information and documentation that the Commission deems appropriate.
(4)
(i) The scope and objectives of the relevant foreign jurisdiction's standards;
(ii) Whether the relevant foreign jurisdiction's standards achieve comparable outcomes to the Commission's corresponding requirements;
(iii) The ability of the relevant regulatory authority or authorities to supervise and enforce compliance with the relevant foreign jurisdiction's standards; and
(iv) Whether the relevant regulatory authority or authorities has entered into a memorandum of understanding or other arrangement with the Commission addressing information sharing, oversight, examination, and supervision of swap entities relying on such comparability determination.
(5)
(6)
(7)
(8)
(h)
The following appendices will not appear in the Code of Federal Regulations.
On this matter, Chairman Tarbert and Commissioners Quintenz and Stump voted in the affirmative. Commissioners Behnam and Berkovitz voted in the negative.
I am pleased to support the Commission's proposed rule on the cross-border application of registration thresholds and certain requirements for swap dealers and major swap participants. It is critical that the CFTC finalize a sensible cross-border registration rule in 2020, as we approach the 10-year anniversary of the Dodd-Frank Act.
Since 2013, market participants have been relying on cross-border “interpretive guidance,”
We call this a “cross-border” proposal, and in certain respects it is. For example, the proposed rule addresses when non-U.S. persons must count dealing swaps with U.S. persons, including foreign branches of American banks, toward the
To answer this question, we must turn to section 2(i) of the Commodity Exchange Act (“CEA”), a provision Congress added in Title VII of the Dodd-Frank Act.
I believe the proposed rule before us today is a levelheaded approach to the exterritorial application of our swap dealer registration regime and related requirements. The proposed rule would fully implement the congressional mandate in section 2(i). At the same time, it acknowledges the important role played by the CFTC's domestic and international counterparts in regulating what is a global swaps market. In short, the proposal employs neither a full-throated “intergalactic commerce clause”
For my part, I am guided by three additional principles in considering the extent to which the CFTC should make full use of its extraterritorial powers.
An important role of the CFTC is to protect and advance the interests of the United States. In this instance, Congress provided the CFTC with explicit extraterritorial power to safeguard the U.S. financial system where swaps activities are concerned. We need to think continually about the potential outcome for American taxpayers. We cannot have a regulatory framework that incentivizes further bailouts of large financial institutions. We therefore need to ensure that risk created outside the United States does not flow back into our country.
But it is not just any risk outside the United States that we must guard against. Congress made that clear in section 2(i). We must not regulate swaps activities in far flung lands simply to prevent every risk that might have a nexus to the United States. That would be a markedly poor use of American taxpayers' dollars. It would also divert the CFTC from channeling our resources where they matter the most: To our own markets and participants. The proposal therefore focuses on instances when material risks from abroad are most likely to come back to the United States and where no one but the CFTC is responsible for those risks.
Hence, guarantees of offshore swaps by U.S. parent companies are counted toward our registration requirements because that risk is effectively underwritten and borne in the United States. The same is true with the concept of a “significant risk subsidiary” (SRS). An SRS is a large non-U.S. subsidiary of a large U.S. company that deals in swaps outside the United States but (1) is not subject to comparable capital and margin requirements in its home country, and (2) is not a subsidiary of a holding company subject to consolidated supervision by an American regulator, namely the Federal Reserve Board. As a consequence, our cross-border rule would require an SRS to register as a swap dealer or major swap participant with the CFTC if the SRS exceeds the same registration thresholds as a U.S. firm operating within the United States. The national interest demands it.
Rarely does the name of Immanuel Kant, the famous 18th century German philosopher, come up when talking about financial regulation.
What I take from it is that we should adopt a regulatory regime that we would like all other jurisdictions to follow as if it were a universal law. How does this work? Let me start by explaining how it does not work. If we impose our regulations on non-U.S. persons whenever they have a remote nexus to the United States, then we should be willing for all other jurisdictions to do the same. The end result would be absurdity, with everyone trying to regulate everyone else. And the duplicative and overlapping regulations would inevitably lead to fragmentation in the global swaps market—itself a potential source of systemic risk.
