Table of Contents I. Background II. The Interim Final Rule III. Administrative Law Matters A. Administrative Procedure Act B. Congressional Review Act C. Paperwork Reduction Act D. Regulatory Flexibility Act E. Riegle Community Development and Regulatory Improvement Act of 1994 F. Use of Plain Language G. OCC Unfunded Mandates Reform Act of 1995 Determination I. Background

The containment measures adopted in response to the public health concerns have slowed economic activity in many countries, including the United States. Financial conditions have tightened markedly, sudden disruptions in financial markets have put increasing liquidity pressure on money market mutual funds, and the cost of credit has risen for most borrowers. Given these liquidity pressures, money market mutual funds have been faced with redemption requests from clients with immediate cash needs and may need to sell a significant number of assets to meet such requests, which could further increase market pressures. Small businesses also are facing severe liquidity constraints, as millions of Americans have been ordered to stay home, severely reducing their ability to engage in normal commerce, and revenue streams for many small businesses have collapsed. This has forced many small businesses to close temporarily or furlough employees. Continued access to financing will be crucial for small businesses to weather economic disruptions caused by the containment measures adopted in response to the public health concerns and, ultimately, to help restore economic activity.

In order to prevent the disruption in the money markets from destabilizing the financial system, the Board of Governors of the Federal Reserve System (Board), with the approval of the Secretary of the Treasury, authorized the Federal Reserve Bank of Boston to establish the Money Market Mutual Fund Liquidity Facility (MMLF), pursuant to section 13(3) of the Federal Reserve Act. 1 Under the MMLF, the Federal Reserve Bank of Boston extends non-recourse loans to eligible borrowers to purchase assets from money market mutual funds (MMFs). Assets purchased from MMFs are posted as collateral to the Federal Reserve Bank of Boston (MMLF collateral). Eligible borrowers under the MMLF include certain banking organizations subject to the Liquidity Coverage Ratio (LCR) rule (covered companies) issued by the Office of the Comptroller of the Currency (OCC), the Board, and the Federal Deposit Insurance Corporation (FDIC) (together, the agencies). 2 MMLF collateral generally comprises securities and other assets with the same maturity date as the MMLF non-recourse loan.

In order to provide liquidity to small business lenders and the broader credit markets, and to help stabilize the financial system, the Board, with the approval of the Secretary of the Treasury, authorized each of the Federal Reserve Banks to extend credit under the Paycheck Protection Program Liquidity Facility (PPPLF), pursuant to section 13(3) of the Federal Reserve Act. 3 Under the PPPLF, each of the Federal Reserve Banks extends non-recourse loans to institutions that are eligible to make Paycheck Protection Program (PPP) covered loans, 4 including depository institutions subject to the agencies' LCR rule. Under the PPPLF, only PPP covered loans that are guaranteed by the SBA under the PPP with respect to both principal and interest and that are originated by an eligible institution may be pledged as collateral to the Federal Reserve Banks (PPPLF collateral). The maturity date of the extension of credit under the PPPLF equals the maturity date of the PPP loans pledged to secure the extension of credit. 5

To facilitate the use of the MMLF and PPPLF, the agencies are adopting this interim final rule, which requires covered companies to neutralize the LCR effects of the advances made by each facility and the exposures securing such facility advances.

The agencies' LCR rule requires covered companies to calculate and maintain an amount of high-quality liquid assets (HQLA) sufficient to cover their total net cash outflows over a 30-day stress period. A covered company's LCR is the ratio of its HQLA amount (LCR numerator) divided by its total net cash outflows (LCR denominator). The total net cash outflow amount is calculated as the difference between outflow and inflow amounts, which are determined by applying a standardized set of outflow and inflow rates to the cash flows of various assets and liabilities, together with off-balance sheet items, as specified in §§ __.32 and __.33 of the LCR rule. 6

Absent the interim final rule, under the LCR rule, covered companies would be required to recognize outflows for MMLF and PPPLF loans with a remaining maturity of 30 days or less and inflows for certain assets securing the MMLF and PPPLF loans. As a result, a covered company's participation in the MMLF or PPPLF could affect its total net cash outflows, which could potentially result in an inconsistent, unpredictable, and more volatile calculation of LCR requirements across covered companies.

Under the LCR rule, secured loans from a Federal Reserve facility with a remaining maturity of 30 calendar days or less are categorized as secured funding transactions with a sovereign entity and assigned an outflow rate that varies based on the collateral securing the loan. 7 In addition, the LCR rule assigns inflow rates to collateral generally based on the asset and counterparty type. 8 As a result of the applicable inflow and outflow rates in the LCR rule, MMLF and PPPLF transactions could receive a non-neutral liquidity risk treatment. Moreover, after these loans are extended and upon their maturity, the associated inflows and outflows could unnecessarily contribute to volatility in LCRs.

Under the terms of the MMLF and PPPLF, covered companies use the value of cash received from posted or pledged assets to repay the MMLF or PPPLF loan, respectively, and in no case is the maturity of the collateral shorter than the maturity of the advance. In addition, because the advance from the Federal Reserve Bank is non-recourse, the banking organization is not exposed to credit or market risk from the collateral securing the MMLF or PPPLF loan that could otherwise affect the banking organization's ability to settle the loan. For these reasons, the agencies believe that it is appropriate to provide predictable and consistent treatment for participation in the MMLF and PPPLF by neutralizing the effects of participation in the MMLF and the PPPLF on covered companies' LCRs. Absent this interim final rule, the agencies believe that the treatment of covered companies' transactions with the MMLF and PPPLF under the LCR rule would not be consistent across transactions or facilities and would not accurately reflect the liquidity risk associated with funding exposures through these facilities.

Specifically, the interim final rule adds a new definition to § __.3 and a new § __.34 to the LCR rule. In § __.3, the new definition “Covered Federal Reserve Facility Funding” means a non-recourse loan that is extended as part of the Money Market Mutual Fund Liquidity Facility or Paycheck Protection Program Liquidity Facility authorized by the Board of Governors of the Federal Reserve System pursuant to section 13(3) of the Federal Reserve Act. The new § __.34 requires Covered Federal Reserve Facility Funding and the assets securing such funding to be excluded from the calculation of a covered company's total net cash outflow amount as calculated under § __.30 of the LCR rule, notwithstanding any other section of the LCR rule. Except as described below, this new section excludes advances made by a Federal Reserve Bank under the MMLF or the PPPLF from being assigned an outflow rate under § __.32 of the LCR rule, and any collateral securing such an advance from being assigned an inflow rate under § __.33 of the LCR rule. While this treatment would neutralize the effect of the use of the facilities on a covered company's LCR for the duration of the facility, banking organizations should be mindful of the need, where applicable, to replace maturing Covered Federal Reserve Facility Funding with appropriate alternative sources in instances where exposures mature later than such funding.

This new § __.34 does not apply to the extent the covered company secures Covered Federal Reserve Facility Funding with securities, debt obligations, or other instruments issued by the covered company or its consolidated entity. When a covered company owns an instrument that it or its consolidated entity issued, the covered company will not record a payment upon the instrument's maturity. The covered company would not receive a payment from outside the consolidated covered company upon maturity or settlement of the collateral that would be available to repay the borrowing (Covered Federal Reserve Facility Funding), and, as a result, this arrangement presents liquidity risk due to the asymmetric cash flows of the covered company because the covered company would not have an inflow to offset its cash outflows. 9 It would, therefore, be inappropriate to neutralize the impact of such a funding transaction under the LCR rule. The agencies seek comment on this provision and all aspects of the interim final rule.

Question 1: The agencies invite comment on the advantages and disadvantages of neutralizing the effects of participating in the MMLF and PPPLF in the LCR rule.

Question 2: How well does the approach in the interim final rule support the objectives of the facilities?

Question 3: What are the advantages and disadvantages of extending this treatment to any other facilities created pursuant to section 13(3) of the Federal Reserve Act in which covered company exposures are pledged as collateral for non-recourse, maturity-matched advances?

Question 4: What are the advantages and disadvantages of excluding from this treatment Covered Federal Reserve Facility Funding that is secured by instruments issued by a covered company or any of its consolidated entities?

The agencies are issuing the interim final rule without prior notice and the opportunity for public comment and the delayed effective date ordinarily prescribed by the Administrative Procedure Act (APA). 10 Pursuant to section 553(b)(B) of the APA, general notice and the opportunity for public comment are not required with respect to a rulemaking when an “agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”  11

The agencies believe that the public interest is best served by implementing the interim final rule immediately upon publication in the Federal Register . As discussed above, the containment measures adopted in response to the public health concerns have slowed economic activity in many countries, including the United States. In particular, these containment measures have acutely affected small businesses, MMFs, and financial markets generally.

Significantly tighter financial conditions and the increased cost of credit for most borrowers have severely affected small businesses. As millions of Americans have been ordered to stay home, severely reducing their ability to engage in normal commerce, revenue streams for many small businesses have collapsed. This has resulted in severe liquidity constraints at small businesses and has forced many small businesses to close temporarily or furlough employees. Continued access to financing will be crucial for small businesses to weather economic disruptions caused by the containment measures adopted in response to the public health concerns and, ultimately, to help restore economic activity.

Additionally, sudden disruptions in financial markets have put increasing liquidity pressure on MMFs. Given these pressures, MMFs have been faced with increased redemption requests from clients with immediate cash needs. The MMFs may need to sell a significant number of assets to meet these redemption requests, which could further increase market pressures.

In order to provide liquidity to banking organizations that lend to small business and the broader credit markets, and to prevent the disruption in the money markets from destabilizing the financial system, the Board, with approval of the Secretary of the Treasury, authorized each of the Federal Reserve Banks to extend credit under the PPPLF and the Federal Reserve Bank of Boston to establish the MMLF. This interim final rule will provide certainty to covered companies regarding the liquidity treatment of inflows and outflows related to these Federal Reserve lending programs. In the absence of this interim final rule, banking organizations may be restricted in their ability to use the MMLF and PPPLF due to potential effects on their LCRs. The urgent funding pressures facing small businesses and MMFs justify the adoption of this interim final rule as quickly as possible. For these reasons, the agencies find that there is good cause consistent with the public interest to issue the interim final rule without advance notice and comment. 12

The APA also requires a 30-day delayed effective date, except for (1) substantive rules that grant or recognize an exemption or relieve a restriction; (2) interpretative rules and statements of policy; or (3) as otherwise provided by the agency for good cause. 13 For the good cause described above, the interim final rule is exempt from the APA's delayed effective date requirement. 14

While the agencies believe that there is good cause to issue the interim final rule without advance notice and comment and with an immediate effective date, the agencies are interested in the views of the public and request comment on all aspects of the interim final rule.

For purposes of Congressional Review Act (CRA), the Office of Management and Budget (OMB) makes a determination as to whether a final rule constitutes a “major” rule. 15 If a rule is deemed a “major rule” by the OMB, the CRA generally provides that the rule may not take effect until at least 60 days following its publication. 16

The CRA defines a “major rule” as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in (1) an annual effect on the economy of $100,000,000 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. 17

For the same reasons set forth above, the agencies are adopting the interim final rule without the delayed effective date generally prescribed under the CRA. The delayed effective date required by the CRA does not apply to any rule for which an agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rule issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. 18 In light of current market uncertainty, the agencies believe that delaying the effective date of the rule would be contrary to the public interest.

As required by the CRA, the agencies will submit the interim final rule and other appropriate reports to Congress and the Government Accountability Office for review.

The Paperwork Reduction Act of 1995 (PRA) states that no agency may conduct or sponsor, nor is the respondent required to respond to, an information collection unless it displays a currently valid OMB control number. 19 This interim final rule does not introduce any new information collections or revise any existing information collections pursuant to the PRA for the OCC or the FDIC. Therefore, no submissions will be made by the OCC or the FDIC to OMB for review. The interim final rule does, however, affect the Board's current information collection for the Complex Institution Liquidity Monitoring Report (FR 2052a; OMB No. 7100-0361). The Board has reviewed the interim final rule pursuant to authority delegated by OMB.

The Board has temporarily revised the reporting form and instructions for the FR 2052a to reflect the changes made in this interim final rule. On June 15, 1984, OMB delegated to the Board authority under the PRA to approve a temporary revision to a collection of information without providing opportunity for public comment if the Board determines that a change in an existing collection must be instituted quickly and that public participation in the approval process would defeat the purpose of the collection or substantially interfere with the Board's ability to perform its statutory obligation.

The Board's delegated authority requires that the Board, after temporarily approving a collection, solicit public comment on a proposal to extend the temporary collection for a period not to exceed three years. Therefore, the Board is inviting comment on a proposal to extend the FR 2052a for three years, with such revisions. The Board invites public comment on the FR 2052a, which is being reviewed under authority delegated by the OMB under the PRA. Comments are invited on the following:

a. Whether the collection of information in the interim final rule is necessary for the proper performance of the Board's functions, including whether the information has practical utility;

b. The accuracy of the Board's estimate of the burden of the proposed information collection in the interim final rule, including the validity of the methodology and assumptions used;

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

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

e. Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.

Comments must be submitted on or before July 6, 2020. At the end of the comment period, the comments and recommendations received will be analyzed to determine the extent to which the Board should modify the information collection.

Report title: Complex Institution Liquidity Monitoring Report.

Agency form number: FR 2052a.

OMB control number: 7100-0361.

Effective date: May 6, 2020.

Frequency: Monthly, and each business day (daily).

Affected public: Businesses or other for-profit.

Respondents: U.S. bank holding companies (BHCs), U.S. savings and loan holding companies (SLHCs), and foreign banking organizations (FBOs) with U.S. assets.

Estimated number of respondents: Monthly, 26; daily, 16.

Estimated average hours per response: Monthly, 120; daily, 220.

Estimated annual burden hours: 917,440.

General description of report: The Board uses the FR 2052a to monitor the overall liquidity profile of supervised institutions. These data provide detailed information on the liquidity risks within different business lines ( e.g., financing of securities positions, prime brokerage activities). In particular, these data serve as part of the Board's supervisory surveillance program in its liquidity risk management area and provide timely information on firm-specific liquidity risks during periods of stress. Analyses of systemic and idiosyncratic liquidity risk issues are then used to inform the Board's supervisory processes, including the preparation of analytical reports that detail funding vulnerabilities.

Legal authorization and confidentiality: The FR 2052a is authorized pursuant to section 5 of the Bank Holding Company Act (12 U.S.C. 1844), section 8 of the International Banking Act (12 U.S.C. 3106), section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) (12 U.S.C. 5365), and section 10 of the Home Owners' Loan Act (12 U.S.C. 1467(a)) and is mandatory. Section 5(c) of the Bank Holding Company Act authorizes the Board to require BHCs to submit reports to the Board regarding their financial condition. Section 8(a) of the International Banking Act subjects FBOs to the provisions of the Bank Holding Company Act. Section 165 of the Dodd-Frank Act requires the Board to establish prudential standards for certain BHCs and FBOs, which include liquidity requirements. Section 10(g) of the Home Owners' Loan Act authorizes the Board to collect reports from SLHCs.

Financial institution information required by the FR 2052a is collected as part of the Board's supervisory process. Therefore, such information is entitled to confidential treatment under Exemption 8 of the Freedom of Information Act (FOIA) (5 U.S.C. 552(b)(8)). In addition, the institution information provided by each respondent would not be otherwise available to the public and its disclosure could cause substantial competitive harm. Accordingly, it is entitled to confidential treatment under the authority of exemption 4 of the FOIA (5 U.S.C. 552(b)(4)), which protects from disclosure trade secrets and commercial or financial information.