Furthermore, we should afford comity to other regulators who have adopted comparable regulations, just as we expect them to do for us. This is especially important when we evaluate whether foreign subsidiaries of U.S. parents could pose a significant risk to our financial system. The categorical imperative leads us to an unavoidable result: We should not impose our regulations on the non-U.S. activities of non-U.S. companies in those jurisdictions that have comparable capital and margin requirements to our own.
Charity, it is often said, begins at home. The categorical imperative further compels us to avoid duplicating the work of other American regulators. If a foreign subsidiary of a U.S. financial institution is subject to consolidated regulation and supervision by the Federal Reserve Board, then we should rely on our domestic counterparts to do their jobs when it is a question of dealing activity outside the United States. The Federal Reserve Board has extensive regulatory and supervisory tools to ensure a financial
In the jurisdictional fight over swaps, Congress split the baby between the CFTC and the SEC in Title VII of the Dodd-Frank Act.
The CFTC and the SEC could not even agree on a basic concept that is not even particular to financial regulation: Who is a “U.S. person.” In what can only be described as a bizarre series of events, the CFTC and the SEC adopted different definitions of “U.S. person” in our respective cross-border regimes. I find it surreal that two federal agencies that regulate similar products pursuant to the same title of the same statute—with an explicit mandate to “consult and coordinate” with each other—have not agreed until today on how to define “U.S. person.” This failure to coordinate has increased operational and compliance costs for market participants.
To be sure, as my colleagues have said on several occasions, we should not harmonize with the SEC merely for the sake of harmonization.
The prime example is the approach we have taken with respect to “ANE Transactions.”
Here, key differences in the markets for swaps and security-based swaps are dispositive. The swaps market is far more global than the security-based swaps market is. While commodities such as gold and oil are traded throughout the world, equity and debt securities trade predominantly in the jurisdictions where they were issued. For this reason, security-based swaps are inextricably tied to the underlying security, and vice versa. This is particularly the case with a single-name credit default swap. The arranging, negotiating, or execution of this kind of security-based swap is typically done in the United States because the underlying reference entity is a U.S. company. Because security-based swaps can affect the price and liquidity of the underlying security, the SEC has a legitimate interest in requiring these transactions to be reported. By contrast, because commodities are traded throughout the world, there is less need for the CFTC to apply its swaps rules to ANE Transactions.
In addition, as noted above, Congress directed the CFTC to regulate foreign swaps activities outside the United States that have a “direct and significant” connection to our financial system. Congress did not give a similar mandate to the SEC. As a result of its different mandate, the SEC has not crafted its cross-border rule to extend to an SRS engaged in swap dealing activity offshore that may pose a systemic risk to our financial system. Our proposed rule does, aiming to protect American taxpayers from another Enron conducting its swaps activities through a major foreign subsidiary.
In sum, the proposed rule before us today represents a critical step toward finalizing the regulations Congress asked of us nearly a decade ago. I believe our proposal is also a sensible and principled approach to addressing when foreign transactions should fall within the CFTC's swaps registration and related requirements.
Perhaps President Eisenhower said it best: “The world must learn to work together, or finally it will not work at all.”
I am very pleased to support today's proposed rule, which, in my view, delineates important boundaries of the Commission's regulation of swaps activity conducted abroad, which would codify elements of the Commission's 2013 interpretive guidance,
As I have said before, the foundational principle underlying any CFTC regulation of cross-border swaps activity, and the prism through which all extraterritorial reach by the CFTC must be viewed, is the statutory directive from Congress that the agency may only regulate those activities outside the United States that “have a direct and
I believe the proposal strikes a strong balance in interpreting Section 2(i) of the CEA. The proposal before us would interpret this provision in ways that both provide important safeguards to the U.S. financial markets, and avoid duplicative regulation or disadvantaging U.S. commercial and financial institutions acting in foreign markets.
The proposal would require a foreign institution dealing in swaps to count the notional value of the swaps it executes towards the CFTC's recently finalized $8 billion registration threshold
First, a foreign swap dealing firm would generally be required to count swaps executed opposite a “
In addition to counting swaps opposite a
Notably, if a non-U.S. firm's obligations to a swap are
I would also like to highlight that the proposal properly does not require a foreign dealer to count towards the CFTC's registration threshold a swap opposite a foreign branch of a U.S. institution already registered with the CFTC as an SD.
Today's proposal makes an important, and appropriate, distinction from the Commission's 2016 proposal on the cross-border application of the SD registration threshold and SD business conduct standards.
By contrast, today's proposal creates a sensible “significance” test for a foreign subsidiary of a U.S. firm through the classification of a “
By limiting the number of foreign firms registered with the CFTC as SDs, I believe the Commission, together with the National Futures Association (NFA), will best apply the agency's limited resources to the non-U.S. entities outside of the Federal Reserve's purview, especially given that there are already over 100 registered SDs organized in more than 10 countries.
In addition to setting boundaries in the area of non-U.S. firms counting swaps towards possible CFTC registration, today's proposal would build on the 2013 guidance by providing certainty regarding when a non-U.S. firm, which is registered with the CFTC as an SD, must comply with the Commission's SD standards. Again, importantly and appropriately out of respect for foreign jurisdictions, the proposal would exempt swaps executed with certain counterparties located abroad and make available compliance with local rules that the CFTC has determined comparable to its own (“substituted compliance”).
With regard to other SD requirements, namely
Today's proposal makes an important distinction from how the Commission's Division of Swap Dealer and Intermediary Oversight (DSIO) addressed compliance with “transaction-level requirements” (referred to in today's proposal as Groups B and C requirements) in 2013. A November 2013 DSIO Advisory
Prudently, today's proposal eliminates the ANE standard. I believe the Commission should only consider applying its transaction-level requirements to a foreign registered SD when a swap is executed opposite a U.S. counterparty.
I am pleased that today's proposal codifies a process under which the Commission will issue future substituted compliance determinations.
In conclusion, I am pleased that the Commission is making meaningful progress in providing legal certainty to the market with regard to complying with the Dodd-Frank swaps regulations on a cross-border basis. I hope that the Commission will soon propose other cross-border regulations regarding other areas of the CFTC's swap regulations, including the swap clearing requirement, the trade execution requirement,
I would like to thank the staff of DSIO for their efforts on this proposal, as well as a personal thank you to Matt Daigler from the Chairman's office, who worked tirelessly on this proposal and its unpublished predecessor and has held countless conversations with me and my staff on this issue over the past year.
I respectfully dissent from the Commodity Futures Trading Commission's (the “Commission” or “CFTC”) notice of proposed rulemaking addressing the cross-border application of the registration
Whereas the Commission understands the scope of our jurisdictional reach with respect to Title VII, a federal district court has affirmed that understanding, and we have operated within such boundaries—aware of the risks and successfully responding in kind, the Commission is now making a decision based on the most current thinking that we should retreat under a banner of comity and focus only on that which can fit on the head of a pin. Oddly enough, that pin will hold only the giants of the swaps market. Indeed, where our jurisdiction stands on its own, the ability to exercise our authority through adjudication
Throughout the preamble, the Proposal evinces a clear understanding that the complexity of swaps markets, transactions, corporate structures and market participants create channels through which swaps-related risks warrant our attention by meeting the jurisdictional nexus described in CEA Section 2(i).
My concerns aside for a moment, I am grateful that within the four corners of the document, the requests for comment seek to build consensus and operatively provide the public an option to maintain the status quo with regard to most aspects of the Guidance—albeit without sticking with guidance. While this leads me to more questions as to whether and how the Proposal could go final absent additional intervening process, I am pleased that there is recognition that the public and market participants may have lost their appetite for this brand of rulemaking or perhaps have come to agree with the D.C. District Court that the Commission's decision to issue the Guidance benefits market participants.
Before I highlight certain aspects of the Proposal, I want to take a brief moment to acknowledge why—as a general matter—we are here, and why this particular proposal is so important. Without rehashing market realties that led to the economic devastation of 2008, it should never be lost on our collective consciousness that a significant driving force that exacerbated the financial crisis and great recession, at least within the context of the over-the-counter derivatives market, was housed overseas. Although much of the risk completed its journey within the continental U.S., it was conjured up in foreign jurisdictions.