Current actions: The Board has temporarily revised the reporting form and instructions of the FR 2052a to incorporate the interim final rule. Specifically, the Board has added: (1) The sub-product value of “Covered Federal Reserve Facility Funding” to the product O.S.6: Exceptional Central Bank Operations and a corresponding instruction to exclude balances reported under this sub-product from the pre-existing sub-product of “Federal Reserve Bank”; (2) a sentence to the “General Guidance” paragraphs under the I.U: Inflows-Unsecured and I.S: Inflows-Secured headings: “Exclude assets that secure Covered Federal Reserve Facility Funding”; (3) a sentence to the definition of product I.O.6: Interest and Dividends Receivable: “Exclude interest and dividends receivable on assets securing Covered Federal Reserve Facility Funding”; (4) a sentence to the definition of product O.O.19: Interest and Dividends Payable: “Exclude interest payable on Covered Federal Reserve Facility Funding”; and (5) a collateral class of “L-12” representing loans guaranteed by U.S. Government agencies.

The Board has determined that these temporary revisions to the FR 2052a must be instituted quickly and that public participation in the approval process would defeat the purpose of the collection of information, as delaying the revisions would interfere with the Board's ability to perform its statutory duties and would cause public harm if firms were unable to take full advantage of the emergency relief provided by the MMLF in response to significant financial industry disruptions from the containment measures adopted in response to the public health concerns.

In addition, the Board proposes to extend the FR 2052a for three years with the revisions discussed above.

The Regulatory Flexibility Act (RFA)  20 requires an agency to consider whether the rules it proposes will have a significant economic impact on a substantial number of small entities. 21 The RFA applies only to rules for which an agency publishes a general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed previously, consistent with section 553(b)(B) of the APA, the agencies have determined for good cause that general notice and opportunity for public comment is unnecessary, and therefore the agencies are not issuing a notice of proposed rulemaking. Accordingly, the agencies have concluded that the RFA's requirements relating to initial and final regulatory flexibility analysis do not apply.

Nevertheless, the agencies seek comment on whether, and the extent to which, the interim final rule would have a significant economic impact on a substantial number of small entities.

Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA), 22 in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions (IDIs), each Federal banking agency must consider, consistent with the principle of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of the RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form, with certain exceptions, including for good cause. 23 For the reasons described above, the agencies find good cause exists under section 302 of the RCDRIA to publish the interim final rule with an immediate effective date.

As such, the interim final rule will be effective immediately. Nevertheless, the agencies seek comment on the RCDRIA.

Section 722 of the Gramm-Leach-Bliley Act  24 requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The agencies have sought to present the interim final rule in a simple and straightforward manner. The agencies invite comments on whether there are additional steps it could take to make the rule easier to understand. For example:

• Have we organized the material to suit your needs? If not, how could this material be better organized?

• Are the requirements in the regulation clearly stated? If not, how could the regulation be more clearly stated?

• Does the regulation contain language or jargon that is not clear? If so, which language requires clarification?

• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes to the format would make the regulation easier to understand? What else could we do to make the regulation easier to understand?

As a general matter, the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531 et seq., requires the preparation of a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. However, the UMRA does not apply to final rules for which a general notice of proposed rulemaking was not published. 25 Therefore, because the OCC has found good cause to dispense with notice and comment for the interim final rule, the OCC has not prepared an economic analysis of the rule under the UMRA.

For the reasons stated in the preamble, the Office of the Comptroller of the Currency amends part 50 of chapter I of title 12, Code of Federal Regulations as follows:

For the reasons stated in the Supplementary Information , the Board of Governors of the Federal Reserve System amends 12 CFR chapter II as follows:

Discussion

Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian AD CF-2019-42, dated November 8, 2019 (also referred to as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc., Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes, Model CL-600-2C10 (Regional Jet Series 700, 701 & 702) airplanes, Model CL-600-2D15 (Regional Jet Series 705) airplanes, and Model CL-600-2D24 (Regional Jet Series 900) airplanes; and all Bombardier, Inc., Model CL-600-2C11 (Regional Jet Series 550) airplanes. You may examine the MCAI in the AD docket on the internet at https://www.regulations.gov by searching for and locating Docket No. FAA-2020-0092.

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Bombardier, Inc., Model CL-600-2B19 (Regional Jet Series 100 & 440) airplanes, Model CL-600-2C10 (Regional Jet Series 700, 701 & 702) airplanes, Model CL-600-2D15 (Regional Jet Series 705) airplanes, and Model CL-600-2D24 (Regional Jet Series 900) airplanes; and all Bombardier, Inc., Model CL-600-2C11 (Regional Jet Series 550) airplanes. The NPRM published in the Federal Register on February 18, 2020 (85 FR 8768). The NPRM was prompted by reports of fractured rudder primary feel unit shafts; a subsequent investigation determined that the fractures in the shafts are consistent with fatigue damage. The NPRM proposed to require replacement of the rudder primary feel unit shaft. The FAA is issuing this AD to address fractures of the rudder primary feel unit shaft, which could result in a loss of feel in the yaw axis and thereby impact the controllability of the airplane. See the MCAI for additional background information.

The FAA gave the public the opportunity to participate in developing this final rule. The FAA has considered the comments received. The Air Line Pilots Association, International (ALPA) and Jacob Yepiz stated support for the NPRM.

The FAA reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this final rule as proposed, except for minor editorial changes. The FAA has determined that these minor changes:

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

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

Bombardier has issued Service Bulletin 601R-27-166, dated April 5, 2019; and Service Bulletin 670BA-27-075, dated April 5, 2019. This service information describes procedures for replacing the rudder primary feel unit shaft that has part number 600-90251-1 with a new shaft. These documents are distinct since they apply to different airplane models. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section.

The FAA estimates that this AD affects 1,002 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

According to the manufacturer, some or all of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. The FAA does not control warranty coverage for affected individuals. As a result, the FAA has included all known costs in our cost estimate.

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

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

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

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

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

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

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

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

Authority for This Rulemaking

The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the United States Code. Subtitle I, Section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it revokes the Class E airspace at Sloulin Field International Airport and amends the Class E airspace at Williston Basin International Airport, Williston, ND, to ensure the safety and management of Instrument Flight Rules (IFR) operations at the airport.

The FAA published a notice of proposed rulemaking in the Federal Register (85 FR 12449; March 3, 2020) for Docket No. FAA-2019-1061 to revoke airspace at Sloulin Field International Airport and amend Class E airspace at Williston Basin International Airport, Williston, ND. Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. One comment was received.

The comment was not germane to the proposed airspace action for the airports.

Class E2 and E5 airspace designations are published in paragraphs 6002 and 6005, respectively, of FAA Order 7400.11D, dated August 8, 2019, and effective September 15, 2019, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

This document amends FAA Order 7400.11D, Airspace Designations and Reporting Points, dated August 8, 2019, and effective September 15, 2019. FAA Order 7400.11D is publicly available as listed in the ADDRESSES section of this document. FAA Order 7400.11D lists Class A, B, C, D, and E airspace areas, air traffic service routes, and reporting points.

This amendment to Title 14 Code of Federal Regulations (14 CFR) part 71 revokes the Class E airspace at Sloulin Field International Airport at Williston ND, due to the airport's closure.

This action also amends Class E airspace at Williston Basin International Airport, Williston, ND. The action establishes Class E airspace, designated at a surface area. This area is designed to provide controlled airspace for terminal operations where a control tower is not in operation. This area is described as follows: That airspace extending upward from the surface within a 4.2-mile radius of the airport, and within 1.3 miles each side of the 135° bearing from the airport, extending from the 4.2-mile radius to 4.7 miles southeast of the airport, and within 1.3 miles each side of the 339° bearing from the airport, extending from the 4.2-mile radius to 4.7 miles north of the Williston Basin International Airport.

Additionally, this action amends the Class E airspace extending upward from 700 feet above the surface by adding two extensions to the current 6.7-mile radius of the airport. One to the southeast and one to the north of the airport. This area is designed to accommodate arriving IFR aircraft descend below 1,500 feet above the surface and departing IFR aircraft until reaching 1,200 feet above the surface. The area is described as follows: That airspace extending upward from 700 feet above the surface within a 6.7-mile radius of the airport, and within 3.6 miles each side of the 132° bearing from the airport, extending from the 6.7-mile radius to 11.4 miles southeast of the airport, and within 3.6 miles each side of the 340° bearing from the airport, extending from the 6.7-mile radius to 11 miles north of the Williston Basin International Airport.

Further, this action adds Class E airspace extending upward from 1,200 feet above the surface. This area is designed to accommodate IFR aircraft transitioning to/from the terminal or en route environments. The area is described as follows: That airspace extending upward from 1,200 feet above the surface within a 41-mile radius of the Williston Basin International Airport.

Lastly, this action implements an administrative correction to the Class E5 airspace legal description's text header by updating the airport's geographic coordinate to match the FAA's aeronautical database. The coordinates read: lat. 48°15′39″ N, long. 103°45′04″ W.

FAA Order 7400.11, Airspace Designations and Reporting Points, is published yearly and effective on September 15.

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

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

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

The FAA published a final rule in the Federal Register (85 FR 5316; January 20, 2020) for FR Doc. 2020-01568 amending the Class D airspace at Joe Williams NOLF, Meridian, MS; Key Field, Meridian, MS; and NAS Meridian/McCain Field, Meridian, MS; the Class E airspace area designated as an extension to Class D airspace at Key Field; and the Class E airspace extending upward from 700 feet above the surface at Key Field, Joe Williams NOLF, and NAS Meridian/McCain Field. Subsequent to publication, the FAA identified that a cardinal direction was inadvertently omitted from the Class E airspace extending upward from 700 feet above the surface at Key Field. This action corrects that error.

Class E airspace designations are published in paragraph 6005 of FAA Order 7400.11D dated August 8, 2019, and effective September 15, 2019, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be subsequently published in the Order.

Accordingly, pursuant to the authority delegated to me, Amendment of the Class D and Class E Airspace; Meridian, MS, published in the Federal Register of January 30, 2020 (85 FR 5318), FR Doc. 2019-01568, is corrected as follows:

This document serves to inform entities registered with the Directorate of Defense Trade Controls (DDTC) pursuant to ITAR §§ 122.1(a) and 129.3(a), of a temporary reduction in registration fees charged to entities in Tier I and Tier II and new registrants. (For more information on DDTC registrations, please visit the “Conduct Business” page then select the “Registration” tab and the “Payment of Registration” tab of the DDTC website). ITAR § 122.1(a) provides that any person who engages in the United States in the business of manufacturing or exporting or temporarily importing defense articles, or furnishing defense services, is required to register with DDTC. ITAR § 129.3(a) further provides that, with limited exceptions, any regulated person who engages in brokering activities is required to register with DDTC. ITAR § 122.3 provides that a person who is required to register must do so on an annual basis by submitting a completed Statement of Registration (form DS-2032) and payment of a fee following the payment guidelines available on the DDTC website at www.pmddtc.state.gov.

Given the extraordinary impact of the COVID-19 pandemic on the national economy and Defense Industrial Base, DDTC is temporarily reducing registration fees for DDTC registrants in Tier I and Tier II to $500 for registrations whose original expiration date is between May 31, 2020 and April 30, 2021. Also, DDTC is reducing registration fees to $500 for new applicants who submit their registration application between May 1, 2020 and April 30, 2021. All new registrants are in Tier I in the first year. This will allow new registrants and existing registrants in Tiers I and II—including the many small to medium sized enterprises that must register under these tiers—to receive and plan for a reduced registration fee over the course of the coming year. The fee structure for Tier III entities remains unchanged at this time given the higher costs incurred by DDTC in processing the volume of licenses and other relevant submissions by entities in Tier III. Also, Tier III already has a provision for a reduced fee if the fee calculated above is greater than 3 percent of the total value of all applications. In such cases, the fee will be 3 percent of the total value of all applications or $2,750, whichever is greater. These measures were informed by consultations with U.S. industry, in particular the Defense Trade Advisory Group, as well as with DDTC's interagency partners in the Departments of Defense and Commerce. This temporary reduction in fees shall apply only through April 30, 2021, at which time fees for entities in Tiers I and II will return to the rates that were in effect on April 1, 2020, unless otherwise extended by a subsequent notification in the Federal Register . 1

For reasons stated above, the State Department amends the fee payment schedule referenced in 22 CFR 122.3 and posted on the DDTC website as follows:

“DDTC is temporarily reducing registration fees for DDTC registrants in Tier I and Tier II to $500 for registrations whose original expiration date is between May 31, 2020 and April 30, 2021. Also, DDTC is reducing registration fees to $500 for new applicants who submit their registration application between May 1, 2020 and April 30, 2021. All new registrants are in Tier I in the first year. This will allow new registrants and existing registrants in Tiers I and II, the majority of which are small and medium-sized enterprises, to receive a reduced registration fee over the course of the coming year. The fee structure for Tier III entities remains unchanged at this time. We anticipate that this temporary reduction in fees for Tier I and Tier II and new registrants will save regulated industry over $20 million over the course of the coming year. The temporary reduction in fees is warranted as a result of the exceptional and undue economic hardship caused by the public health emergency caused by the COVID-19 pandemic.”

“This temporary reduction in fees shall apply only through April 30, 2021, at which time fees for entities in Tiers I and II will return to the rates that were in effect on April 1, 2020 unless otherwise extended by a subsequent notice in the Federal Register .”

The Department of State is of the opinion that controlling the import and export of defense articles and defense services is a military or foreign affairs function of the United States Government and rules implementing this function are exempt from section 553 (Rulemaking) and section 554 (Adjudications) of the Administrative Procedure Act (APA) pursuant to 5 U.S.C. 553(a)(1).

Since the Department is of the opinion that this rulemaking is exempt from the provisions of 5 U.S.C. 553, there is no requirement for an analysis under the Regulatory Flexibility Act.

This rulemaking does not involve a mandate that will result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any year and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

The Department does not believe this rulemaking is a major rule under the criteria of 5 U.S.C. 804. Based on the criteria of 5 U.S.C. 804(2), the Department does not believe this rulemaking will have an annual effect on the economy of $100,000,000 or more. The Department estimates that this rulemaking will result in the elimination of approximately $20,000,000 in registration fees that otherwise would have been collected by the Department.

This rulemaking does not have sufficient federalism implications to require consultations or warrant the preparation of a federalism summary impact statement. The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities do not apply to this rulemaking.

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, distributed impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rulemaking is a significant but not an economically significant rule, under the criteria of Executive Order 12866, and is consistent with the provisions of Executive Order 13563.

The Department of State has reviewed this rulemaking in light of sections 3(a) and 3(b)(2) of Executive Order 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden.

The Department of State has determined that this rulemaking will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not preempt tribal law. Accordingly, the requirements of Executive Order 13175 do not apply to this rulemaking.

This rulemaking does not impose or revise any information collections subject to 44 U.S.C. Chapter 35.

This rulemaking is not subject to the requirements of E.O. 13771 since it relates to a military or foreign affairs function of the United States.

Background

The final regulations (TD 9806) that are the subject of this correction are under sections 1291, 1298, 6038, and 6046 of the Internal Revenue Code.

As published December 28, 2016 (81 FR 95459), the final regulations (TD 9806; FR Doc. 2016-30712) contained errors that needs to be corrected.

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendment:

We are updating addresses and contact information for Presidential libraries, records centers, and archival research facilities to reflect changes in operations, to add websites and email addresses and similar technology changes, to update URLs, and similar administrative changes. We are also updating information about public use of our facilities to better clarify provisions, including the kinds of events for which the public may request use of our spaces and the difference between removal and banning if it becomes necessary to restrict a person's use. We are streamlining and clarifying rules regarding behavior and removing outdated provisions regarding requests to use space for private events. These changes will affect all customers who do business with NARA. This rule is effective after 40 days for good cause as permitted by the Administrative Procedure Act (5 U.S.C. 553(d)(3)). We believe that a longer standard public comment period is unnecessary as this rule makes only minor changes to our agency facility regulations and does not change substantive requirements people must follow.

The Office of Management and Budget (OMB) has reviewed this rulemaking and determined it is not “significant” under section 3(f) of Executive Order 12866. It is not significant because it consists of administrative and minor revisions, involves agency organization and management, does not change substantive requirements, and imposes no costs on the public.

This review requires an agency to prepare an initial regulatory flexibility analysis and publish it when the agency publishes the proposed rule. This requirement does not apply if the agency certifies that the rulemaking will not, if promulgated, have a significant economic impact on a substantial number of small entities (5 U.S.C. 603). We certify, after review and analysis, that this rulemaking will not have a significant adverse economic impact on small entities.

This rulemaking does not impose additional information collection requirements on the public that are subject to the Paperwork Reduction Act. However, 36 CFR 1280 continues to include three associated information collections already approved by OMB: 3095-0024, request to use Presidential library spaces, 3095-0040, request to film, photograph, or videotape, and 3095-0043, request to use NARA spaces. Because we are removing several sections of this regulation and reorganizing the provisions to be more streamlined, we are submitting a non-substantive change request to OMB to change the regulatory section numbers referred to in the information collections accordingly.

Review under Executive Order 13132 requires that agencies review regulations for Federalism effects on the institutional interest of states and local governments, and, if the effects are sufficiently substantial, prepare a Federal assessment to assist senior policy makers. This rulemaking will not have any effects on state and local governments within the meaning of the Executive Order. Therefore, no Federalism assessment is required.

Review under E.O. 13771 seeks to reduce Federal regulations that impose private expenditures in order to comply with them, and to control those costs in any such regulations. OMB has reviewed this rulemaking and determined that it is exempt from E.O. 13771 requirements. This rulemaking is exempt because it involves agency organization, management, or personnel, modifies an existing rule, and does not involve regulatory costs subject to the Executive Order.

Review under the Unfunded Mandates Reform Act requires that agencies determine whether any Federal mandate in the rulemaking may result in state, local, and tribal governments, in the aggregate, or the private sector, expending $100 million in any one year. NARA certifies that this rulemaking does not contain a Federal mandate that may result in such an expenditure, and this rulemaking is therefore not subject to this requirement.

For the reasons stated in the preamble, NARA revises 36 CFR parts 1253 and 1280 as follows:

On October 7, 2019, the Board issued a notice of proposed rulemaking to propose changes to its existing demurrage regulations to address several issues regarding carriers' demurrage billing practices. Demurrage Billing Requirements ( NPRM ), EP 759 (STB served Oct. 7, 2019). 1 Demurrage is subject to Board regulation under 49 U.S.C. 10702, which requires railroads to establish reasonable rates and transportation-related rules and practices, and under 49 U.S.C. 10746, which requires railroads to compute demurrage charges, and establish rules related to those charges, in a way that will fulfill the national needs related to freight car use and distribution and maintenance of an adequate car supply. 2

Demurrage is a charge that serves principally as an incentive to prevent undue car detention and thereby encourage the efficient use of rail cars in the rail network, while also providing compensation to rail carriers for the expense incurred when rail cars are unduly detained beyond a specified period of time ( i.e., “free time”) for loading and unloading. See Pa. R.R. v. Kittaning Iron & Steel Mfg. Co., 253 U.S. 319, 323 (1920) (“The purpose of demurrage charges is to promote car efficiency by penalizing undue detention of cars.”); 49 CFR 1333.1; see also 49 CFR pt. 1201, category 106.

In the simplest demurrage case, a railroad assesses demurrage on the consignor (the shipper of the goods) for delays in loading cars at origin and on the consignee (the receiver of the goods) for delays in unloading cars and returning them to the rail carrier at destination. 3

Demurrage, however, can also involve third-party intermediaries, commonly known as warehousemen or terminal operators, that accept freight cars for loading and unloading but have no property interest in the freight being transported. 4 Warehousemen do not typically own the property being shipped (although, by accepting the cars, they can be in a position to facilitate or impede car supply).

In response to the NPRM, the Board received a significant number of comments from stakeholders. 5 This decision adopts the proposed rule with respect to requiring Class I carriers to directly bill the shipper for demurrage when the shipper and warehouseman agree to that arrangement and so notify the rail carrier, with the modifications discussed below. 6

This proceeding arises, in part, as a result of the testimony and comments submitted in Oversight Hearing on Demurrage & Accessorial Charges, Docket No. EP 754. In that proceeding, parties from a broad range of industries raised concerns about demurrage billing practices, including issues with the receipt of invoices containing insufficient information. See NPRM, slip op. at 5-6 (providing overview of comments received in Docket No. EP 754 related to the adequacy of demurrage invoices). Warehousemen also raised concerns related to Class I carriers' billing practices as applied to them following the Board's adoption of the final rule in Demurrage Liability, EP 707 (STB served Apr. 11, 2014), codified at 49 CFR part 1333, which established that a person receiving rail cars for loading or unloading that detains the cars beyond the free time provided in the rail carrier's governing tariff may be held liable for demurrage if that person had actual notice, prior to rail car placement, of the demurrage tariff establishing such liability. See NPRM, EP 759, slip op. at 6-8 (providing overview of comments received in Docket No. EP 754 relating to warehousemen).

After carefully considering the comments and testimony in Docket No. EP 754, the Board issued the NPRM in this docket. 7 As relevant here, the Board has proposed a rule relating to the identity of the party that should receive and be responsible for paying the demurrage bill when shipments are handled by warehousemen. As explained in the NPRM, before 2014, there was a split among the U.S. courts of appeals regarding who should bear liability for demurrage charges when a warehouseman that detains rail cars for too long is designated as consignee in the bill of lading, but asserts either that it did not know of its consignee status or that it affirmatively asked the shipper not to designate it as consignee. The Board reviewed those court decisions, determined that it needed to reexamine its policies to assist in providing clarification, and instituted a proceeding in Demurrage Liability, Docket No. EP 707. As noted above, in a final rule issued in that docket, the Board established that a person, including a warehouseman, receiving rail cars for loading or unloading that detains the cars beyond the free time provided in the rail carrier's governing tariff may be held liable for demurrage if that person had actual notice, prior to rail car placement, of the demurrage tariff establishing such liability. Demurrage Liability, EP 707, slip op. at 1, 17, 25. Under that final rule, the identification of a party in the bill of lading no longer controls; as the Board explained, it was “adopting a conduct-based approach to demurrage in lieu of one based on the bill of lading.” Id. at 15. The Board explained that its rule was “based on the theory that responsibility for demurrage should be placed on the party in the best position to expedite the loading or unloading of rail cars at origin or destination.” Id. at 8.

During the Docket No. EP 754 proceeding, warehousemen addressed the circumstances under which, in their view, a rail carrier should bill shippers directly for demurrage without requiring warehousemen to assume responsibility for any charges left unpaid by the shipper. Pointing out that, in some cases, shippers may be best positioned to mitigate delays in returning cars, warehousemen asked that the Board permit warehousemen and shippers to determine between themselves which party should receive and be responsible for the demurrage bill. 8

In the NPRM, the Board found that warehousemen and shippers are in the best position to determine which party should bear responsibility for demurrage charges and, therefore, that they should be able to make agreements for payment of demurrage charges that reflect this determination. NPRM, EP 759, slip op. at 11. Allowing shippers and warehousemen to reach direct-billing agreements that impose liability for demurrage charges on the party best positioned to mitigate the delays that cause demurrage would promote the efficient use of rail assets, thereby fulfilling the purpose of demurrage. Id. Accordingly, the Board proposed a requirement that Class I carriers send any demurrage bills related to transportation involving a warehouseman to the shipper (without requiring the warehouseman to guarantee payment), if the shipper and warehouseman agree to that arrangement and so notify the carrier. Id. As discussed below, most shippers and warehousemen commenters either support the Board's direct-billing proposal or are neutral towards it, while the six Class I railroads that filed comments (and AAR) uniformly oppose the proposal, and ASLRRA supports the proposed exclusion of Class II and Class III carriers from the proposal. In addition, Class I carriers, warehousemen, and shippers ask the Board to clarify certain aspects of the proposal.

The Board now adopts a final rule requiring Class I carriers to directly bill the shipper for demurrage when the shipper and warehouseman agree to that arrangement and so notify the rail carrier. As discussed below, the final rule reflects modifications made in response to parties' comments, following the Board's review of the issues raised. The final rule is below.

As noted above, most shippers and warehousemen who commented on direct billing are in favor of the proposal or neutral towards it. 9 Kinder Morgan states that the direct-billing requirement is “very fair, as it is predicated upon agreement by the shipper and terminal and would help end the gridlock that has prevented reasonable discussion and resolution of individual disputes.” (Kinder Morgan Comments 7.) Kinder Morgan argues that direct billing will allow for more efficient handling of demurrage disputes and will help end “abusive practices by railroads with respect to the collection of demurrage charges.” ( Id. at 1, 8.) Likewise, ILTA contends that direct billing will bring greater clarity to the assessment and collection of demurrage charges and will help ensure fair treatment of warehousemen. (ILTA Comments 1.) Some commenters ask the Board to clarify certain aspects of the requirement to notify the carrier of the agreement. (ILTA Comments 3; IARW Comments 1.) In addition, some shippers and warehousemen argue that the rule should apply to Class II and Class III carriers. ( See, e.g., FRCA Comments 5.)

CN, CP, CSXT, KCS, and AAR (joined by NSR and UP) oppose the Board's direct-billing proposal. These commenters argue that they lack privity of contract to enforce direct-billing agreements, ( see CSXT Comments 15; see also CN Comments 15; CP Comments 8-9; AAR Comments 6); that the notice requirement, as proposed in the NPRM, is flawed, (CSXT Comments 14-15; KCS Comments 3; CP Comments 8); that the direct-billing proposal is inconsistent with 49 U.S.C. 10746, (CSXT Comments 12), and the final rule in Demurrage Liability, EP 707, (CN Comments 17-18; AAR Comments 4, 6); and that the direct-billing proposal would only increase the difficulty and complexity of demurrage disputes, (CP Comments 7-9; CSXT Comments 15-16).

The Board will adopt its direct-billing proposal with the modifications discussed below.

Many Class I carrier commenters and AAR argue that the NPRM' s direct-billing proposal is unworkable because carriers would be unable to understand or enforce nuanced and complex agreements to which they are not parties. CSXT and CN explain that agreements between shippers and warehousemen can have substantially different provisions regarding when shippers will accept demurrage liability. (CSXT Comments 15; CN Comments 15.) CSXT expresses concern that shippers might limit the circumstances in which they will accept liability. (CSXT Comments 15.) In this regard, CN references Kinder Morgan's third-party complaint against some of its customers, which shows that Kinder Morgan's shipper-customers declined to accept across-the-board responsibility for demurrage liability, pointing instead to various exceptions that would place the liability on Kinder Morgan. (CN Comments 15.) CSXT further argues that carriers “will have no knowledge of the terms of the agreement” and therefore “will have no ability to understand or effectively enforce these contractual provisions and no ability to adjudicate responsibility in situations where receiver and shipper disagree as to fault.” (CSXT Comments 15.)  10 In order to ensure accountability to the carrier, CP urges the Board to require the shipper to “expressly agree that it is liable to the railroad for demurrage on its assets even if such demurrage is due to actions taken by the warehouseman or actions of its other shippers.” (CP Comments 9.)

Kinder Morgan argues that such preconditions by the carrier are not necessary for direct-billing arrangements, which Kinder Morgan points out were common before the Docket No. EP 707 rule was adopted. (Kinder Morgan Reply 14-16.) ILTA argues that Class I carriers' concern about not being parties to direct-billing agreements “confounds both legal obligations and common sense.” (ILTA Reply 2.)

The Board finds that the arguments by the Class I carriers and AAR are overstated. As the court cases preceding Docket No. EP 707 indicated, the shipper, rather than the warehouseman, is often the signatory to the bill of lading and the one that actually has the privity of contract with the railroad. Indeed, that was why some courts had held that, unless the warehouseman was aware that it had been named as a party to the bill of lading, the shipper was the only party to which the railroad could send the demurrage bill. See Demurrage Liability, EP 707, slip op. at 3-4 (citing Norfolk S. Ry. v. Groves, 586 F.3d 1273, 1275-76 (11th Cir. 2009), cert. denied, 131 S. Ct. 993 (2011)). Under the final rule adopted in this decision, where shippers and warehousemen jointly notify their serving railroads that the shipper is the party to be billed, billing arrangements would effectively proceed under the standard practices that prevailed for much of the industry before the final rule in Docket No. EP 707 was adopted. ILTA correctly notes that it is inconsistent for the carriers, from a contractual privity standpoint, to prefer avoiding direct billing of shippers with whom they are often signatories on the bill of lading in favor of holding warehousemen, with whom they often hold no contractual relationships, responsible for demurrage.

The intent in proposing the direct-billing requirement at 49 CFR 1333.3(b) was not to require Class I carriers to analyze or enforce any specific conditions of liability agreed upon by the shipper and warehouseman. Rather, in an agreement under the new direct-billing rule, the shipper must agree to (1) receive the demurrage bill from the Class I carrier and (2) be liable to the Class I carrier for demurrage that accrues on all of the shipments received by the warehouseman from the shipper during the term of the agreement.

Warehousemen and shippers may address the nuances of demurrage liability between themselves in their commercial relationships, as the Board has previously contemplated. 11 However, Class I carriers would not be responsible for billing in accordance with any specific liability conditions that the warehouseman and shipper may have agreed upon as between themselves. 12 Rather, to the extent the shipper believes that its commercial arrangement with the warehouseman requires the warehouseman to reimburse the shipper for demurrage it has paid to the carrier, the Board expects the shipper and warehouseman to resolve this issue between themselves. In doing so, the warehouseman would continue to have an incentive to make efficient use of rail cars in the rail network, contrary to carriers' claims that, if the shipper agrees to accept responsibility for demurrage, then the warehouseman would not have any incentive to efficiently utilize rail cars. ( See AAR Comments 5; CN Comments 17; CP Comments 3.)

To clarify its intent in the regulations, the Board will revise § 1333.3(b) to specify that the Class I carrier must bill the shipper for demurrage when a warehouseman “has reached an agreement with a shipper (or consignee) that the shipper (or consignee) shall be billed for demurrage” and so notifies the Class I carrier. 13 Furthermore, the Board will add an additional sentence to clarify that, pursuant to this paragraph, “the shipper (or consignee) shall be liable to the Class I carrier for demurrage but shall not be prohibited from seeking payment from the third-party intermediary for demurrage charges for which the third-party intermediary is responsible pursuant to an agreement between the shipper (or consignee) and the third-party intermediary.”  14 The full text of revised § 1333.3(b) is set forth below.