Since 2013, when the Commission announced its first cross-border approach in flexible guidance as a non-binding policy statement,
To be clear, while I support the Commission's efforts to address problems resulting from its current approach to regulating swaps activities in the cross-border context, it is not clear to me at this moment that we have reached a point where codification would provide immediate benefits to either the Commission or the public. While the Guidance is complex, it is difficult to say it is any more complex than the Proposal. The complexity is and will be inherent to whatever action we take as it,
As recognized by the D.C. District Court, the Title VII statutory and regulatory requirements apply extraterritorially through the independent operation of CEA section 2(i), which the CFTC is charged with enforcing.
As I read the Proposal—which purports to reflect the Commission's current views
I also cannot help but notice the Proposal seems to frequently reference “comity” without providing supporting rationales for deferring to our fellow domestic regulators and foreign counterparts or for providing per se exemptions. I support working closely with foreign regulators to address potential conflicts with respect to each of our respective regulatory regimes, and I believe that our cross-border approach must absolutely align with principles of international comity. But, I do not understand how we can reach regulatory absolutes and conclusions based on comity, absent a finding that the exercise of our authority under CEA section 2(i) would be patently unreasonable under international principles. I believe that substituted compliance is generally the most workable and respectful solution, and I believe we must engage with our fellow global regulators to address matters of risk that may impact each of our jurisdictions regardless of size and nature.
The bulk of the Proposal is dedicated to codifying 23 definitions “key” to determining whether certain swaps or swap positions would need to be counted towards a person's SD or MSP threshold and in addressing the cross-border application of the Title VII requirements. While most of the defined terms are familiar from the Guidance, there are some differences that stand out as more than a simple exercise in conformity. For example, the preamble of the Proposal describes the proposed definition of “U.S. person” as “largely consistent with” and the definition of “guarantee” as “consistent with” the Commission's Cross-Border Margin Rule.
With regard to “U.S. persons,” the definition harmonizes with the definition adopted by the Securities and Exchange Commission (“SEC”) in the context of its regulations regarding cross-border security-based swap activities, which largely encompasses the same universe of persons as the Commission's Cross-Border Margin Rule. However, among other things, the proposed “U.S. person” definition, unlike the Cross Border Margin Rule, would not include certain legal entities that are owned by one or more U.S. person(s) and for which such person(s) bear unlimited responsibility for the obligations and liabilities of the legal entity (“unlimited U.S. responsibility prong”).
To be clear, the Guidance includes an unlimited U.S. responsibility prong in its interpretation of “U.S. persons” for purposes of applying CEA section 2(i) that is intended to cover entities that are directly or indirectly owned by U.S. person(s) such that the U.S. owner(s) are ultimately liable for the entity's obligations and liabilities.
While I am not arguing that the Commission cannot change its views regarding the necessity for including a U.S. responsibility prong in a proposed “U.S. person” definition, I do believe that if we do
More concerning, the proposed “guarantee” definition is narrower in scope than the one used in the Guidance in that it would not include several different financial arrangements and structures that transfer risk directly back to the United States such as keepwells and liquidity puts, certain types of indemnity agreements, master trust agreements, liability or loss transfer or sharing agreements, etc.
The introduction of the “significant risk subsidiary” or “SRS” is perhaps the most elaborate departure from the Commission's interpretation of CEA section 2(i) and almost seems to be an attempt to ensure that no non-U.S. subsidiary of a U.S. parent entity will ever have to consider its swap dealing activities for purposes of the relevant SD or MSP registration threshold calculations. Save for a single footnote reference to a request for comment and passing references to SRSs likely being classified as conduits in the explanation of Cost-Benefit Considerations, the Proposal does not mention anything regarding the Guidance's concept of a conduit affiliate—despite the fact that the SEC includes the concept of conduit affiliate in its definitions relevant to cross-border security-based swap dealing activity.
SRSs represent a tiny subset of the consolidated non-U.S. subsidiaries of U.S. parent entities that the Commission believes are of supervisory interest in light of their clear potential to permit U.S. persons to accrue risk that, in the aggregate, may have a significant effect on the U.S. financial system or may otherwise be used for evasion.