Class I carrier commenters seek clarification of the NPRM proposal to require Class I carriers to bill the shipper for demurrage charges “after being notified of the agreement by the shipper, consignee, or third-party intermediary.” NPRM, EP 759, slip op. at 14. CSXT expresses concern that because the proposed rule requires notice by only one party, the counterparty would be able to disclaim the validity of the agreement to the carrier. (CSXT Comments 14-15.) Additionally, both KCS and CP express concerns about the notice requirement as it relates to interlined traffic. KCS states that, in some cases in which traffic is interlined for destination delivery to the warehouseman, it does not know the identity of the original shipper. (KCS Comments 3.) CP likewise explains that much of its traffic originates or terminates on CP, but not both, and when CP is the delivering carrier, it may not have a relationship with the shipper. (CP Comments 8.)

Warehousemen commenters seek clarity about the form of the notice contemplated by the NPRM. They argue that it is not feasible for shippers and warehousemen to share their entire contracts with carriers because doing so would expose confidential business information. Accordingly, they ask the Board to specify that the notice requirement may be satisfied by an excerpt or redacted version of the agreement, a separate letter or an email between the parties, or a copy of standard terms and conditions for storage. (ILTA Comments 3; IARW Comments 1.)

Based on these comments, the Board will revise and clarify the notice requirements. First, to avoid the possibility that one of the parties may subsequently disclaim the existence of an agreement and the validity of the notice, the Board will require that the shipper and warehouseman jointly notify the carrier of a direct-billing agreement. 15

Second, the Board clarifies that the notice requirement does not expect that shippers and warehousemen share their contracts with Class I carriers. As discussed above, shippers that enter into direct-billing agreements must agree to be billed by Class I carriers for demurrage and to accept responsibility to the carrier for paying demurrage bills. Of course, the recipient of the bill, whichever party it may be, has every right to challenge the appropriateness of the bill with the carrier or with the Board. But any specific conditions under which the shipper and warehouseman apportion ultimate responsibility are for the shipper and warehouseman to address between themselves. If the shipper believes that it has been billed for demurrage for which the warehouseman is responsible under the terms of an agreement between the shipper and warehouseman, then the shipper may seek reimbursement for those charges from the warehouseman in accordance with their commercial arrangement and applicable laws. However, the notice of the billing agreement would be sufficient to provide the Class I carrier with the information it needs in order to know where to send its demurrage bills.

Third, to address commenters' concerns that a delivering carrier may not always know the identity of the shipper in the direct-billing agreement, the Board will require that the notice contain the shipper's contact information. 16 This information is necessary, not only for interline carriers, but also for all Class I carriers that seek to charge demurrage because Demurrage Liability, EP 707, established that carriers must provide actual notice of their demurrage tariffs prior to charging demurrage. 17 The Board will also require that the notice contain the date upon which the Class I carrier is to begin billing the shipper for demurrage. Recognizing that Class I carriers will need sufficient time to provide shippers with actual notice of the carriers' demurrage tariffs and to update their billing systems to reflect new direct-billing arrangements, this date shall be no earlier than 20 days after the notice is provided.

For the reasons discussed above, the Board will revise 49 CFR 1333.3(b), which is set forth in full in below, to state that Class I carriers must directly bill a shipper for demurrage “after being jointly notified of the agreement by the shipper (or consignee) and third-party intermediary.” The Board will also add a sentence clarifying that “[t]he joint notice required by this paragraph may be provided in hard copy or electronic form, and must contain the contact information for the shipper (or consignee) who has agreed to be billed (and liable to the Class I carrier) for demurrage and provide the date upon which the Class I carrier is to begin billing the shipper (or consignee) for demurrage (no earlier than 20 days after the notice is provided).” To address the concern discussed above regarding potential disagreements between warehousemen and their customers about the existence of direct-billing agreements, the Board will also modify § 1333.3(b) to require that a party to the agreement notify not only the Class I carrier but also the other party to the agreement that the agreement is no longer in force if and when appropriate. 18 To provide further guidance on these notice requirements, the Board has provided a sample letter in the Appendix below that the warehouseman and shipper may use (but are not required to use) to notify the Class I carrier of their direct-billing agreement.

CSXT argues that a direct-billing requirement is contrary to 49 U.S.C. 10746 because “[f]orcing a railroad's demurrage billing to be governed by contracts to which that railroad is not a party is directly inconsistent with Congress's instruction that railroads have the right to `compute demurrage charges and establish rules related to those charges' in the first instance.” (CSXT Comments 12.) However, requiring railroads to bill shippers instead of warehousemen for demurrage under specific circumstances does not limit the railroads' ability to compute demurrage and determine when it will apply. Indeed, as noted in Demurrage Liability, EP 707, slip op. at 3-4, the ICC, the Board, and the courts have all weighed in on whom the railroads could charge for demurrage. These sorts of actions are consistent with 49 U.S.C. 10702, which authorizes the Board to determine the reasonableness of railroad-established rates, rules, and practices, and with 49 U.S.C. 1321(a), which authorizes the Board to “prescribe regulations in carrying out . . . subtitle IV.”  19

In establishing this final rule, the Board exercises its regulatory authority to ensure that carriers' demurrage practices allow shippers and warehousemen, who are best positioned to determine which party between them will typically be most able to promote prompt movement of the cars, to make agreements that reflect this determination. Allowing shippers and warehousemen to reach direct-billing agreements that impose liability for demurrage charges on the party best positioned to mitigate the delays that cause demurrage would promote the efficient use of rail assets, thereby fulfilling the purpose of demurrage.

Class I carrier commenters also argue that the direct-billing proposal contradicts the regulations established in Demurrage Liability, EP 707. However, the Board may modify its rules as long as its actions are rational and fully explained. 20 Here, these modifications comport with the spirit of Docket No. EP 707 (and with the other actions the Board is currently pursuing regarding demurrage) by advancing the principle that demurrage should be assessed on a party that can alter its behavior to help promote the efficient use of rail assets. Below, the Board discusses the direct-billing rule as it relates to the current demurrage regulations at 49 CFR 1333.2 and 1333.3 and modifies 1333.2.

CSXT and CN argue that a direct-billing rule contradicts the language in 49 CFR 1333.2, which states that a “serving carrier and its customers (including those to which it delivers rail cars at origin or destination) may enter into contracts pertaining to demurrage, but in the absence of such contracts, demurrage will be governed by the demurrage tariff of the serving carrier.” Based on this provision, CSXT and CN contend that the only contracts that can alter demurrage liability are those to which the serving carrier is a party. (CN Comments 13-14; CSXT Comments 12-13.) Some of the Class I carriers indicate that they would be willing to enter into such contracts provided they maintain their ability to hold warehousemen accountable when they deem it appropriate to do so. (CN Comments 19-20; CSXT Comments 12.)

As noted, the Board may modify existing regulations as long as its actions are rational and adequately explained. Here, the language of § 1333.2 relied on by CN and CSXT permitting contracts between a “serving carrier and its customers” does not prevent the Board from modifying the regulations to require direct billing to shippers in certain circumstances, and it provides no basis for a finding that payment guarantees from warehousemen are necessary in direct-billing agreements. As before, under § 1333.2, a “serving carrier and its customers (including those to which it delivers rail cars at origin or destination) may enter into contracts pertaining to demurrage.” The final rule here merely adds another option: A direct-billing arrangement between the shipper and warehouseman. To harmonize § 1333.2 with the final rule, the Board will revise this section to be consistent with the language in new § 1333.3(b). Specifically, the Board will add a sentence stating that “a third-party intermediary may enter into contracts with a shipper (or consignee) that the shipper (or consignee) shall be billed for demurrage pursuant to § 1333.3(b).” To reflect the added sentence, the Board will update the section heading to “Who May Charge Demurrage and Who May Enter into Contracts Pertaining to Demurrage.” The full text of the revised section 1333.2 is set forth below.

Furthermore, the Board does not find that payment guarantees from warehousemen are necessary in direct-billing agreements. After all, before 2014, railroads regularly billed shippers, rather than warehousemen, without holding warehousemen as guarantors. 21 Moreover, the Board rejects the view that warehousemen should be guarantors because they are the only parties positioned to mitigate demurrage. As discussed in the NPRM, EP 759, slip op. at 3, warehousemen, by accepting rail cars, may be in a position to facilitate or impede car supply. However, in some cases, shippers may be in a better position to affect car supply by, for example, modifying the frequency or volume with which they consign cars. 22 The Board continues to find, as discussed in the NPRM, that warehousemen and shippers are in the best position to know which party can best promote the prompt handling of cars and hence which party should bear responsibility for demurrage charges.

In the NPRM, the Board stated that while the “proposed rule would amend the Board's current regulations to require Class I carriers to issue invoices to shippers and to treat shippers as the ultimate guarantors of payment (when the shipper and warehouseman agree to that arrangement and have so notified the rail carrier), . . . rail carriers are already permitted to do so under the current rule,” which states that parties who receive rail cars “may be held liable for demurrage.” NPRM, EP 759, slip op. at 11 (quoting 49 CFR 1333.3). CN takes exception to the Board's statement, contending that “the [ NPRM 's] suggestions that a rail carrier is already permitted to issue direct bills to shippers because they are `listed on the bill of lading' has no support in the actual language of the Part 1333 regulations,” which “effectively forbid bills to nonreceivers in the absence of an explicit agreement to that effect.” (CN Comments 17; see also AAR Comments 4, 6.) CN maintains that the proposed rule cannot be reconciled with the Board's prior decision to “ `place demurrage liability on the receiver of rail cars, regardless of their designation in the bill of lading.' ” ( Id. at 17-18 (quoting Demurrage Liability, EP 707, slip op. at 5).)

The Board does not agree with CN's interpretation of the rule adopted in Docket No. EP 707. The Board pointed out in the NPRM (and in the proposed policy statement in Docket No. EP 757) that § 1333.3 states, in permissive terms, that parties who receive rail cars “may be held liable for demurrage.”  23 In other words, § 1333.3 permits billing of warehousemen, but does not foreclose direct billing of shippers. None of this prevents the Board from adopting, as it does here, a final rule that explicitly requires shippers to be billed for demurrage under certain conditions. Furthermore, as discussed above, even if CN's interpretation were accurate, which it is not, the Board is not constrained from modifying regulations previously in effect, as long as its actions are rational and adequately explained.

Some Class I carrier commenters contend that the Board's proposal would make demurrage disputes more complex and difficult to resolve. CP argues that demurrage disputes frequently involve information that is only within the warehouseman's possession, such as daily orders submitted by the warehouseman, pipeline information of other shippers, and information regarding cars arriving from other carriers (when the warehouseman is served by more than one carrier). (CP Comments 7.) CP and CSXT also contend that demurrage disputes can raise issues concerning confidential shipper data. (CP Comments 8; CSXT Comments 15-16.) CSXT argues that shippers “will be in a poor position to assess whether any demurrage charges are attributable to railroad fault or to the receiver's conduct (such as favoring one customer's traffic over others)” because “[i]nformation about incoming shipments to other customers at that receiver facility will typically be protected by 49 U.S.C. 11904.” (CSXT Comments 15-16.) To account for § 11904, CP requests that the Board mandate that a warehouseman “obtain the consent of all its shippers for the delivering railroad to disclose all shipment data associated with that receiving location necessary to allow the shipper to audit the carrier's invoicing.” (CP Comments 9.) CP also raises concerns about dispute resolution if it needs to pursue a shipper for demurrage in an inconvenient forum or “in another country altogether.” ( Id. at 8.) CP states that there “must be a clear path for formal resolution should the shipper refuse to pay due to delay or bunching that is not caused by the delivering rail carrier.” ( Id. at 9.)

Apart from the fact that some demurrage disputes may turn on information—such as the frequency and volume of cars consigned—that is more accessible to shippers than to warehousemen, these claims ring hollow. Before 2014, direct billing of the shipper rather than the warehouseman was common, and yet carriers were somehow able to resolve their highly fact-specific demurrage disputes. 24 Moreover, any information deficit an individual shipper may have vis-à-vis the warehouseman—such as access to information about incoming shipments from other customers at the warehouseman's facility—would presumably disadvantage the shipper rather than the railroad in a particular dispute. 25 Therefore, the Board concludes that shippers that choose to enter into agreements with warehousemen are capable of determining, based on the facts and circumstances of their particular situation, whether they are suited to assess the factual issues associated with a demurrage dispute. If a particular demurrage dispute between the carrier and shipper involves information that is solely within the warehouseman's possession, the discovery of such information is best addressed in the context of the individual dispute. 26

To the extent carriers, shippers, and warehousemen are having difficulty resolving demurrage disputes informally or in another jurisdiction, the Board strongly encourages them to avail themselves of the Board's alternative dispute resolution options (mediation, arbitration, 27 and the Rail Customer and Public Assistance program  28 ).

In the NPRM, the Board explained that it did not propose to require Class II and Class III carriers to comply with the rule because it would be more costly for smaller carriers to do so and the demurrage issues raised by stakeholders before the Board predominantly pertained to Class I carriers. NPRM, EP 759, slip op. at 10-11. The Board invited comment on the proposed exclusion of Class II and Class III carriers. Id. at 11.

Although some shippers find that that demurrage issues most frequently involve Class I carriers, ( see AFPM Comments 8; ISRI Comments 10), several commenters express concerns about excluding Class II and Class III carriers, 29 particularly those with larger, more sophisticated operations, ( see FRCA Comments 5; AFPM Comments 8). One commenter urges the inclusion of Class II and Class III carriers for uniformity across the industry, ( see ISRI Comments 10), and others fear that Class I carriers will seek to evade the rule by tasking Class II and Class III carriers with demurrage invoicing where possible, ( see NITL Comments 10; AF&PA Comments 10). Acknowledging that the new requirements may be too burdensome for the smallest carriers, some commenters suggest that the Board apply the rule to all carriers and grant waivers on a case-by-case basis. (NITL Comments 10; AF&PA Comments 10; AM Reply 5-6.) Others suggest that the Board exclude some or all Class III carriers from the rule, but not Class II carriers. (AFPM Comments 8 (exclude all Class III carriers, but not Class II carriers); FRCA Comments 5 (require Class II carriers and Class III carriers affiliated with large holding companies to comply.))

ASLRRA supports the Board's proposal to exclude Class II and Class III carriers, ( see ASLRRA Comments 4), pointing out that shippers' complaints have been about Class I carriers and that small carriers already “work closely every day with their customers and if there arises a question about invoices, services or anything else, the customer and small railroad resolve those issues in a timely manner directly between them,” ( see ASLRRA Reply 6-7). ASLRRA questions the workability of some commenters' suggestion that Class II and Class III carriers could file for individual waivers, which, it states, would be an expensive and time-consuming process for small carriers with limited resources. (ASLRRA Reply 7.) Importantly, ASLRRA dismisses commenters' concerns that Class I carriers would assign demurrage billing to Class II and Class III carriers to avoid the rule, arguing that Class I carriers will not “want to cede the control of their operations or practices to others or the compensation they receive for the misuse of their rail assets.” ( Id. at 8.)

In the NPRM, EP 759, slip op. at 10, 11, the Board proposed to exclude Class II and Class III carriers because the demurrage issues raised by stakeholders in Docket No. EP 754 predominantly pertained to Class I carriers. The comments have not changed the Board's view on this issue, nor do they provide any realistic basis for concluding that Class I carriers will seek to avoid the rule by assigning their demurrage billing to small carriers. 30 The case-by-case waiver approach suggested by some shipper parties could be impractical and unduly burdensome for some small carriers. Likewise, the Board declines to adopt AFPM's proposal to make Class II carriers (but not Class III carriers) subject to the rule because, as noted above, the record indicates most demurrage issues pertain to Class I carriers and the record does not justify imposing the requirements on Class II carriers at this time. Nonetheless, the Board continues to strongly encourage Class II and Class III carriers to comply with the rule to the extent they are able to do so, but it will not make compliance mandatory at this time.