Rather than rehashing the elements of the SRS definition, I will focus on two aspects that I find most troubling. First is the requirement that the U.S. parent entity meet a $50 billion consolidated asset threshold. This threshold is intended to limit the SRS definition to only those entities whose U.S. parent entity may pose a systemic risk to the U.S. financial system. Foremost, given CEA section 2(i)'s focus on activities in the aggregate, a bright line threshold at the entity level is irrelevant. Not to mention that if Congress had wanted the Commission to focus its cross-border authority on systemically significant entities, it would have used language that was not so embedded in common law
Second, even if a non-U.S. person met one of three tests for being a significant subsidiary of a U.S. parent with over $50 billion in consolidated assets, it would not be an SRS if it is either subject to prudential regulation as a subsidiary of a U.S. bank holding company or subject to comparable capital and margin standards and oversight by its home country supervisor. While I believe these exclusions are appropriate in the context of the policy the Proposal is putting forward in its vision of the SRS, I am concerned that we are substituting our oversight with that of the Federal Reserve Board, in one instance, on the grounds that being subject to consolidated supervision and regulation by the Federal Reserve Board with respect to capital and risk management requirements provides appropriate regulatory coverage. While I do not disagree with respect to risk management that the Federal Reserve Board provides comparable oversight, finding that comparability satisfies our regulatory oversight concerns in this instance may lead us down a slippery slope in which we find ourselves fighting to maintain our own Congressionally delegated jurisdiction with respect to swaps activities. This fact is only further validated— considering the breadth of the exclusions—by the high likelihood that a non-U.S. subsidiary of a U.S. parent entity with over $50 billion in consolidated assets is a financial entity subject to some form or prudential regulation in its home jurisdiction. Indeed, the Proposal suggests that of the current population of 59 SDs, “few, if any, would be classified as SRSs.”
While the concept of an SRS is interesting to me, the Proposal's attempt to draw multiple bright lines in a web of interconnectedness almost ensures that risk will find an alternate route back to the U.S. with potentially disastrous results. Without a better understanding of how the SRS proposal would work in practice and whether it is truly better than the conduit affiliate concept currently outlined in the Guidance and presumably similar to the SEC's own approach, it is difficult to get behind a policy that could most certainly bring risk into the U.S. of the very type CEA Section 2(i) seeks to address.
The issue of how to address the application of certain transaction-level requirements with respect to swap transactions arranged, negotiated, or executed by personnel or agents located in the United States of non-U.S. SDs (whether affiliates or not of a U.S person) with non-U.S. counterparties (“ANE Transactions”) is one aspect of the Commission's cross-border approach that has continually raised concerns and demands greater certainty. First articulated in a 2013 Staff Advisory,
The proposal sets forth an approach largely based on comments to the 2014 Request for Comment
Despite my concerns regarding this Proposal, I look forward to hearing constructive input from market participants and the public. I am encouraged by the balanced nature of the requests for comment, and would like to modestly request that in responding to the Proposal, commenters indicate whether they believe it is appropriate and prudent for the Commission to proceed with a rulemaking at this time, or whether the preference is to adhere to the current Guidance, or some hybrid of the two.
As with all rulemakings, input the Commission receives through public comment drives the conversation, and sets us on a course that balances diverse interests; seeks transparency, resiliency, and efficiency; and above all else, focuses on protecting U.S. markets, its participants and most importantly the customers that rely on this truly global marketplace. One might assume that making targeted, surgical changes to an existing regulatory framework is easier than creating a framework. But, in some circumstances, it is exactly the opposite. Global swaps markets have grown and evolved around rule sets that were completed and implemented in the very recent past. As regulators I believe we should caution against any wholesale rewrite when we find well regulated, transparent, and generally well running financial markets. But, if we do find vulnerabilities or inefficiencies in our rules (certainly both old and new), the process to reconsider should be deliberate, balanced, and inclusive to ensure the Commission, as a collective body, understands the gravity of its decisions.
I dissent from today's cross-border swap regulation proposal (the “Proposal”) because it would significantly weaken the Commission's existing regulatory framework that protects the United States from risky overseas swaps activity. The existing cross-border framework has worked well over the past six years to protect the U.S. financial system from risks from cross-border swaps activity, while simultaneously enabling U.S. banks to compete successfully in overseas markets.