Consistent with this decision, the Board adopts a final rule requiring Class I carriers to directly bill the shipper for demurrage without requiring the warehouseman to act as a guarantor, when the shipper and warehouseman agree to that arrangement and so notify the rail carrier, unless and until a party to the agreement notifies both the Class I carrier and the other party to the agreement that the agreement is no longer in force. This rule is set out in full below and will be codified in the Code of Federal Regulations.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, generally requires a description and analysis of new rules that would have a significant economic impact on a substantial number of small entities. In drafting a rule, an agency is required to: (1) Assess the effect that its regulation will have on small entities, (2) analyze effective alternatives that may minimize a regulation's impact, and (3) make the analysis available for public comment. §§ 601-604. In its final rule, the agency must either include a final regulatory flexibility analysis, § 604(a), or certify that the proposed rule would not have a “significant impact on a substantial number of small entities,” § 605(b). Because the goal of the RFA is to reduce the cost to small entities of complying with federal regulations, the RFA requires an agency to perform a regulatory flexibility analysis of small entity impacts only when a rule directly regulates those entities. In other words, the impact must be a direct impact on small entities “whose conduct is circumscribed or mandated” by the proposed rule. White Eagle Coop. v. Conner, 553 F.3d 467, 480 (7th Cir. 2009).

As discussed above, the final rule will apply only to Class I carriers. Accordingly, the Board again certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities as defined by the RFA. 31 A copy of this decision will be served upon the Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Business Administration, Washington, DC 20416.

In this proceeding, the Board is modifying an existing collection of information that is currently approved by the Office of Management and Budget (OMB) under OMB Control No. 2140-0021. In the NPRM, the Board sought comments pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3521, and OMB regulations at 5 CFR 1320.11, regarding: (1) Whether the collection of information, as modified, is necessary for the proper performance of the functions of the Board, including whether the collection has practical utility; (2) the accuracy of the Board's burden estimates; (3) ways to enhance the quality, utility, and clarity of the information collected; and (4) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology, when appropriate. The Board received one comment, from CN, in response to the Board's PRA analysis in the NPRM regarding the requirement that railroads directly bill the shipper for demurrage when the shipper and warehouseman agree to that arrangement and so notify the rail carrier. 32

Demurrage is subject to Board regulation under 49 U.S.C. 10702, which requires railroads to establish reasonable rates and transportation-related rules and practices, and under 49 U.S.C. 10746, which requires railroads to compute demurrage charges, and establish rules related to those charges, in a way that will fulfill the national needs related to freight car use and distribution and maintenance of an adequate car supply. 1 Demurrage is a charge that serves principally as an incentive to prevent undue car detention and thereby encourage the efficient use of rail cars in the rail network, while also providing compensation to rail carriers for the expense incurred when rail cars are unduly detained beyond a specified period of time ( i.e., “free time”) for loading and unloading. See Pa. R.R. v. Kittaning Iron & Steel Mfg. Co., 253 U.S. 319, 323 (1920) (“The purpose of demurrage charges is to promote car efficiency by penalizing undue detention of cars.”); 49 CFR 1333.1; see also 49 CFR pt. 1201, category 106. 2 Accessorial charges are not specifically defined by statute or regulation but are generally understood to include charges other than line-haul and demurrage charges. See Revisions to Arbitration Procedures, EP 730, slip op. at 7-8 (STB served Sept. 30, 2016). As discussed below, this policy statement pertains to accessorial charges that, like demurrage charges, are designed or intended to encourage the efficient use of rail assets.

On October 7, 2019, the Board issued, for public comment, a notice of proposed statement of Board policy providing information with respect to certain principles it would consider in evaluating the reasonableness of demurrage and accessorial rules and charges. See Policy Statement on Demurrage & Accessorial Rules & Charges ( NPPS ), EP 757 (STB served Oct. 7, 2019). 3 As described in the NPPS, EP 757, slip op. at 2-3, that action arose, in part, as a result of the testimony and comments submitted in Oversight Hearing on Demurrage & Accessorial Charges ( Oversight Proceeding ), Docket No. EP 754. The Board commenced the Oversight Proceeding by notice served on April 8, 2019 ( April 2019 Notice ), following concerns expressed by users of the freight rail network (rail users)  4 and other stakeholders about recent changes to demurrage and accessorial tariffs administered by Class I carriers, which the Board was actively monitoring. 5

In response to the NPPS, the Board received 44 comments and 13 replies. 6 After considering the comments received, along with the record in the Oversight Proceeding, the Board is issuing this statement of Board policy. Through this policy statement, the Board expects to facilitate more effective private negotiations and problem solving between rail carriers and shippers and receivers on issues concerning demurrage and accessorial rules and charges; to help prevent unnecessary future issues and related disputes from arising; and, when they do arise, to help resolve them more efficiently and cost-effectively. The Board is not, however, making any binding determinations by this policy statement. Nor is the Board promoting complete uniformity across rail carriers' demurrage and accessorial rules and charges; the principles discussed in this policy statement recognize that there may be different ways to implement and administer reasonable rules and charges. When adjudicating specific cases, the Board will consider all facts and arguments presented in such cases.

The Board encourages all carriers, and all shippers and receivers, to work toward collaborative, mutually beneficial solutions to resolve disputes on matters such as those raised in the Oversight Proceeding   7 and intends for this policy statement to provide useful guidance to all stakeholders.

The NPPS, EP 757, slip op. at 4-7, provides a detailed historical overview and summary of general principles related to demurrage. The Board here addresses some of the more general comments raised by commenters before turning to comments about the specific issues addressed in the policy statement.

Rail users generally support the proposed policy statement and endorse its key principles. Many rail carrier commenters also either generally support or do not take exception to the general principles discussed in the proposed policy statement. In particular, several Class I carriers voiced support for two key principles: That there may be different ways to implement and administer reasonable demurrage rules and practices, and that disputes pertaining to demurrage are best resolved on a case-specific basis that considers all pertinent facts. ( See BNSF Comments 2-3; CSXT Comments 3; UP Comments 2; CN Reply Comments 3.) AAR, however, raises objections, which are shared by some carriers, to certain language in the proposed policy statement related to compensation and the imposition of demurrage charges for delays beyond a rail user's reasonable control. ( See AAR Comments 1-6; CSXT Comments 1-2; CP Comments 15-16; KCS Comments 3, 5.)

In its discussion of general principles, the Board stated that the overarching purpose of demurrage is to incentivize the efficient use of rail assets (both equipment and track) by holding rail users accountable when their actions or operations use those resources beyond a specified period of time. NPPS, EP 757, slip op. at 6-7 (citing Kittaning, 253 U.S. at 323). 8 That period of time must be reasonable, 9 and further, it is unreasonable to charge demurrage for delays attributable to the rail carrier. See, e.g., R.R. Salvage & Restoration, Inc., NOR 42102 et al., slip op. at 4 (“a shipper is not required to compensate a railroad for delay in returning the asset if the railroad and not the shipper is responsible for the delay”). The Board also reiterated its concerns about demurrage charges for delays that a shipper or receiver did not cause. NPPS, EP 757, slip op. at 7 (citing Utah Cent. Ry.—Pet. for Declaratory Order—Kenco Logistic Servs., LLC, FD 36131, slip op. at 12 n.38 (STB served Mar. 20, 2019); Exemption of Demurrage from Regulation, EP 462, slip op. at 4 (STB served Mar. 29, 1996)). The Board stated that where demurrage charges are imposed for circumstances beyond the shipper's or receiver's reasonable control, they do not accomplish their purpose to incentivize behavior to encourage efficiency—the stated rationale for and objective of the rail carriers' demurrage rules and charges. 10

In its comments, AAR claims that the proposed policy statement “ignore[s] the compensation function of demurrage.” (AAR Comments 4.) But the Board's regulations and the NPPS recognize this dual role, see NPPS, EP 757, slip op. at 2 (citing 49 CFR 1333.1), and the Board recognizes and reaffirms here that carriers should be compensated when a rail user unduly detains rail assets. As noted by one rail carrier in the Oversight Proceeding, “Congress framed the purposes of demurrage not in terms of cost recovery . . ., but rather in terms of incentives.” CN Comments 8, June 6, 2019, Oversight Proceeding, EP 754. In other words, under the operative statutory framework, demurrage rules and charges must serve an incentivizing function. And, as AAR itself recognized in the Oversight Proceeding, demurrage and storage charges have long been considered “primarily a penalty to deter undue car detention, and to a lesser extent, compensation to the railroad for expenses incurred.” AAR Comments 4, June 6, 2019, Oversight Proceeding, EP 754 (quoting R.Rs. Per Diem, Mileage, Demurrage & Storage—Agreement, 1 I.C.C.2d 924, 933 (1985)). 11 When carriers established individualized demurrage programs in the post-Staggers Act  12 era, they stopped breaking out demurrage charges into incentivizing (punitive) and compensatory (per diem) components. Cases involving disputed charges are no longer decided on that basis, and, in the Oversight Proceeding, AAR eschewed a return to the former system. 13 The compensatory function of demurrage is achieved, along with its incentivizing function, by permitting the delivering carrier to retain the charges assessed for a rail user's undue detention of rail assets.

AAR also argues that “[t]he law is well settled that assessment of demurrage charges in no way depends upon a finding of shipper or consignee fault.” (AAR Comments 6 (quoting Foreston Coal Int'l v. Balt. & Ohio R.R., 349 I.C.C. 495, 500 (1975).) AAR's argument, however, fails to take full account of the caselaw on this issue. As an initial matter, AAR overlooks that each case stands on its own facts, as the agency retains broad discretion to determine whether demurrage charges, under all the circumstances of a particular case (including fault), are reasonable under section 10702 and comport with the statutory requirements specified in section 10746. 14 Also overlooked is the fact that, as AAR acknowledged in the Oversight Proceeding, historically under “straight” demurrage programs, 15 “the shipper or receiver was not assessed demurrage if severe weather or other circumstances beyond their control prevent[ed] them from returning cars on time.” AAR Comments 5, June 6, 2019, Oversight Proceeding, EP 754. AAR also overlooks more recent Board decisions, discussed in the NPPS, EP 757, slip op. at 6-7, expressing concern about holding a rail user liable for demurrage attributable to delays beyond its reasonable control. Several carriers acknowledged at the oversight hearing various circumstances in which it would not be appropriate to charge a customer for delays the customer did not cause, 16 and UP and ASLRRA affirmatively state that demurrage should not be charged to rail users for delays beyond their reasonable control. 17

In sum, the Board finds that AAR's arguments are misplaced, as there have been long-standing concerns about rail users being held responsible for circumstances beyond their reasonable control. The proposed policy statement properly focused on the foundational questions that arise in determining whether demurrage rules and charges are reasonable and designed to fulfill national needs related to freight car use and distribution, and to maintenance of an adequate car supply, under 49 U.S.C. 10746. 18

As noted above, rail users generally support the proposed policy statement, and several agree with the Board that the principles outlined in the NPPS would help prevent disputes from arising, and, when they do arise, help resolve them more efficiently and cost-effectively. 19 Some voiced concern that carriers would not voluntarily change certain rules and practices and called for further prescriptive actions. 20 Such prescriptive actions are not appropriate for inclusion in a policy statement, and the Board declines at this time to take further regulatory action beyond the actions taken in Demurrage Exclusion Final Rule, Docket No. EP 760, and the actions under consideration in Demurrage Billing Requirements, Docket No. EP 759. However, the Board will remain open to argument that these concerns and suggestions should be considered in future proceedings in assessing the reasonableness of demurrage rules and charges and whether they comport with the objectives specified in section 10746. Further, carriers are encouraged to thoughtfully consider rail users' concerns and suggestions—along with the principles discussed below—as potential solutions that would promote the goals of transparency, timeliness, and mutual accountability stakeholders broadly profess to embrace.

In the NPPS, EP 757, slip op. at 7-10, the Board described the background and current issues surrounding free time—the period of time allowed for a rail user to finish using rail assets and return them to the railroad before demurrage charges are assessed. 21 The Board explained that free time, which railroads may set within reasonable limits, helps temper adverse impacts to rail users of delays arising from service variability, and plays a role in the credit and debit rules and practices of many rail carriers. NPPS, EP 757, slip op. at 8.

The NPPS also explained that, until recently, rail carriers typically provided at least 24 hours of free time (or one credit day) to load rail cars and at least 48 hours of free time (or two credit days) to unload cars. 22 NPPS, EP 757, slip op. at 8 (citing Portland & W. R.R.—Pet. for Declaratory Order—RK Storage & Warehousing, Inc., FD 35406, slip op. at 5 (STB served July 27, 2011).) Some Class I carriers use alternative rules and practices for private cars in which no credit days are given as a proxy for free time. NPPS, EP 757, slip op. at 8-9.

Recent reductions in free time implemented by several Class I carriers were a major focal point of the Oversight Proceeding. At least one rail carrier reduced the number of credit days for loading and unloading private cars, in some circumstances, from two to zero. Some other rail carriers reduced free time for unloading from 48 to 24 hours (or two credit days to one) for both private and railroad-owned cars. In its April 2019 Notice, the Board directed the Class I carriers to submit information on a list of specified subjects, including all tariff changes since January 2016 pertaining to the amount of free time allowed for loading and unloading rail cars and the reason(s) for the change. April 2019 Notice, EP 754, slip op. at 2-3.

Rail carriers that reduced free time identified similar objectives and rationales for doing so: to better align the behavior of shippers and receivers in order to promote network fluidity for the benefit of all rail users through improved service reliability and reduced cycle times. These carriers stated that the reductions were made to enable them to optimize network efficiencies and provide better, more reliable service; that the changes were not made to generate revenue; and that their hope is that recent revenue increases generated from demurrage charges will be temporary as shippers and receivers adapt and respond because, in the words of one rail carrier, “the intention is to improve service, not drive cost increases for our customers.”  23 Rail carriers' post-hearing submissions largely reiterated these points and expressed willingness to work with customers to help them align their behavior to better meet the reductions in free time. While the Board recognizes that some changes and rail carrier outreach occurred following the hearing, it is apparent that many issues related to free time remain.

In the Oversight Proceeding, interested parties from many industries expressed multiple concerns about the recent reductions in free time. Several stated that they lacked the physical capacity or capital needed to expand facilities to meet the reduced free-time periods. Many reported that bunching or otherwise unreliable service is a major obstacle to meeting the reduced free-time periods, and that the recent reductions have made it more difficult and costly to deal with unreliable service because the free time that has been eliminated had served as an important buffer against unpredictable railroad performance. Rail users that rely on private rail cars expressed additional objections and concerns and noted that there has been a significant industry shift from rail carrier ownership of rail cars to private car ownership since the enactment of section 10746. See NPPS, EP 757, slip op. at 9-10 (describing comments submitted in Docket No. EP 754). Although rail carriers presented data in the Oversight Proceeding, generally on a system-wide basis, reflecting recent improvements in some metrics, they presented limited data on the extent to which changes to their demurrage rules and charges succeeded in reducing loading and unloading times, as compared to the times prior to the changes. See NPPS, EP 757, slip op. at 11.

Comments from rail users on the NPPS broadly reiterate these concerns and suggest that the Board should take more binding action. 24 Comments from rail carriers on the NPPS were largely silent about its discussion of free time. CP states that its customers adapted to free-time reductions implemented in 2013 by adding track capacity, using CP tools to better manage their pipeline, and adjusting labor schedules, and that CP is moving more cars while demurrage charges have decreased. (CP Comments 7.) UP states that it has worked collaboratively with customers over the past year and that “the vast majority” have successfully adapted to a reduction in free time from 48 hours to 24 hours. (UP Reply 2.)

Demurrage serves a valuable purpose to encourage the efficient use of rail assets (both equipment and track) by holding rail users accountable when their actions or operations use those assets beyond a specified period of time. That period of time must be reasonable and consistent with the overarching purpose of demurrage. The Board continues to have serious concerns about the adverse impacts of reductions in free time to rail users, including the potentially negative consequences of providing no credit days for private cars if rail carriers do not have reasonable rules and practices for dealing with, among other things, variability in service and carrier-caused bunching, and for ensuring that rail users have a reasonable opportunity to evaluate their circumstances and order incoming cars before demurrage begins to accrue. Some of these reductions to free time or credit days may make it more difficult for rail users to contend with variations in rail service and therefore may not serve to incentivize their behavior to encourage the efficient use of rail assets. 25 In some circumstances, which would need to be examined in individual cases, such reductions may not be reasonable or consistent with rail carriers' statutory charge to compute demurrage and establish related rules in a way that fulfills the national needs specified in section 10746. Where, for example, carrier-caused circumstances give rise to a situation in which it is beyond the rail user's reasonable control to avoid charges, the overarching purpose of demurrage is not fulfilled.

As stated in the NPPS, EP 757, slip op. at 12, such circumstances might include, for example, charging demurrage that accrues as a result of a missed switch (both cars scheduled to be switched and incoming cars impacted by the missed switch); charging demurrage for transit days to move cars from constructive placement in remote locations; or charging demurrage that arises from bunched deliveries substantially in excess of the number of cars ordered until the rail user has had a reasonable opportunity to process the excess volume of incoming cars. Changes in historical practices on which the rail user has long relied ( e.g., regarding switching frequency or delivery methods that deviate from prior arrangements made by the parties) may also be taken into account. 26

Lastly, the Board remains concerned that, in some circumstances, such reductions in free time may jeopardize important goals of the nation's rail transportation policy by rendering freight rail service less likely to meet the needs of the public and, if other modes are even effectively an option for a rail user, less competitive with other transportation modes. 27

The Board recognizes that reductions in free time might be justified if there were evidence to show, by way of example, that (1) advances in technology or productivity have made compliance with the shorter time frames reasonably achievable; (2) service improvements resulting from more efficient use of rail assets would facilitate the ability of shippers and receivers to adjust to the reductions; (3) reductions are necessary to address systemic problems with inefficient behavior or practices by shippers or receivers; or (4) rail carriers have implemented tariff provisions or program features—such as credits for bunching, service variabilities, and certain capacity constraints—that place the avoidance of demurrage charges within the reasonable control of the rail user.

The Board also recognizes an important goal of demurrage in incentivizing the behavior of rail users to encourage the efficient use of rail assets, which benefits rail carriers and users alike. Rail carriers and users have a shared responsibility in this endeavor—rail carriers to implement and administer reasonable rules and charges designed to accomplish this goal, and rail users to recognize and accept responsibility for promoting efficiencies within their reasonable control.

Although the Board will not, as certain commenters suggest, take more binding action pertaining to free time, 28 it will closely scrutinize demurrage rules and charges where free time has been reduced, or where no credit days have been provided. The Board encourages all stakeholders to take the principles and considerations discussed above into account going forward. The Board will do likewise in future proceedings, along with all evidence and argument the parties present.

Bunching-related issues were identified as a common problem by rail users across a broad range of industries in the Oversight Proceeding. Some rail carriers in that proceeding stated that they award credits for bunching in some instances but did not describe with specificity how these credits are awarded or did not otherwise address the concerns expressed by rail users. See NPPS, EP 757, slip op. at 13-14 (describing comments submitted in Docket No. EP 754).

In response to the NPPS, rail users reiterate that bunching is a significant problem that has increased following changes to rail carriers' operating plans, 29 has become even more difficult to contend with due to free-time reductions, 30 and often is not sufficiently addressed in either carrier tariffs or the initial invoices. 31 Some commenters request the Board to elaborate on what it would consider “reasonable rules and practices for dealing with . . . variability in service and carrier-caused bunching”;  32 two propose mechanisms keyed to trip-plan compliance;  33 and some state that upstream bunching is an issue best resolved among the railroads participating in the movement without involving the rail user. 34

Certain rail carriers and ASLRRA express concerns about addressing upstream bunching in the policy statement. CP argues that any attempt by the Board to address upstream bunching is contrary to law insofar as past decisions have held rail users responsible for demurrage unless the delivering carrier is at fault. (CP Comments 10 (citing Chrysler Corp. v. N.Y. Cent. R.R., 234 I.C.C. 755, 758 (1939).) In addition, these commenters note that because the delivering carrier may have no knowledge of or ability to control upstream events, it should not be forced to bear the costs of delays arising from off-line events. (CP Comments 10-12; KCS Comments 3 n.2; ASLRRA Reply 4-5.)

The types of factual scenarios described by CP, KCS, and ASLRRA are among the reasons why bunching should be addressed on a case-by-case basis in order to permit the Board to properly consider all relevant circumstances pertaining to an assessment of demurrage. Further, it is the Board's view that carriers should consider the actions of upstream carriers when administering their demurrage rules and charges. CP's claim that Board consideration of upstream bunching would be contrary to law overlooks the points discussed above and in the NPPS explaining that demurrage rules and charges must be designed to incentivize rail users' behavior. 35 Where rail carriers' operating decisions or actions result in bunched deliveries and demurrage charges that are not within the reasonable control of the rail user to avoid, the overarching purpose of demurrage is not fulfilled. 36 When analyzing the appropriateness of demurrage charges, rail carriers should consider these principles both when cars originate with the serving carrier and when cars originate on an upstream carrier—as at least one carrier professes to do. 37 The Board encourages all rail carriers to take these considerations into account in their administration of demurrage rules and charges, particularly in evaluating whether their automatic billing processes sufficiently account for carrier-caused bunching (especially for cars that originate on their network  38 or bunching attributable to missed switches), and in resolving bunching disputes. In any future proceeding, the Board expects to take these considerations into account as well, along with any additional evidence and argument the parties may choose to present.

Some commenters request that the Board clarify the definition of accessorial charges for purposes of the policy statement, 39 and ask that the policy statement include a more robust discussion of how its general principles apply to accessorial charges. 40

As stated in the April 2019 Notice, EP 754, slip op. at 2 n.1, and the NPPS, EP 757, slip op. at 2 & n.3, accessorial charges are generally understood to include anything other than line-haul or demurrage charges. Upon further consideration, however, the Board notes that many accessorial charges do not serve the same efficiency-enhancing purpose as demurrage or implicate issues raised in the Docket No. EP 754 Oversight Proceeding.   41 The Board therefore clarifies that, insofar as the purpose of an accessorial charge is to enhance the efficient use of rail assets in the same way as demurrage, the principles discussed in the policy statement would generally apply. The Board further clarifies that references to accessorial charges in the policy statement are intended to encompass only such types of charges. 42

Many participants in the Oversight Proceeding voiced concerns about additional charges that had recently been instituted by two Class I carriers for claimed customer-caused congestion or delay. See NPPS, EP 757, slip op. at 15 (describing comments submitted in Docket No. EP 754 relating to a so-called “congestion” charge imposed by NSR and a “not prepared for service” charge imposed by UP).

As noted in the NPPS, both rail carriers have since responded to these specific concerns. See NPPS, EP 757, slip op. at 15 (noting announcements that NSR would discontinue the “congestion” charge and that UP had clarified and limited the application of the “not prepared for service” charge). The Board was encouraged by these actions but nevertheless found it important to provide forward-looking guidance indicating that it would have concerns about such overlapping demurrage-type charges. See id. Commenters generally either broadly supported or did not address the Board's proposed guidance. ACC, however, argues that the discussion in the NPPS did not fully capture the concerns about overlapping charges, which may arise even when one of the charges might be considered reasonable. (ACC Comments 3.) The Board clarifies that, when adjudicating specific cases, it would have significant concerns about the reasonableness of a tariff provision that sought to impose an overlapping charge intended to serve the same purpose as demurrage, or a charge arising from the assessment of demurrage for congestion or delay that is not within the reasonable control of the rail user to avoid. 43 In an individual proceeding, the Board remains open to evidence and argument that such a charge could in some instance be reasonable, but no such information was presented in Docket No. EP 754 or in this proceeding.

In the Oversight Proceeding, the Board heard repeatedly that demurrage charges are difficult, time-consuming, and costly to dispute and that invoices are often inaccurate or lack information needed to assess the validity of the charges. Commenters also stated that, under some carriers' rules and practices, charges must be disputed within limited time frames, while carriers are often slow to respond and disputes are often denied. Some tariffs have imposed costs or charges that serve as a deterrent to pursuing a dispute or a formal claim. See NPPS, EP 757, slip op. at 16 (describing comments submitted in Docket No. EP 754). Rail users reiterate these points in comments on the proposed policy statement, 44 and in Demurrage Billing Requirements, Docket No. EP 759, where the Board has proposed to specify certain information that Class I carriers must provide on or with demurrage invoices to enable recipients to, among other things, more readily verify the validity of the demurrage charges. 45 Two commenters also express concerns about untimely billing. 46

While the Board recognizes that some rail carriers may already employ billing and dispute resolution rules and practices consistent with the principles discussed in this policy statement, the Board remains deeply troubled by these reports, which come from rail users in a broad range of industries that are highly dependent on rail service. If rail carrier rules and practices effectively preclude a rail user from determining what occurred with respect to a particular demurrage charge, then the user would not be able to determine whether it was responsible for the delay; the responsible party would not be incentivized to modify its behavior; and the demurrage charges would not achieve their purpose. Transparency, timeliness, and mutual accountability are important factors in the establishment and administration of reasonable rules and charges for demurrage. 47 Rail users should be able to review and, if necessary, dispute charges without the need to engage a forensic accountant or expend “countless hours and extra overhead” to research charges and seek to resolve disputes. 48

As indicated in the NPPS, the Board encourages all Class I carriers (and Class II and Class III carriers to the extent they are capable of doing so), taking into account the principles discussed here, to provide, at a minimum and on a car-specific basis: The unique identifying information of each car; the waybill date; the status of each car as loaded or empty; the commodity being shipped; the identity of the shipper, consignee, and/or care-of party; the origin station and state of the shipment; the dates and times of actual placement, constructive placement (if applicable), notification of constructive placement (if applicable), and release; and the number of credits and debits issued for the shipment (if applicable). 49 The Board also expects rail carriers to bill for demurrage only when the charges are accurate and warranted, consistent with the purpose of demurrage, and to send invoices on a regular and timely basis. 50

With respect to the dispute resolution process more broadly, several commenters request elaboration or prescriptive action pertaining to the Board's initial guidance that shippers and receivers should be given a reasonable time period to request further information and to dispute charges, and the rail carrier likewise should respond within a reasonable time period. 51 The Board will not take prescriptive action at this time. However, the Board emphasizes that the time frames in question should be both reasonable and balanced. By way of example, the Board would have serious concerns about a process that imposed a short deadline to dispute charges or a process that placed no meaningful restrictions on the time carriers can take to respond. Similarly, the Board would have serious concerns about the reasonableness of costs or charges that could deter shippers and receivers from pursuing a disputed claim. Although the Board remains open to argument and evidence in individual proceedings, no apparent justification for imposing such costs or charges was provided in the record in the Oversight Proceeding or in this proceeding.

Finally, some commenters call for the Board to establish more streamlined formal dispute resolution procedures. 52 The Board notes that a variety of formal mechanisms already exist, both within and outside the Board's purview, for aggrieved parties to resolve demurrage and accessorial charge disputes in an efficient, cost-effective manner. For example, three Class I carriers have agreed to arbitrate certain demurrage disputes under the binding, voluntary program set forth in 49 CFR part 1108. 53 In addition, BNSF was commended by one commenter for including an arbitration provision in its tariffs, see NGFA Comments 28, May 8, 2019, Oversight Proceeding, EP 754, and UP reported that it has also agreed to arbitrate contested demurrage and accessorial charges using various external programs, see UP Response to Data Request 3 (pdf page 8), May 1, 2019, Oversight Proceeding, EP 754 (listing NGFA's Rail Arbitration Rules and AAR's Interchange Rules). 54

The Board commends rail carrier commitments to address disputes about demurrage and accessorial rules and charges through arbitration or other streamlined dispute resolution procedures and strongly encourages all rail carriers to commit to doing so. 55 Likewise, the Board also strongly encourages rail users to make use of these procedures to resolve disputes that they are unable to resolve informally, and to keep the Board apprised of their endeavors to do so. 56 The Board hopes that such commitments by all stakeholders to make use of these procedures will make it unnecessary for the Board to revisit these issues. However, the Board remains open to doing so if stakeholders encounter obstacles to the effective use of the mechanisms already in place. The Board also expresses its commitment to resolve disputes brought before it in an expeditious manner. See 49 U.S.C. 10101(2) (“it is the policy of the United States government . . . to require fair and expeditious regulatory decisions when regulation is required”).

A common concern voiced by rail users in the Oversight Proceeding is that various limitations imposed by rail carriers diminish the utility of credits as a means of offsetting debits that are incurred, while carriers' charges ( i.e., debits) do not “expire” until they are paid. See NPPS, EP 757, slip op. at 18 (describing comments submitted in Docket No. EP 754). In the NPPS, the Board provided preliminary guidance as to how it would expect to evaluate credit rules and practices when adjudicating specific cases. In response, rail users reiterate the concerns about credits and broadly endorse the Board's suggestion that its concerns would be allayed if rail users were compensated for the value of unused credits at the end of each month (rather than the credits expiring). 57 Some rail users call for further action or guidance from the Board. 58 Some rail carriers state that credits are intended to address specific problems associated with carrier-caused delay, and that allowing customers to keep credits long after that delay would undermine the purpose of the credit, encourage inefficient use of rail assets, and create operational and accounting complexities. (CSXT Comments 3-4; CP Comments 12-14 (also claiming that “allowing [rail users] to monetize such credits penalizes the carrier” and “raises similar concerns as banked credits” about disincentivizing efficiency); UP Comments 5-6 n.7.) UP also states that its system is consistent with agency precedent that favorably discusses monthly reconciliation of credits and debits and the expiration of unused credits, and suggests that the Board modify the policy statement to be consistent with that precedent. (UP Comments 5 (citing Red Ash Coal Co. v. Central R.R. of N.J., 37 I.C.C. 460, 462 (1916).)