The Proposal also sends us down a rabbit hole with a complex new entity designation, “Significant Risk Subsidiary” (“SRS”). An SRS would be a type of overseas swap dealing affiliate that in theory is subject to greater Commission oversight. The Proposal admits, however, that there would be “few, if any,” entities in this elusive category.
The Proposal would transform the Commission from a watchdog guarding U.S. shores into a timid turtle, reluctant to poke its head out of its domestic shell. When the next financial crisis arrives, will foreign governments bail out affiliates of U.S. persons located in their jurisdictions? Experience has taught us that while finance may be global, global financial rescues are American. With today's Proposal, I fear that the U.S. tax payer will once again be called on to bear the costs. We've been down this de-regulatory road before, and it ended in disaster for the United States and the global financial system. Congress enacted the Dodd-Frank Act to avoid these same mistakes, yet today the Commission is voting out a proposal that ignores both those lessons and the law.
It seems that every few years, we must remind ourselves of why regulating cross-border financial transactions, and swaps in particular, is important to managing systemic risk. If we forget, the financial system delivers its own destructive reminders. Examples from recent history prove that foreign financial activity, usually involving swaps, can lead to massive losses triggering the need for emergency action by the Department of the Treasury and/or the Federal Reserve System—sometimes at the expense of the U.S. taxpayer. As described later in my statement, the Proposal would undermine the direction in CEA section 2(i) to regulate cross-border swap activity, and again allow such activity by U.S. financial institutions to go unobserved and unsupervised.
In 1998, the U.S. hedge fund Long-Term Capital Management L.P. (“LTCM”) was saved from failure through an extraordinary bailout by 15 banks. The bailout was brokered by the Federal Reserve Bank of New York. The near failure of LTCM roiled financial markets. The financial system could have seized up if LTCM had failed because of the large and opaque derivatives exposures that many U.S. banks had with LTCM.
In 2007, U.S.-based Bear Stearns provided loans intended to shore up two Cayman Islands hedge funds sponsored by Bear
Walter Wriston, former chairman and CEO of Citicorp, testified to Congress regarding the obligation of a parent bank to bail out a subsidiary, no matter the degree of legal separation: “It is inconceivable that any major bank would walk away from any subsidiary of its holding company. If your name is on the door, all of your capital funds are going to be behind it in the real world.
When Lehman Brothers went bankrupt and triggered the 2008 financial crisis, its London affiliate, Lehman Brothers International Europe, had a book of nearly 130,000 swaps that took many years to resolve in bankruptcy.
In 2012, on the eve of the swap dealer regulations going into effect, J.P. Morgan Chase & Co. disclosed multi-billion dollar losses from credit-related swaps managed through its London chief investment office. While this loss did not require the Treasury or the Federal Reserve System to act, it did result in an enforcement action by the CFTC. The enforcement order detailed how the trading activity that caused the loss would have been subject to tighter controls and oversight—and likely would not have happened—if the activity had been subject to swap dealer regulation by the CFTC.
Each of these very substantial financial failures occurred at least in part because of overseas activity by U.S. financial institutions. Although the activity occurred away from the United States, and was not subject to direct U.S. regulatory oversight, the risks and the costs both came back to the United States.
Foreign derivatives activity is of particular concern because derivatives are, by their very nature, contracts that can transfer large amounts of risk between entities and across borders. Congress recognized this concern when it adopted CEA section 2(i) applying the swaps provisions of the Dodd-Frank Act to regulate cross-border swaps activity that has a “direct and significant connection with activities in, or effect on, commerce of the United States.” Notably, this cross-border jurisdiction is both activity-based as well as effects-based. It is the nature of the activity and its connection to commerce in the United States—not simply the level of risk presented—that is the basis for the CFTC's cross-border jurisdiction. Congress recognized that we cannot always foresee the risks presented by swap activities. By supposedly focusing on risk, the Proposal ignores this crucial insight and critical component of the Commission's cross-border jurisdiction.
But even with respect to activities presenting serious risks to the United States, the Proposal gets it wrong. The risks incurred by foreign affiliates are transferred, or otherwise inure, to the U.S. parent firms in several ways. The traditional method was for the U.S. parent to guarantee the swap payment obligations of its foreign affiliates. Swap dealers removed many of those formal, written guarantees that were executed prior to the financial crisis in 2014 after the 2013 Guidance was issued (more on that later). Alternatively, using inter-affiliate swaps, a foreign affiliate typically transfers to its U.S. parent all of the risk it incurs in a swaps portfolio. While the U.S. parent may not be directly liable to the counterparties of its foreign affiliate, any losses of the affiliate are equivalent to losses the parent incurs on its swap with the affiliate. If the affiliate makes bad bets, the parent pays for them. Finally, a U.S. parent can be less directly responsible for its foreign affiliate's swap obligations through capital contribution arrangements (
The Commission's regulation of cross-border swap activity should address all of these risk transfer conduits. At the same time, it should be flexible enough to allow U.S. banks to compete in global markets. In my view, the 2013 Guidance and the attendant no action relief achieved the right balance and is working well. As noted above, U.S. banks are competing throughout the world. In fact, they are out-competing their non-U.S. competitors. There is no persuasive reason to weaken a regulatory standard that is consistent with our law and that has successfully protected the American people for the last six years—
The Proposal would greatly weaken the Commission's ability to monitor and regulate foreign swap activity by U.S. financial institutions, putting our financial system at risk once again. Only ten years after the financial crisis, the Proposal tosses aside hard lessons learned at the expense of 10% unemployment, millions of foreclosures, massive bailouts, and lasting damage to the economic fortunes of tens of millions of our fellow citizens. It does this in the interest of secondary considerations—harmonization, a “workable framework” for regulations, and reducing costs. Whereas “legal certainty” was the buzzword to limit the CFTC's jurisdiction over the swaps market in the 1990s and 2000s, today's de-regulatory mantra includes “harmonization,” “reducing fragmentation,” and “deference.” Call it what you like, but the results are intended to be the same: Preventing the CFTC from overseeing the swaps activity of major U.S. banks. Creating the possibility for another taxpayer-funded bailout for overseas swap activity cannot possibly be the right outcome for the American people.
The Proposal starts on a good note by essentially adopting the interpretation of CEA section 2(i) contained in the 2013 Guidance. The Proposal also acknowledges that “a global financial enterprise effectively operates as a single business, with a highly integrated network of business lines and services conducted through various branches or affiliated legal entities that are under the control of the parent entity.”
But the Proposal makes a number of changes to key provisions, all geared toward limiting the application of our regulations. Most concerning are the narrowing of the definition of “guarantee” and “U.S. persons,” and codifying full relief for arranging, negotiating, or executing (“ANE”) swaps in the United States that are then booked in non-U.S. legal entities. Together, these provisions in the Proposal create a loophole through which U.S. financial institutions can undertake substantial swap dealing activity outside the U.S. swap regulatory regime through unregistered foreign affiliates and bring the risks they incur back to the United
I am concerned that codifying this result will encourage U.S. banks to book much of their swap dealing activity in foreign affiliates that limit their swap dealing with U.S. persons and therefore will not have to register as swap dealers. Under the narrowed definition of “guarantee” in the Proposal, the U.S. parents would be able to provide full financial support to these unregistered foreign affiliates, just not in the form of an explicit, direct swap payment guarantee. Furthermore, these changes will allow two U.S. entities, whether they are, for example, two global banks or a global bank and a large U.S. corporation, insurance company or hedge fund, to trade with each other without subjecting that trade to U.S. oversight so long as the trade is booked in foreign affiliates. Finally, by largely eliminating the ANE requirement,
This outcome is not merely an issue of whether the foreign affiliates of U.S. persons need to register as swap dealers. By not registering, these foreign affiliates will not need to report their swap activity to CFTC registered swap data repositories. They will not be subject to our margin, capital, and risk management requirements. These firms will not be subject to the swap dealing best practices that our regulations require. CEA section 2(i) will be undermined.
The three changes in the Proposal are intended to address unintended effects on previously standard business practices that helped U.S. banks compete in global markets. A foreign counterparty that is not headquartered in the United States (a “true non-U.S. entity”) may not want to trade with affiliates of U.S. banks, or with bank employees in the United States, if doing so means the true non-U.S. entity would need to count those swaps toward its CFTC swap dealer registration threshold.