The Board remains troubled by the lack of reciprocity between demurrage credits and charges, particularly where the expiration date of a credit, in effect, undermines the value of credits allocated for a problem or delay that was not within the reasonable control of a rail user. The Board also recognizes that credits issued for carrier-caused problems and delays serve a different purpose than credits that function as a proxy for free time, and that different types of credits might have different application methods or expiration time frames. As stated in the NPPS, the Board remains open to argument and evidence in future cases that involve these issues. However, the Board disagrees with the concerns raised by the rail carriers on this issue. The primary concern in the NPPS was “whether the shipper or receiver has been afforded a reasonable opportunity to make use of the credits,” and, contrary to the claims of some carriers, ( see CSXT Comments 3; CP Comments 13; UP Comments 6 n.7), the Board did not suggest that credits should never expire. The Board's concerns about this issue would be allayed if rail users were compensated for the value of unused credits at the end of each month. Compensating rail users for the value of unused credits at the end of each month could hold rail carriers more accountable for service failures that undermine network efficiency and make rail users less likely to incur future demurrage charges that could be offset by the credits;  59 it would also be consistent with the conventional calendar month-end accounting practice discussed in Red Ash. 60

The Board reiterates its initial guidance and declines to take further regulatory action related to credits at this time. The Board intends to evaluate how credit rules and practices are administered in determining the reasonableness of demurrage rules and charges when adjudicating specific cases, including, in particular, whether the rail user has been afforded a reasonable opportunity to make use of the credits in question, before any expiration date imposed by the rail carrier. The Board reiterates that it would also take into account the purpose and function of the credits in question and that these concerns would be allayed if rail users were compensated for the value of unused credits at the end of each month (rather than the credits expiring). The Board remains open to argument and evidence on all credit issues, including those involving reciprocity.

Some commenters in the Oversight Proceeding indicated that carriers provided insufficient notice of major changes to demurrage and accessorial tariff provisions, particularly with respect to changes involving reductions in free time. Among other things, rail users commented that they were suddenly forced to try to redesign, on short notice, operations and infrastructure that had been designed around a 48-hour free-time provision, and noted that rail carriers had many months to adjust their operations to implement new operating plans but often expected customers to comply with their new rules and practices in 45 days. See NPPS, EP 757, slip op. at 19 (describing comments submitted in Docket No. EP 754). Rail users reiterate these points in this proceeding. Some comments call for prescriptive guidance that is not appropriate for inclusion in a policy statement;  61 others either tend to support or do not address the principles discussed in the NPPS. 62 UP states that it will continue to provide customers with “reasonable notice of accessorial and demurrage tariff changes but not less than 60 days' notice.” (UP Comments 3.)

The Board reiterates the guidance it provided in the NPPS. As a matter of commercial fairness, and consistent with the principles discussed in this policy statement, railroads should provide sufficient notice of major changes to demurrage and accessorial tariffs to enable shippers and receivers to evaluate, plan, and undertake any feasible, reasonable actions to avoid or mitigate new resulting charges. The Board recognizes that a 20-day notice period is statutorily prescribed for changes to common carrier rates and service terms. 49 U.S.C. 11101(c). However, in the Docket No. EP 754 Oversight Proceeding, rail carriers themselves recognized that 20 days was not sufficient lead time in many cases, and noted that they generally provided between 45 and 60 days, periods that other commenters found were still insufficient. Rail carriers also described various other actions taken to help shippers and receivers adapt, such as delayed billing and working with those that needed more flexibility. See NPPS, EP 757, slip op. at 19.

The Board continues to encourage rail carriers to take these and other initiatives to support all rail users facing the financial, operational, or other challenges of adjusting to major tariff changes, to thoughtfully consider the amount of advance notice that should be given, and to be especially cognizant of and accommodating to any unique obstacles a shipper or receiver may face in adapting to demurrage and accessorial tariff changes.

In the Oversight Proceeding, several participants expressed concerns about the impact of demurrage on third-party intermediaries who handle goods shipped by rail but have no property interest in them (also commonly known as warehousemen, as noted above) following the Board's adoption of the final rule in Demurrage Liability, Docket No. EP 707 (codified at 49 CFR part 1333). The NPPS addressed these issues and noted that the Board had initiated a rulemaking on this subject. See NPPS, EP 757, slip op. at 20-21. The Board refers stakeholders to the decision being issued concurrently herewith in Demurrage Billing Requirements, Docket No. 759, for further direction and guidance pertaining to this issue.

The Board concludes by restating two fundamental principles that all rail carriers, and all shippers and receivers, are encouraged to keep in mind. First, demurrage rules and charges may be unreasonable when they do not serve to incentivize the behavior of shippers and receivers to encourage the efficient use of rail assets. In other words, charges generally should not be assessed in circumstances beyond the shipper's or receiver's reasonable control. It follows, then, that revenue from demurrage charges should reflect reasonable financial incentives to advance the overarching purpose of demurrage and that revenue is not itself the purpose. Second, transparency, timeliness, and mutual accountability by both rail carriers and the shippers and receivers they serve are important factors in the establishment and administration of reasonable demurrage and accessorial rules and charges. Just as this policy statement recognizes that there may be different ways to implement and administer reasonable rules and charges, carriers are encouraged to recognize the importance of working with rail users to develop reasonable solutions to unique situations those shippers and receivers may face.

The Board expects to take all of the principles discussed in this policy statement into consideration, together with all of the evidence and argument that is before it, in evaluating the reasonableness of demurrage and accessorial rules and charges in future cases.

Congressional Review Act. Pursuant to the Congressional Review Act, 5 U.S.C. 801-808, the Office of Information and Regulatory Affairs has designated this policy statement as non-major, as defined by 5 U.S.C. 804(2).

Background

Regulations implementing the Atlantic Herring Fishery Management Plan (FMP) for herring are located at 50 CFR part 648, subpart K. Regulations at § 648.200 require the Council to recommend herring specifications for NMFS' review and publish in the Federal Register , including: The overfishing limit (OFL); acceptable biological catch (ABC); annual catch limit (ACL); optimum yield (OY); domestic annual harvest; domestic annual processing; U.S. at-sea processing; border transfer; the sub-ACL for each management area, including seasonal periods as specified at § 648.201(d) and modifications to sub-ACLs as specified at § 648.201(f); and research set-aside (RSA) (up to 3 percent of the sub-ACL from any management area) for 3 years. These regulations also allow the Council to recommend river herring and shad catch caps as part of the specifications.

Under the Magnuson-Stevens Fishery Conservation and Management Act, NMFS is required to publish proposed rules for comment after preliminarily determining whether they are consistent with applicable law. The Magnuson-Stevens Act permits NMFS to approve, partially approve, or disapprove framework adjustment measures proposed by the Council based only on whether the measures are consistent with the fishery management plan, plan amendment, the Magnuson-Stevens Act and its National Standards, and other applicable law. Otherwise, NMFS must defer to the Council's policy choices. Under the regulations guiding the herring specifications process, NMFS must review the Council's recommended specifications and publish notice proposing specifications, clearly noting the reasons for any differences from the Council's recommendations. NMFS must then publish a notice approving, disapproving, or partially approving these measures. NMFS is approving measures to implement Framework 6 as well as specifications and river herring/shad catch caps for the herring fishery, consistent with the Council's recommendations.

A new stock assessment for herring was completed in June 2018. The assessment concluded that although herring were not overfished and overfishing was not occurring in 2017, poor recruitment would likely result in a substantial decline in herring biomass over the next several years. The stock assessment estimated that recruitment was at historic lows during the most recent five years (2013-2017), but projected that biomass could increase after reaching a low in 2019 if recruitment returns to average levels. The final stock assessment summary report is available on the Center's website ( www.nefsc.noaa.gov/publications/ ). The Magnuson-Stevens Act requires NMFS to notify the Council if a fishery has become overfished or is approaching the condition of being overfished. According to the Act, “a fishery shall be classified as approaching a condition of being overfished if, based on trends in fishing effort, fishery resource size, and other appropriate factors, the Secretary estimates that the fishery will become overfished within two years.” In February 2019, we notified the Council that herring was approaching an overfished condition.

Based on the stock assessment and at the request of the Council, we reduced the 2018 ACL in August 2018 (83 FR 42450) (from 104,800 mt to 49,900 mt) and the 2019 ACL in February 2019 (84 FR 2760) (from 49,900 mt to 15,065 mt) through inseason adjustments to prevent overfishing and lower the risk of the stock becoming overfished. The ACL reduction for 2018 ensured at least a 50-percent probability of preventing overfishing, while the ACL reduction for 2019 reflected the Council's risk policy for herring and was consistent with the new ABC control rule developed in Amendment 8 to the Herring FMP.

The Northeast Fisheries Science Center has updated its schedule for stock assessments, and will now hold herring assessments every 2 years, with the next scheduled for June 2020. Accordingly, the Council and NMFS now plan to develop specifications every 2 years for the upcoming 3-year cycle. For example, the Council and NMFS will develop herring specifications in the summer/fall of 2020 for the 2021-2023 fishing years.

At its June 2019 meeting, the Council recommended maintaining status quo catch limits for 2019 and reducing catch limits for 2020 and 2021 (see Table 1). This rule approves herring specifications for 2019-2021 consistent with the Council's recommendations. These specifications are intended to provide for a sustainable herring fishery and to be consistent with the Council's harvest policy for herring.

Because the Herring FMP requires herring specifications for a period of 3 years, Framework 6 analyzes maintaining the status quo 2019 specifications that we implemented via inseason adjustment in early 2019 and new specifications for 2020 and 2021. Because Framework 6 will be effective after the end of 2019, this rule focuses on the 2020-2021 specifications.

Several factors contributed to the Council's ABC recommendations for 2020-2021. The ABC is reduced from the OFL to account for scientific uncertainty. The Council's Scientific and Statistical Committee (SSC) and the Council determined that a conservative method of management, specifically one that accounts for scientific uncertainty, was essential due to the current status of the herring stock and the uncertainty surrounding estimates of biomass and recruitment. Another consideration was Amendment 8's new control rule harvest policy of reducing available harvest to explicitly account for herring's role as forage in the ecosystem. Subsequent to the Council's recommendations, in November 2019 we approved Amendment 8's ABC control rule. For 2021, the SSC was uncomfortable with increasing the ABC based on the recent assessment's projection that recruitment would increase from historical lows to average levels. Therefore, the SSC and Council recommended maintaining the 2020 ABC for 2021. The 2020 stock assessment is expected to update recruitment information and allow the Council to reconsider the 2021 ABC for the next specifications.

The ACL is reduced from ABC to account for management uncertainty. Currently, although the FMP allows for consideration of other aspects of management uncertainty ( e.g., uncertainty around discard estimates of herring caught in Federal and state waters), the only source for management uncertainty that is applied to the 2020-2021 ABCs are landings in the New Brunswick weir fishery. Because weir fishery landings can be highly variable, fluctuating with effort and herring availability, the Council recommended a management uncertainty buffer of 4,560 mt, consistent with average landings in the New Brunswick weir fishery over the last 10 years (2009-2018). The resulting ACL for both 2020 and 2021 is 11,571 mt. The Council also recommended and this rule approves a provision that if weir fishery landings are less than 2,942 mt through October 1, NMFS will subtract 1,000 mt from the management uncertainty buffer and reallocate that 1,000 mt to the Area 1A sub-ACL and ACL. Previously, this provision is allowed if New Brunswick weir landings are less than 4,000 mt through October 1.

Border transfer is a processing allocation available to Canadian dealers that is included in, and does not reduce, the domestic catch limits. The Magnuson-Stevens Act provides for the issuance of permits to Canadian vessels transporting U.S. harvested herring to Canada for sardine processing. The Council recommended and this rule approves 100 mt for border transfer for 2020 and 2021. The amount specified for border transfer has equaled 4,000 mt since 2000, but we reduced it to 0 mt as part of the 2019 inseason adjustment. The Council recommended 100 mt for border transfer in case there continues to be Canadian interest in transporting herring for sardine processing.

The Council recommended and this rule approves maintaining status quo river herring/shad catch caps for 2020-2021 (see Table 2). These catch caps were originally set for the fishery in the 2016-2018 specifications, and we maintained them in the inseason adjustment for 2019. Catch is tracked against river herring/shad catch caps on trips landing more than 6,600 lb (3,000 kg) of herring. Once a catch cap is reached, the possession limit for herring vessels using that gear type and fishing in that area (or the corresponding catch cap closure area) is reduced to 2,000 lb (907 kg) of herring for the remainder of the fishing year. These caps are intended to meet the original catch cap goals to provide a strong incentive for the herring fleet to continue to reduce river herring and shad catch, while allowing the fleet to fully harvest the herring ACL.

The Council recommended status quo methods to set all other herring specifications, including the management area sub-ACLs, fixed gear set-aside, and research set-aside.

On January 24, 2020, NMFS determined that there were no ACL overages in fishing year 2018 and no pound-for-pound reductions are required in 2020. Table 3 below summarizes final catch by management area.

Given that this rule suspends carryover from fishing year 2019 into 2020 and no ACL overages occurred in fishing year 2018, the specifications summarized in Table 1 are approved with no modification.

This rule updates the “overfished” and “overfishing” definitions to make them more consistent with the 2018 herring stock assessment and definitions used for other stocks in the region, consistent with Framework 6. The updated definitions are:

The stock is considered overfished if stock biomass is less than 1/2 the stock biomass associated with the Maximum Sustainable Yield (MSY) level or its proxy ( e.g., Spawning Stock Biomass at MSY (SSB MSY ) or proxy). The stock is considered subject to overfishing if the estimated fishing mortality rate (F) exceeds the fishing mortality rate associated with the MSY level or its proxy ( e.g., F MSY or proxy).

Over time, the parameters used to assess the herring stock have changed, and so have the corresponding projections used to evaluate stock status and set catch levels. The updated definition is more flexible because it can incorporate any estimate of biomass that is warranted (total biomass, SSB, or relevant proxy), depending on what is used in the stock assessment and considered the best available science. The new definitions are consistent with many overfishing and overfished definitions used in the region, as well as parameters in the new ABC control rule developed in Amendment 8.

Previously, regulations at § 648.201 require carryover of up to 10 percent of the unharvested catch in a herring management area shall be added to that area's sub-ACL for the fishing year following when total catch is determined. For example, total catch for 2018 would be determined in 2019. If there was unharvested catch in 2018, the unharvested catch in a management area (up to 10 percent of the initial sub-ACL for that area) would be added to the area's sub-ACL for 2020. This carryover increases the sub-ACL for that management area, but it does not increase the total ACL.

This rule approves the suspension of carryover of unharvested catch for the 2020 and 2021, consistent with the recommendation in Framework 6, such that unharvested catch in 2018 and 2019 will not be added to sub-ACLs for 2020 and 2021, respectively. Suspending carryover is approved because the amount of carryover from 2018 (just under 5,000 mt) is substantial relative to the ACL for 2020 and 2021 (11,571 mt), and could have unintended consequences on the stock or fishery. For example, if carryover is harvested in specific management areas early in the year, other areas that are typically fished later in the year may be constrained by the ACL such that the sub-ACLs in those areas cannot be fully harvested. Estimated 2019 year end catch is less than 85 percent of the ACL for 2019 (15,574 mt), so there may also be a substantial amount of unharvested catch that would have otherwise been carried over relative to the reduced ACL for 2021 (11,571 mt). Furthermore, given the low estimate of herring biomass, concentrating fishing effort and catch in certain management areas may have negative impacts on the herring stock. Continuation of the suspension of carryover into 2021 is consistent with the Council's conservative management due to the current status of the herring stock and the uncertainty surrounding estimates of biomass and recruitment.

We are implementing the following administrative changes to the herring regulations under the authority of section 305(d) to the Magnuson-Stevens Act, which provides that the Secretary of Commerce may promulgate regulations necessary to carry out an FMP or the Magnuson-Stevens Act.