Under the 2013 Guidance, guaranteed foreign affiliates of U.S. banks are deemed U.S. persons for purposes of counting dealing swaps with U.S. persons. The term “guarantee” was defined broadly. Once it became apparent that true non-U.S. entities did not want to count those swaps, U.S. banks de-guaranteed their foreign affiliate swap dealers. The 2016 cross border proposal
I am highly skeptical that the status quo will be maintained if the ANE no action relief and de-guaranteeing framework are codified. Large U.S. banks would have incentives to de-register some of their foreign affiliate swap dealers. They are likely to maintain only one or two foreign entities that are registered to handle business with U.S. persons operating in foreign jurisdictions who want to trade with registered swap dealers. Even if they do not de-register those swap dealers, swap activity can easily be moved to other unregistered foreign affiliates that are supported by their U.S. parents in ways other than an explicit swap payment obligation guarantee.
There is a potential alternative for addressing the concerns of true non-U.S. entities without also excluding from oversight all activity of foreign affiliates of U.S. financial institutions. The regulations potentially could provide that, with substituted compliance determinations in place for key swap regulations (
At the same time, foreign entities that are wholly owned by U.S. parents would still be required to count swaps with other wholly-owned foreign affiliates of other U.S. parents. In this way, U.S. financial institutions can compete for foreign swap business while preventing U.S. firms from evading swap regulation by booking swaps with each other in foreign affiliates.
I invite commenters to address this potential solution.
The Proposal contains a new regulatory construct called the “Significant Risk Subsidiary” (“SRS”). It is a putative replacement for a broader definition of guarantee and the FCS alternative. But it appears to be an empty set. The Cost-Benefit Considerations project that “few, if any” entities would fall within its ambit. It would not accomplish anything.
The SRS is a very complicated construct, with no less than six tests for determining whether a firm would qualify for regulation as an SRS. Bizarrely, none of these tests have anything to do with the amount of the entity's swap activity. The basic threshold is that the entity be affiliated with a commercial enterprise with at least $50 billion in capital. Consider this: LTCM had $4 billion in capital and a derivatives book with a notional amount of about $1 trillion at the time it was bailed out.
Another hurdle excludes any entity regulated by U.S. or foreign banking regulators. In effect, the entities that do the vast majority of swap dealing in the world are excluded from the SRS definition. With so many hurdles for the SRS determination, it appears that the Proposal has little interest in actually contributing to the control of systemic risk exposure in the U.S. financial system. The reasoning goes, if the entity is regulated by a banking regulator that follows basic Basel capital and supervision standards, then CFTC regulation is unnecessary.
I support the principle of international comity. The CFTC should continue to recognize the interests of other countries in regulating swap activity occurring within their borders. The 2013 Guidance has a flexible, outcomes based substituted compliance review process based on a finding that the foreign regulated entities are subject to comparable, comprehensive supervision and regulation.
The Proposal would apply a lesser standard. It would permit the Commission to issue a comparability determination if it determines that “some or all of the relevant foreign jurisdiction's standards are comparable.” The condition that the regulations be “comprehensive” is dropped. Furthermore, unlike the 2013 Guidance and the CEA comparability analysis, which require the Commission to make a comparability determination or finding based on the standard, the Proposal says that the Commission can consider any factors it “determines are appropriate, which
The Proposal would allow U.S. banks to evade swap regulation by booking swaps in non-U.S. affiliates. The Proposal would enable U.S. banks to arrange, negotiate, and execute swaps in New York, but avoid swap regulation by booking those swaps in their non-U.S. affiliates. A non-U.S. affiliate of a U.S. bank could enter into trillions of dollars of swaps with non-U.S. affiliates of other U.S. entities without registering with the CFTC as a swap dealer. The U.S. parent bank could provide full financial support for those non-U.S. affiliates so long as the support does not come in the narrow form of an explicit swap payments guarantee.
Ultimately, the risk from all of those swaps will still be borne by the parent bank in the United States. These risks can be very large. The activities of bank affiliates outside the United States have a direct and significant connection with activities in, or effect on, commerce in the United States. In Title VII of the Dodd-Frank Act, the Congress directed the CFTC to apply its swap regulations to these activities. Because the Proposal retreats from these responsibilities, I dissent.