First, in §§ 648.4, 648.7, 648.10, 648.11, 648.14, 648.15, 648.80, 648.83, 648.86, 648.201, 648.202, 648.204, and 648.205, this rule simplifies the names of herring vessel permits. Previously, each herring vessel permit has two names used in regulations, the first name specifies the permit type ( i.e., limited or open access) and herring management area and the second name assigns a category letter to each permit type. For example, the All Areas Limited Access Herring Permit is also known as a Category A Herring Permit. This rule simplifies references to herring vessel permits by only using the category name in regulation. This clarification is intended to aid in the understandability of herring regulations as most stakeholders refer to herring vessel permits by category name.

Second, this rule clarifies the transiting and pre-landing prohibitions for the herring fishery in § 648.14. This rule clarifies that vessels are prohibited from transiting Area 1A during June through September with midwater trawl gear onboard, unless gear is properly stowed and not available for immediate use, consistent with § 648.2. This rule also clarifies that herring vessels are required to notify NMFS of offloading through the vessel monitoring system of the time and place of offloading at least 6 hours prior to landing or, if fishing ends less than 6 hours before landing, as soon as the vessel stops catching fish. These requirements currently exist elsewhere in the regulations, and this rule updates regulations in § 648.14, accordingly.

Third, this rule updates the definition of OY consistent with new National Standard guidance for OY in § 648.200. This rule also updates terminology to reflect that the Atlantic States Marine Fisheries Commission's (Commission's) Herring Section is now a Herring Board and that the Commission's Atlantic Herring Technical Committee conducts the work that was previously described as being conducted by the Plan Review Team.

NMFS published a proposed rule on January 28, 2020 (85 FR 4932), seeking comment on the proposed specifications and measures. NMFS received eight comment letters on the proposed rule, including comments from the Conservation Law Foundation (CLF), Seatuck Environmental Association, and six members of the public. A summary of comments and NMFS responses is presented below:

Comment 1: CLF, Seatuck Environmental Association, and six members of the public supported the proposed specifications. CLF also supported changes to the overfished/overfishing definitions, and suspension of carryover.

Response: NMFS agrees with the Council's rationale for its specifications recommendation, as described earlier in this rule. These measures are approved without modification.

Comment 2: While the Seatuck Environmental Association supported the river herring and shad catch caps, CLF did not, stating that the proposed caps are inconsistent with National Standard 9 and inconsistent with the purpose and need of Framework Adjustment 3 to the Herring FMP.

Response: NMFS has determined that the river herring and shad catch caps are likely sufficiently conservative, meet the original catch cap goals to provide an incentive for the herring fleet to continue to reduce river herring and shad catch, and are consistent with National Standard 9. Catch caps were implemented through Framework 3, with a goal of minimizing river herring and shad bycatch and bycatch mortality to the extent practicable, while allowing the herring fishery an opportunity to fully harvest the herring ACL.

Framework 3 established a process for setting and modifying catch caps for river herring (alewife and blueback) and shad (American and hickory) catch caps in the Atlantic herring fishery (herring fishery), and sets specific river herring and shad catch caps for the 2014 and 2015 fishing years. Framework 3 outlined a process for setting and modifying the river herring and shad catch caps that includes: Identification of gears, areas, and trips that would be subject to the catch caps; changes to reporting requirements for vessels issued limited access and Herring Management Areas 2/3 open access herring permits; criteria that would trigger the closure of an area to directed herring fishing for a particular gear type; and a list of management measures related to setting catch caps that can be modified through the herring specifications process and/or framework adjustment process. Catch caps for 2014 and 2015 were set based upon the most recent river herring stock assessment conducted by the Atlantic States Marine Fisheries Commission, which indicated that river herring populations have declined from historic levels and many factors would need to be addressed to allow their recovery, including: Fishing in both state and Federal waters; improvement of river passageways and water quality; reduced predation; and understanding the effects of climate change.

These catch caps were intended to be adjusted when new information became available. The approved catch caps were originally implemented in a 2016-1018 specifications action and were calculated using updated data and a revised methodology. The 2016-2018 caps were set based on recent Commission river herring and shad assessments, which indicated that data are not robust enough to determine a biologically-based river herring/shad catch cap and/or the potential effects of such a catch cap on river herring/shad populations on a coast-wide scale. Through this specifications action, proactive catch caps were set to manage and minimize catch to the extent practicable.

No new information is available that inform altering the previously approved river herring and shad catch caps. The approved catch caps likely promote the concept of reducing bycatch to the extent practicable by providing an incentive to avoid incidental catch of river herring and shad while still allowing an opportunity to achieve OY. When a cap trigger is reached, it implements a minimal Atlantic herring possession limit (area closure) that is expected to end directed fishing effort for herring in the corresponding closure area for the rest of that fishing year.

In approving status quo river herring and shad catch caps, the Council acknowledged that it is possible that the fishery will catch the same amount of haddock, river herring, and shad, even with a lower herring quota. However, the approved catch caps likely reduce bycatch and bycatch mortality to the extent practicable by providing an incentive to avoid the incidental catch of river herring and shad by allowing an opportunity to achieve OY. This action also maintains the trigger that implements a low Atlantic herring possession limit (area closure) that is likely to further limit bycatch and bycatch mortality once the cap is reached. The approved caps remain proactive and should continue to provide an incentive for the Atlantic herring industry to avoid river herring and shad catch and bycatch, while still allowing an opportunity to use the full Atlantic herring ACL. Therefore, this action is both consistent with the purpose and need of Framework 3 and National Standard 9.

This rule includes slight adjustments to the regulatory corrections in 50 CFR 648.7(b)(2)(i), 648.7(m), 648.11(r)(1)(iv)(A), and 648.80(e)(5) implemented under section 305(d) of the Magnuson-Stevens Act to account for new regulations implemented in the New England Industry-Funded Monitoring Omnibus Amendment (85 FR 7414, February 7, 2020).

The NMFS Assistant Administrator has determined that this final rule is consistent with the Herring FMP, National Standards and other provisions of the Magnuson-Stevens Act, and other applicable law.

The Assistant Administrator for Fisheries finds good cause under the authority of 5 U.S.C. 553(d)(3) to waive the 30-day delay in this action's effective date. This action sets 2020 herring catch limits, puts in place other herring specifications, and sets river herring/shad catch caps for the herring fishery. This rule must be in effect as soon as practicable to prevent overharvesting the ACL and management area sub-ACLs and to ensure the FMP's goals and objectives are achieved. Because this rule lowers herring catch limits directly related to preventing overharvesting the ACL, a 30-day delay would be contrary to the public interest.

Delaying the effective date of the specifications for 30 days will affect NMFS' ability to prevent the herring fishery from exceeding its 2020 area sub-ACLs and ACL. Federal regulations at 50 CFR 648.201(a)(1)(i) require NMFS to implement a 2,000-lb possession limit for each management area through the end of the current fishing year once it is projected that 92 percent of the area sub-ACL will be harvested. NMFS must, under § 648.201(a)(1)(ii), implement the 2,000-lb possession limit for the whole fishery (all areas) when 95-percent of the total herring ACL is harvested. As required by § 648.201(a)(4), NMFS must also implement the 2,000-lb possession limit for river herring/shad accountability measure areas when 95-percent of the river herring/shad catch cap for a specific area is reached.

This action reduces the 2020 herring ACL (11,571 mt) by nearly 25 percent compared to the ACL that was in place in fishing year 2019 (15,065 mt). This action similarly reduces sub-ACLs for each Herring Management Area. Because this action reduces the 2020 herring ACL, NMFS is concerned about preventing catch from exceeding harvest limits in Herring Management Areas 2 (3,217 mt reduced from 4,188 mt) and 3 (4,513 mt reduced from 5,876 mt) which opened on January 1, 2020. Delaying implementation could encourage a derby-style rush to fish before the lower limits are in effect. This not only could result in exceeding the catch limits, but also could pose safety concerns as vessels might perceive a greater incentive to fish during the delay that could be contrary to safe practices. If catch exceeds a sub-ACL, the excess catch must be deducted from a future sub-ACL and would reduce future fishing opportunities.

The 2019-2021 herring specifications are based on the best available science. This action is reducing the herring ACL and sub-ACLs. Delaying implementation of the 2020-2021 herring specifications for 30 days would be contrary to the public interest because the herring fishery may exceed the new, lower sub-ACLs and/or the ACL. Exceeding these harvest limits would negatively impact the herring industry when future harvest is limited to account for excess catch.

The specifications are part of regular rulemaking prescribed by the FMP's regulations. As such, herring fishery participants expect the implementation of the specifications at the earliest date practicable. Catch limits are an integral part of the fishery and are not new requirements. The herring fishery participants are well aware of and accustomed to operating under the catch limits and catch caps. A 30-day delay to adjust these measures therefore is unnecessary because it provides no benefit to the herring fishery. Conversely, a 30-day delay could result in undue loss of economic opportunity from unnecessary catch restrictions or future economic restrictions due to otherwise avoidable overages in this fishing year. For these reasons, NMFS has determined that a 30-day delay in the effectiveness of this rule is contrary to the public interest.

This final rule has been determined to be not significant for purposes of Executive Order (E.O.) 12866.

This final rule is not an Executive Order 13771 regulatory action because this rule is not significant under Executive Order 12866.

NMFS prepared a Final Regulatory Flexibility Analysis (FRFA) for this final rule, as required by section 603 of the Regulatory Flexibility Act (RFA), 5 U.S.C. 603. The FRFA incorporates the IRFA, a summary of the significant issues raised by the public comments in response to the IRFA, NMFS responses to those comments, and a summary of the analyses completed in the Framework 6 EA. A summary of the IRFA was published in the proposed rule for this action and is not repeated here. A description of why this action was considered, the objectives of, and the legal basis for this action is contained in the preamble to the proposed rule (85 FR 4932), and is not repeated here. All of the documents that constitute the FRFA are available from NMFS and a copy of the IRFA, the RIR, and the EA are available upon request (see ADDRESSES ) or via the internet at www.greateratlantic.fisheries.noaa.gov.

NMFS received eight comment letters on the proposed rule. Those comments, and NMFS' responses, are contained in the Comments and Responses section of this final rule and are not repeated here. None of the comments addressed the IRFA and NMFS did not make any changes in the final rule based on public comment.

For RFA purposes only, NMFS has established a small business size standard for businesses, including their affiliates, whose primary industry is commercial fishing (see 50 CFR 200.2). A business primarily engaged in commercial fishing (NAICS code 11411) is classified as a small business if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and has combined annual receipts not in excess of $11 million for all its affiliated operations worldwide.

For the purposes of this analysis, ownership entities are defined by those entities with common ownership personnel as listed on permit application documentation. Permits with identical ownership personnel are categorized as a single entity. For example, if five permits have the same seven personnel listed as co-owners on their application paperwork, those seven personnel form one ownership entity, covering those five permits. If one or several of the seven owners also own additional vessels, with sub-sets of the original seven personnel or with new co-owners, those ownership arrangements are deemed to be separate ownership entities for the purpose of this analysis.

This rule would affect all permitted herring vessels; therefore, a directly regulated entity is a firm that owns at least one herring permit. There are many businesses that hold an open-access (Category D) permit. These businesses catch a small fraction of herring; furthermore, they are minimally affected by the regulations. Firms are defined as active in the herring fishery if they landed any herring in 2018. This section describes the directly regulated small entities in four classes: All permitted firms; all active firms; limited access permitted firms; and active limited access permitted firms.

In 2018, there were 1,205 firms (1,193 small) that held at least one herring permit. There were 62 (60 small) active firms that held at least one herring permit. There were 68 (62 small) firms that held at least one limited access permit, 31 (29 small) of which were active. Small entity limited access permit holders as a whole derived approximately 38 percent of total entity revenue from the herring fishery. All small entity herring permit holders as a whole derived approximately 29 percent of total entity revenue from the herring fishery. Approved measures decrease the ACL in 2020 and 2021 from the baseline, as presented in Table 4.

To examine effects of the approved measures, this analysis assumes catch is equal to the ACL. Recent catch from the four herring management areas has frequently been below the ACL and sub-ACLs. However, recent ACLs have been much higher than the Council's preferred 2020 ACL and portions of the fishery have been restricted due to catch of non-target species ( i.e., river herring and shad). With decreasing ACLs but status quo non-target species catch caps, excessive catch of non-target species becomes less likely. The sub-ACL percentages remain constant between the baseline period (2019) through 2020 and 2021; therefore, there is an approximate 23-percent decrease in available catch in each management area from 2019 to 2021. Using this information we can evaluate the effects of the action on small entity revenues. The average percentage of total small entity revenue derived from each management area is listed in Table 5.

Seventeen small entities, mainly purse seine vessels, fished for herring in Area 1A in 2018. Ten of these small entities derived 30 percent or less of total entity revenue from Area 1A. Seven small entities derived more than 80 percent of total entity revenue from Area 1A. Area 1A generates revenue for more small entities than any other area; all other areas only have 3 entities deriving more than 80 percent of revenue from herring. Nine small entities fished for herring in Area 1B in 2018, with 5 entities deriving 30 percent or less from the area and 4 entities deriving between 70 and 100 percent from 1B. Thirty-nine small entities fished for herring in Area 2 in 2018. Twenty-seven of them derived between 0 and 1 percent of total entity revenue from Area 2, and another 6 entities derived less than 30 percent of entity revenue from Area 2. Four entities derived between 70 and 100 percent of total entity revenue from herring in Area 2. Finally, 8 small entities fished for herring in Area 3 in 2018. Four of those entities derived less than 30 percent of total entity revenue from Areas 3 and 4 entities derived between 70 and 100 percent of total entity revenue from Area 3.

While the overall fishery ACL will decline by 23 percent, NMFS does not expect that each of these small entities will have a 23-percent reduction in herring revenue. Rather, because of the low catch limits, some companies may decide not to fish for herring in 2020 and 2021 and would lose 100 percent of revenue from herring. If this happens, the remaining small entities who fish for herring in 2020 and 2021 may realize less than 23-percent reduction in revenue from herring, as there may be fewer vessels herring fishing. Because entities that catch herring are also active in other fisheries, the reduction in total revenue for small entities would likely be less than the reduction in herring revenue. Without being able to predict these specific shifts, Table 6 estimates the percent change for small entities in total revenue resulting from a 23-percent reduction in the herring ACL.

This final rule does not introduce any new reporting, recordkeeping, or other compliance requirements.

Specification of commercial harvest and river herring/shad catch caps are constrained by the conservation objectives set forth in the FMP and implemented at 50 CFR part 648, subpart K under the authority of the Magnuson-Stevens Act. Furthermore, specifications must be based on the best available scientific information, consistent with National Standard 2 of the Magnuson-Stevens Act. With the specification options considered, the measures in this final rule are the only measures that both satisfy these overarching regulatory and statutory requirements while minimizing, to the extent possible, impacts on small entities. This rule implements the herring specifications outlined in Table 1 and the river herring/shad catch caps outlined in Table 2. Other options considered by the Council, including those that could have less of an impact on small entities, failed to meet one or more of these stated objectives and, therefore, cannot be implemented.

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 FRFA, 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. As part of this rulemaking process, a bulletin to permit holders that also serves as small entity compliance guide was prepared. This final rule and the guide ( i.e., bulletin) will be sent via email to the Greater Atlantic Regional Fisheries Office herring email list and are available on the website at: https://www.fisheries.noaa.gov/species/atlantic-herring. Hard copies of the guide and this final rule will be available upon request (see ADDRESSES ).

For the reasons set out in the preamble, 50 CFR part 648 is amended as follows: