The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2012-21-08, Amendment 39-17224 (77 FR 64711, October 23, 2012) (AD 2012-21-08). AD 2012-21-08 applied to certain The Boeing Company Model 737-600, -700, -700C, -800, and -900 series airplanes. The NPRM published in the Federal Register on February 27, 2020 (85 FR 11319). The NPRM was prompted by reports that during autopilot coupled ILS approaches, the airplane did not capture or track the glideslope correctly. In the NPRM, the FAA proposed to continue to require inspecting for part numbers of the OPS of the FCCs, and to add a new requirement to update the version of the FCC OPS if necessary. The NPRM also proposed to expand the applicability to include The Boeing Company Model 737-900ER series airplanes. The FAA is issuing this AD to address the glideslope capture problem, which could allow the airplane to descend below the glideslope beam and result in controlled flight into terrain on airplanes that do not have the upgraded FCC OPS installed.

The FAA received comments from two commenters, including Air Line Pilots Association, International (ALPA) and United Airlines, who supported the NPRM without change.

The FAA received additional comments from three commenters, including Boeing, Alaska Airlines, and Aviation Partners Boeing. The following presents the comments received on the NPRM and the FAA's response to each comment.

Aviation Partners Boeing stated that the installation of winglets per Supplemental Type Certificate (STC) ST00830SE does not affect the actions specified in the NPRM.

The FAA agrees with the commenter that STC ST00830SE does not affect the accomplishment of the manufacturer's service instructions. Therefore, the installation of STC ST00830SE does not affect the ability to accomplish the actions required by this AD. The FAA has not changed this AD in this regard.

Alaska Airlines requested that the proposed AD be revised to require removing a particular version of the software or earlier versions, rather than require installing a particular version or later versions. The commenter asserted that Rockwell Collins software versions 9.0 and earlier are the cause of the unsafe condition.

The FAA does not agree with the suggested change to the requirements of this AD. Such a change would require operators who have certain acceptable earlier software to install different software unnecessarily. Paragraph (k) of this AD specifically prohibits installing Rockwell Collins FCC OPS software versions P1.1, P2.0, P3.0, P8.0, and P9.0. The unsafe conditions identified in AD 2012-21-08 and in this AD only exist with Rockwell Collins software versions P1.1, P2.0, P3.0, P8.0, and P9.0.

Paragraph (k) of the proposed AD had inadvertently referred to software version “P1.0” as one of the affected versions that was prohibited for installation. Boeing Alert Service Bulletin 737-22A1211 correctly identifies this affected software version as “P1.1.” The FAA has corrected this reference as version “P1.1” in paragraph (k) of this AD.

Boeing requested that the FAA revise the NPRM to refer to Boeing Alert Requirements Bulletin 737-22A1322 RB, Revision 1, dated January 28, 2021, rather than Boeing Alert Requirements Bulletin 737-22A1322 RB, dated November 21, 2018. Boeing noted that Boeing Alert Requirements Bulletin 737-22A1322 RB, Revision 1, dated January 28, 2021, is the most current revision and has the correct FAA-only approval statement for The Boeing Company Model 737-700C airplanes.

The FAA agrees with the request. The changes in Revision 1 are non-substantive and do not affect the requirements as proposed in the NPRM for this AD. Therefore, the FAA has revised this final rule to refer to Boeing Alert Requirements Bulletin 737-22A1322 RB, Revision 1, dated January 28, 2021, as the appropriate source of service information for the newly required software installation. The FAA also has added paragraph (l) of this AD to provide credit for certain actions that were performed before the effective date of this AD using Boeing Alert Requirements Bulletin 737-22A1322 RB, dated November 21, 2018. Subsequent paragraphs have been re-identified accordingly.

The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Except for minor editorial changes, and any other changes described previously, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.

The FAA reviewed Boeing Alert Requirements Bulletin 737-22A1322 RB, Revision 1, dated January 28, 2021. The service information describes procedures for installing and testing an updated version of the FCC OPS.

This AD also requires Boeing Alert Service Bulletin 737-22A1211, dated April 13, 2010; and Boeing Alert Service Bulletin 737-22A1224, dated May 18, 2012; which the Director of the Federal Register approved for incorporation by reference as of November 27, 2012 (77 FR 64711, October 23, 2012).

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 ADDRESSES .

The FAA estimates that this AD affects 520 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

The FAA estimates the following costs to do any necessary on-condition actions that would be required. The FAA has no way of determining the number of aircraft that might need these on-condition actions:

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

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus SAS Model A318, A319, A320, A321, A330-200, A330-200 Freighter, A330-300, A330-800, A330-900, A340-200, A340-300, A340-500, A340-600, and A380-800 series airplanes. The NPRM published in the Federal Register on July 19, 2021 (86 FR 37936). The NPRM was prompted by a determination that repetitive disconnection and reconnection of certain PMA Ni-Cd batteries during airplane parking or storage could lead to a reduction in capacity of those batteries. In the NPRM, the FAA proposed to require replacing certain PMA Ni-Cd batteries with serviceable Ni-Cd batteries, or maintaining the electrical storage capacity of those PMA Ni-Cd batteries during airplane storage or parking. The NPRM corresponds to a previously proposed AD on type design Ni-Cd batteries with the same unsafe condition on the same model airplanes. The FAA is issuing this AD to address reduced capacity of certain PMA Ni-Cd batteries, which could lead to reduced battery endurance performance and possibly result in failure to supply the minimum essential electrical power during abnormal or emergency conditions.

The FAA received comments from Air Line Pilots Association, International, which supported the NPRM without change.

The FAA received additional comments from two commenters, including American Airlines and United Airlines. The following presents the comments received on the NPRM and the FAA's response to each comment.

American Airlines and United Airlines stated there is an NPRM, Docket No. FAA-2021-0350 (86 FR 25810, May 11, 2021), for a different AD that addresses an unsafe condition for certain type design Ni-Cd batteries (original equipment manufacturer (OEM) parts) on Airbus airplanes, which corresponds to European Union Aviation Safety Agency (EASA) AD 2020-0274, dated December 10, 2020 (EASA AD 2020-0274). American Airlines and United Airlines noted that this NPRM, Docket No. FAA-2021-0547, addresses that same unsafe condition for PMA Ni-Cd batteries (PMA parts) and has the same required actions. American Airlines requested that the intent of both NPRMs be combined into a single AD to simplify tracking and actions associated with the aforementioned NPRMs. United Airlines questioned why the FAA is planning on issuing two separate ADs.

The FAA does not agree to combine both NPRMs into a single AD. At the time the NPRMs were developed, the FAA separated the rulemaking for OEM parts from the PMA parts since the FAA was informed of implementation issues with the adoption of combined rulemaking (OEM parts and PMA parts) by the foreign civil aviation authorities. Therefore, as an interim action, the FAA has decided to issue separate ADs for the OEM parts and the PMA parts. The FAA is discussing how to address OEM and PMA parts in ADs for future rulemaking. However, in the interest of safety to address the unsafe condition on the PMA parts identified in this AD, the FAA has determined this AD cannot be delayed.

United Airlines stated that the requirements in paragraphs (g), (h), and (i) of the proposed AD for the PMA parts have more detail than the requirements in NPRM, Docket No. FAA-2021-0350, for the OEM parts. United Airlines asked if there is contrasting work scopes between the OEM parts NPRM and the PMA parts NPRM.

The FAA notes that the work scope is the same in both NPRMs. The OEM parts NPRM (published as AD 2021-20-08, Amendment 39-21746 (86 FR 57025, October 14, 2021)), refers to EASA AD 2020-0274 as the appropriate source of service information. EASA AD 2020-0274 provides the details for the required actions. Paragraphs (g), (h), and (i) of this AD correspond to the Definitions and paragraphs (1) and (2) of EASA AD 2020-0274.

The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Except for minor editorial changes, this AD is adopted as proposed in the NPRM. None of the changes will increase the economic burden on any operator.

Airbus has issued Alert Operators Transmission—AOT A24L007-20, Rev 00, dated September 23, 2020; Alert Operators Transmission—AOT A24N006-20, Rev 01, dated October 12, 2020; and Alert Operators Transmission—AOT A24R009-20, Rev 00, dated September 23, 2020. This service information describes procedures for maintaining the electrical storage capacity of Ni-Cd batteries during airplane storage or parking. 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 up to 1,814 airplanes of U.S. registry. The FAA estimates the following costs to comply with this AD:

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

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:

NOAA's Office of National Marine Sanctuaries (ONMS) serves as the trustee for a network of underwater parks encompassing more than 600,000 square miles of marine and Great Lakes waters from Washington State to the Florida Keys, and from Lake Huron to American Samoa. The network includes a system of 15 national marine sanctuaries and two marine national monuments.

NOAA established Monterey Bay National Marine Sanctuary in 1992 for the purposes of protecting and managing the conservation, ecological, recreational, research, educational, historical, and aesthetic resources and qualities of the area, including the submarine Monterey Canyon and, subsequently, Davidson Seamount. The sanctuary is located offshore of California's central coast, encompassing a shoreline length of approximately 276 miles between Rocky Point (Marin County) and Cambria (San Luis Obispo County). With the inclusion of the Davidson Seamount Management Zone (DSMZ) in 2008, the sanctuary now spans approximately 6,094 square miles (4,602 square nautical miles (nmi 2 )) of ocean and coastal waters, and the submerged lands thereunder, extending an average distance of 30 miles (26 nautical miles (nmi)) from shore. Supporting some of the world's most diverse and productive marine ecosystems, the sanctuary is home to numerous mammals, seabirds, fishes, invertebrates, sea turtles and plants.

The primary purpose of the action is to fulfill section 304(e) of the National Marine Sanctuaries Act (16 U.S.C. 1431 et seq. ) (NMSA). Section 304(e) (16 U.S.C. 1434(e)) requires periodic review of sanctuary management plans to ensure that site-specific management techniques and strategies effectively address changing environmental conditions and threats to protected resources and qualities of the sanctuaries, and that they fulfill the purposes and policies of the NMSA. The management plan review process also includes an assessment of existing sanctuary regulations to determine if any regulatory changes are needed to support management plan objectives.

Accordingly, ONMS conducted a review of the MBNMS management plan and regulations, which resulted in the development of a new management plan for the sanctuary and changes to the sanctuary's regulations.

With this final rule, NOAA modifies three provisions of the MBNMS regulations, modifies appendix E to the MBNMS regulations, and adds one new definition to the MBNMS regulations. These changes support more efficient and effective program management and enhanced stewardship of the sanctuary's natural resources. The need for each regulatory action is described in greater detail in Section III below.

The process for this action included four major stages: (1) Information collection and characterization via development and issuance of a sanctuary condition report that describes the status and trends of driving forces and pressures on the ecosystem and natural and archaeological resource conditions in MBNMS, as well as public scoping to further identify issues associated with revising the management plan (scoping was completed on October 30, 2015); (2) preparation and release of a proposed rule (85 FR 40143, July 6, 2020), draft revised management plan, and draft EA in accordance with the National Environmental Policy Act (NEPA); (3) public review and comment on the proposed rule, draft management plan, and draft EA; and (4) preparation and release of a final rule, final management plan, final EA, and FONSI. With the publication of this final rule, NOAA completes the fourth phase of the process. All written comments NOAA received are available at https://www.regulations.gov/docket/NOAA-NOS-2020-0094 . NOAA's responses to public comments are included in Appendix A of the final EA, and the comments pertaining to this rulemaking are included in Section IV of this document.

Together with this final rule, NOAA is releasing the final management plan, as well as a final EA and FONSI. The management plan describes strategies and action plans for conservation and management of the sanctuary. The EA contains more detailed information on the considerations of the final management plan and regulatory amendments, including an assessment of alternatives, analysis of environmental impacts, and references. The management plan, EA, and FONSI can be found on the website listed in the ADDRESSES section above.

After considering the public comments received between July 6 and September 4, 2020, and engaging in interagency consultations and internal deliberations, NOAA revised the proposed beneficial use definition in 15 CFR 922.131 to modify the standard applicable to dredged material eligible for beneficial use in the sanctuary and to clarify that beneficial use includes habitat protection and restoration purposes (changes described in detail below). NOAA made corresponding changes to the final EA and management plan. Additionally, NOAA made technical changes to the descriptions and coordinates of the Motorized Personal Watercraft (MPWC) Zones and access routes within the sanctuary in appendix E to subpart M of part 922. All other regulatory modifications NOAA outlined in the proposed rule remain the same in the final rule.

In the proposed rule, NOAA proposed a definition of “beneficial use of dredged material” to mean the use of dredged material removed from any of the four public harbors immediately adjacent to the shoreward boundary of the sanctuary (Pillar Point, Santa Cruz, Moss Landing, and Monterey) that has been determined by the Director to be clean (as defined by 15 CFR 922.131) and suitable (as consistent with regulatory agency reviews and approvals applicable to the proposed beneficial use) as a resource for habitat restoration purposes only. NOAA also proposed the clarification that the beneficial use of dredged material is not disposal of dredged material. With this final rule, NOAA finalizes the definition of “beneficial use of dredged material” to mean the use of dredged material removed from any of the four public harbors adjacent to the sanctuary (Pillar Point, Santa Cruz, Moss Landing, and Monterey) that has been determined by the Director to be suitable as a resource for habitat protection or restoration purposes only. NOAA also finalizes the clarification that the beneficial use of dredged material is not disposal of dredged material.

NOAA made changes to the definition in response to two primary concerns raised during the public comment period. First, several commenters expressed concern that the prescribed use of dredged material for habitat restoration was too restrictive and precluded the use of such material for more proactive shoreline protection projects, such as: Protecting habitat for wildlife; softscape erosion control alternatives; shoreline stabilization; and adaptive management to address impacts from sea level rise. NOAA acknowledges that the term “restoration” alone does not adequately encompass proactive measures to protect habitat that may prevent the need for restoration by helping to prevent future habitat degradation. For example, placing sediment on an eroding beach can help protect it from further erosion, and it can contribute to the coastal sediment transport system, which provides sediment to other nearby coastal beaches. Nourishing beaches also helps protect coastal dunes, which provide habitat for threatened and endangered species, such as western snowy plovers. NOAA also recognizes that there may be ancillary benefits from these projects, such as the protection of coastal infrastructure. The purpose of the beneficial use regulatory provisions is to protect and restore sanctuary habitats, such as beaches, through the beneficial use of dredged material. Therefore, NOAA replaces the term “restoration” with “protection or restoration” to allow the beneficial use of suitable dredged material removed from any of the four local harbors to cover protecting and restoring MBNMS habitats.

Second, commenters expressed concern that the standard NOAA proposed in the definition of “beneficial use of dredged material” for sediment to be “clean” would be a prohibitively strict threshold because, based on other definitions in the MBNMS regulations, it would mean that the sediment used for habitat protection or restoration projects could contain no detectable levels of any of the substances listed pursuant to section 42 U.S.C. 9601(14) of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) at 40 CFR 302.4. 1 Commenters were concerned that if this standard were applied, it would be more restrictive than those used by other Federal agencies that utilize dredged materials for similar projects, such as the U.S. Army Corps of Engineers (USACE) and the Environmental Protection Agency (EPA). Commenters also expressed concern that it would be very difficult to find sediment that could meet the proposed standard, which would effectively prevent the placement of any dredged sediment and make implementation of the regulation impracticable.

After reviewing public comments, conferring with other agencies, and conducting internal deliberations, NOAA determined that the proposed use of “clean” as a standard created challenges, given that word's meaning elsewhere in MBNMS definitions. Upon consideration, NOAA concurs with the concerns outlined above that were raised during the public comment period. Moreover, NOAA has determined that the purpose of protection of sanctuary resources and qualities can be maintained via a revised sediment standard and through the implementation of permit and/or authorization review criteria. Therefore, with this final rule, NOAA revises the standard so that the ONMS Director must determine that the dredged material is “suitable” as a resource for habitat protection or restoration purposes only.

NOAA also removed the parenthetical language in the proposed rule following “suitable” ( i.e., “as consistent with the regulatory agency reviews and approvals applicable to the proposed beneficial use”) to clarify that the ONMS Director's “suitable” determination is not limited to only considering regulatory agency reviews and approvals, although these reviews and approvals will continue to be required. The revised standard fulfills the same purposes and policies of the originally proposed “clean” and “suitable” standard by ensuring that dredged sediment for proposed habitat protection or restoration projects is subject to rigorous evaluation and furthers the statutory and regulatory purpose of protection of sanctuary resources. The beneficial use of dredged material within MBNMS for habitat protection or restoration purposes still has to meet NOAA's own permitting and/or authorization criteria and undergo environmental review, as well as other rigorous testing and screening criteria established by other Federal and state regulatory agencies, as applicable.

Additionally, NOAA has made technical changes to the descriptions of the harbors in the definition of “beneficial use of dredged material,” as well as to the descriptions and coordinates of the Motorized Personal Watercraft (MPWC) Zones and access routes within the sanctuary in appendix E to subpart M of part 922. These technical changes include: Revising the phrase “removed from any of the four public harbors immediately adjacent to the shoreward boundary of the sanctuary (Pillar Point, Santa Cruz, Moss Landing, and Monterey)” to “removed from any of the four public harbors adjacent to the sanctuary (Pillar Point, Santa Cruz, Moss Landing, and Monterey)”; adding the missing phrase “[Coordinates listed in this appendix are unprojected (Geographic) and based on the North American Datum of 1983]” to the beginning of appendix E to clarify which projection NOAA uses to calculate the zone coordinates; adding the last point coordinates to each of the five zones to complete the polygon, along with descriptive text explaining how to draw the polygons from point to point; and correcting the magnetic bearings listed for each zone to make them more accurate. These technical changes in the final rule do not result in differences in the list of eligible harbor sources or locations of the polygons from the proposed rule.

NOAA determined that the changes made from proposed to final rule did not result in any changes in the conclusions of the final EA with regard to the significance of the impacts.

The MBNMS terms of designation and regulations prohibit permitting the disposal of dredged material within the sanctuary other than at sites authorized by the EPA prior to the effective date of designation. 2 NOAA is adding a new definition for “beneficial use of dredged material” to 15 CFR 922.131 and amending 15 CFR 922.132(f) to clarify that “beneficial use” of dredged material as defined in 15 CFR 922.131 is not “disposal” of dredged material as described at 15 CFR 922.132(a)(2)(i)(F) and 15 CFR 922.132(f). Together, these regulatory changes clarify that the MBNMS terms of designation and regulations do not preclude NOAA from approving the beneficial use of dredged material within sanctuary boundaries that has been removed from any of the four public harbors adjacent to the sanctuary and that has been determined by the Director to be suitable for habitat protection or restoration purposes. In this section, NOAA discusses the requirements to approve beneficial use projects; provides additional historical context for this regulatory clarification in light of the original terms of designation and management approaches; summarizes additional options for sediment placement for habitat protection and restoration purposes that are currently available and remain unchanged by this rulemaking; and provides a brief overview of the regulatory context of dredge, fill, and disposal projects that helped inform this rulemaking.

This section provides additional context on the review criteria and other requirements that must be met for beneficial use projects to be approved.

Any project that proposes the beneficial use of dredged material would require a NOAA sanctuary permit and/or authorization, as well as appropriate review under NEPA, the Clean Water Act, and other applicable statutes. The ONMS Director has broad authority in applying permit review criteria to ensure the proposed project is conducted in a manner that is compatible with the primary objective of protecting sanctuary resources and qualities; to consider other permit review factors deemed appropriate; and to include any permit terms or conditions deemed appropriate. 3 The ONMS Director also has broad authority in applying authorization reviews of any valid lease, permit, license, or approval to include any terms or conditions deemed reasonably necessary to protect sanctuary resources and qualities. 4 The Director would also assess the suitability of the sediment using water quality and sediment quality criteria that are established and updated by the sanctuary to ensure that it matches the physical properties of native sediments at any planned receiving site ( e.g., grain size, sediment type) and meets sanctuary water quality objectives.

A proposed project involving the use of dredged material would only be eligible for approval by NOAA if the project demonstrates a sanctuary habitat protection or restoration purpose under the new definition of “beneficial use of dredged material” at 15 CFR 922.131. For the purposes of the “beneficial use of dredged material” definition in this final rule, “habitat restoration” means placing sediment for the purpose of re-establishing natural habitats that have been negatively impacted by erosion processes, including but not limited to wetlands, sandy beaches, and coastal dune habitats. For the purposes of the “beneficial use of dredged material” definition in this final rule, “habitat protection” means placing sediment at sites in the sanctuary to protect against habitat degradation and reduce the need for future habitat restoration. As an example of how habitat protection may proactively reduce the need for future habitat restoration, a well-designed project could help minimize coastal erosion by providing a buffer of protection during seasonally dynamic storm cycles that could otherwise remove or replace large volumes of sand. Furthermore, when a coastal beach habitat is restored or protected, the adjacent upland resources such as shoreline infrastructure may also be protected.

In addition to a sanctuary permit and/or authorization and an appropriate environmental review, the beneficial use of dredged material at sites within the sanctuary may also require review and permitting by other Federal and State regulatory authorities with jurisdiction over the proposed beneficial use project.

This section explains the historical context of the prohibition in the MBNMS terms of designation and regulations on permitting disposal of harbor dredged materials. This section also explains the sources of sediment that are eligible for use in permitted beneficial use projects in the sanctuary: Suitable sediment from local harbors immediately adjacent to the sanctuary; suitable sediment from upland and onshore sources; and suitable sediment from non-harbor offshore sources within the sanctuary.

A key provision of the terms of designation and regulations governing MBNMS stipulates that in no event may sanctuary managers permit, authorize, or approve the disposal of dredged material within the sanctuary other than at federally approved dredge disposal sites established prior to sanctuary designation. 5 Absent clarification in MBNMS regulations that “disposal of dredged material” is a different activity than “beneficial use of dredged material” for habitat protection or restoration, NOAA has not authorized discharges of harbor-dredged material directly into the sanctuary under its discretionary authority described at 15 CFR 922.48, 922.49, 922.132(e), and 922.133 other than at pre-approved disposal sites.

However, in the last MBNMS Management Plan (November 2008), NOAA stated, “[i]f investigations indicate that employment of additional beach nourishment sites using clean dredged harbor material would be possible and appropriate, MBNMS may examine whether revision of MBNMS regulations and Designation Document may be warranted; or if a beneficial program might occur via MBNMS permit or authorization in concert with other agencies.”  6

NOAA has determined that the protection and restoration purposes of local harbor-driven beach nourishment projects—projects that have, to date, largely relied on onshore placement of suitable material—can be further promoted by allowing placement of suitable dredged material directly into the sanctuary below the mean high water (MHW) line for habitat protection or restoration purposes. One example site that could benefit from placement of sediment below MHW line, subject to a project proposal and applicable permit and environmental review criteria, is the potential placement of suitable dredged material from Pillar Point Harbor into the shallow subtidal zone of the sanctuary at El Granada/Surfer's Beach (discussed in more detail below). The beneficial use of suitable dredged material for habitat protection or restoration purposes in the sanctuary would provide an additional effective and sustainable option to address sites in the sanctuary where shoreline habitat and resources have been heavily impacted by erosion or no longer exist due to the presence of shoreline structures, coastal armoring, sea level rise, and increased storm activity.

For the reasons explained here and throughout this final rule, NOAA has determined that employment of additional habitat protection or restoration projects using suitable dredged material from any of the four adjacent harbors would be possible and appropriate. Accordingly, this final rule clarifies that beneficial use projects may occur through MBNMS permits and/or authorizations if all applicable criteria are met.

The four harbors immediately adjacent to the sanctuary, and no other harbors, are considered eligible sources of material for protecting or restoring habitats for several reasons. 7

First, the four harbors and the sanctuary are in the same local sediment transport cell, which means that the sediments that settle in the four harbor channels generally come from the same sources as those that settle in the sanctuary. Second, if the four harbors adjacent to the sanctuary did not exist, sand and other sediment would not settle in the harbors and would thus remain in the coastal transport cell. Therefore, the regulatory clarifications regarding the permitted use of suitable dredged material from the four named harbors for beneficial use projects achieve the intent of helping restore the normal transport of sediment along the coast within the sanctuary.

Third, the original terms of designation and regulations for MBNMS regarding dredge disposal contemplated the need to accommodate dredging from the four local harbors via disposal of such dredged material at authorized, offshore disposal sites, but they never envisioned the sanctuary as a site to absorb dredge materials from harbors distant to the sanctuary. In fact, NOAA's final EIS for the 1992 MBNMS designation discussed how designating the new sanctuary would prevent the creation of new disposal sites within MBNMS's boundaries for dredged material extracted from the harbors within San Francisco Bay, due to the sanctuary's regulatory prohibition on designation and use of any new ocean dredged material disposal sites within the sanctuary. 8

Therefore, the clarification in this final rule that disposal of dredged material does not include the beneficial use of dredged material is meant to only address material dredged from any of the four harbors immediately adjacent to MBNMS. For these reasons, the new definition for “beneficial use of dredged material” applies to material removed from these four local harbors and not to material removed from other harbors.

As explained above, the original prohibition on the disposal of dredged material in the MBNMS terms of designation and regulations addressed a concern with disposal of harbor-dredged material. 9 Onshore or upland sources of sediment, provided they are not sourced from dredging a harbor other than the four adjacent to MBNMS, are treated differently because they are not harbor-dredged material. NOAA received public comments on the proposed rule that expressed confusion as to the effect of the rulemaking on NOAA's ability to permit placement of upland material for beneficial use projects. This rulemaking does not change NOAA's current authority and long-standing approach with respect to permitting placement of upland or onshore sediments within the sanctuary. The placement of suitable material within the sanctuary that originates from onshore sources ( e.g., sediment from coastal bluffs/dunes, coastal lagoon sediment traps, coastal highway construction projects, river maintenance) for habitat protection or restoration projects may continue to be allowed through appropriate permits and/or authorizations and environmental review. NOAA has issued permits in the past for placement of these types of materials within the sanctuary, such as south of Año Nuevo and along the Big Sur coast from coastal highway maintenance and repair projects.

NOAA also received public comments that expressed confusion about whether beneficial use projects in the sanctuary may rely upon sediment from offshore sources. Similar to proposed beneficial use projects using upland material, NOAA may permit the placement of suitable sediment from offshore sources within the sanctuary for habitat protection and restoration purposes, as long as the sediment is not dredged from a harbor other than one of the four local harbors referenced above. This rulemaking does not alter NOAA's ability to permit such projects and does not preclude a potential permit applicant from requesting to source and dredge material from within MBNMS ( e.g., an offshore sand cell) and deposit it nearshore for habitat protection or restoration.

Review of such a proposed project currently, and after this rulemaking, would need to evaluate the environmental impacts of the removal of the offshore material and the impacts of its deposit elsewhere in the sanctuary. In order to approve such a project, NOAA would need to make the necessary findings within the MBNMS permit or authorization review criteria and other applicable regulations. Review and approval by other agencies may also be required.

This section provides a brief summary of two available options for sediment placement for beneficial use purposes in which the sediment is placed outside, rather than within, the sanctuary.

Placement of sediment above the mean high water (MHW) line ( i.e., outside the MBNMS shoreward boundary) immediately adjacent to the sanctuary would not constitute prohibited disposal of dredged material within the sanctuary. To date, NOAA has accommodated requests for such placement of dredged sediment above the MHW line from three of the four adjacent harbors for beach nourishment purposes.

Several examples of such projects are as follows. In 2007, NOAA concurred with other agencies to allow Moss Landing Harbor to place suitable beach nourishment material from harbor dredging on the beach above MHW immediately south of the harbor breakwater, in an area not within the sanctuary. Further, beach replenishment projects currently occur at Del Monte Beach in Monterey and Twin Lakes Beach in Santa Cruz. The City of Monterey has an MBNMS authorization for the annual placement of dredged material from Monterey Harbor onto two EPA-approved locations above MHW at Del Monte Beach. The material meets USACE, EPA, and California Regional Water Quality Control Board water and sediment quality standards and consists primarily of an acceptable grain size that is compatible with the receiving beach. Sediment deposited at these two beach locations in Monterey is eventually washed by natural wave action into lower tidal areas ( i.e., below MHW and thus inside the sanctuary) and laterally along the shoreline, effectively maintaining or creating improved coastal habitat and recreational resources within the sanctuary. A similar but larger on-shore beach restoration protocol has been established at Twin Lakes Beach in Santa Cruz for suitable sediment dredged from the entrance channel to Santa Cruz Harbor.

Based upon the past successful use of suitable dredged material for beach nourishment at Santa Cruz, Moss Landing, and Monterey, in 2015 NOAA wrote to Pillar Point Harbor to convey how onshore placement of its suitable dredge material would not constitute discharge within the bounds of the sanctuary and could allow the harbor district to implement a beach nourishment project it had long sought for El Granada/Surfer's Beach next to that harbor. Due to the interruption of natural sand transport patterns, the beach has eroded to such a degree that ocean waters now extend to the toe of the riprap armoring that safeguards Highway 1. El Granada/Surfer's Beach is now often submerged at MHW, and a fraction of the former beach appears only at the lowest tide levels. An on-shore beach restoration project could restore the natural coastal beach habitat, as well as provide recreational benefits to beach goers and protect the highway infrastructure. Pillar Point Harbor has received grant funds and continues to study such an on-shore beach restoration project.

The habitat restoration projects described here have proven successful in maintaining the integrity of high public use beaches that would otherwise suffer from accelerated erosion due to human interruptions of natural sediment transport patterns in the area. Placement of dredged material on these beaches has helped protect coastal beaches and dunes, stabilize their geologic profiles, and protect these habitats for wildlife. Although NOAA has determined that the protection and restoration purposes of local harbor-driven beach nourishment projects can be further promoted by allowing placement of suitable harbor-dredged material directly into the sanctuary, the option of a project using onshore placement of suitable material remains available.

This rulemaking does not affect the current prohibitions on deposition in the sanctuary of any material dredged from harbors other than the four adjacent to the sanctuary, such as the complex of harbors in San Francisco Bay or the San Francisco main ship channel, except for use of federally-approved disposal sites SF-12 and SF-14 off Moss Landing. Nonetheless, Federal and State agencies and harbor managers could discharge suitable material from these sources for beach nourishment offshore of or onshore the approximately 12 miles of coastal habitat and beaches off San Francisco, Daly City, and Pacifica that is outside of the boundaries of Monterey Bay National Marine Sanctuary, subject to other applicable review and permitting requirements. Such a beach nourishment project along this stretch of coast would be closer to the dredged source, which would both increase project feasibility and restore the material to the closest location within the littoral coastal transport cell. A beach nourishment project in this area would not be governed by sanctuary regulations unless there was a potential for that material to enter and injure sanctuary resources.

This action, which clarifies NOAA's authority to approve the use of dredged material from the four adjacent public harbor jurisdictions that has been determined by the Director to be suitable as a resource for habitat protection or restoration purposes within the sanctuary, is consistent with the regulatory framework for dredge, fill, and disposal projects as outlined by the Clean Water Act (33 U.S.C. 1251 et seq. ), the Ocean Dumping Act (33 U.S.C. 1401 et seq. ), and applicable USACE and EPA regulations. The existing regulatory framework differentiates between the disposal, or discarding, of dredged material and the beneficial use of dredged material, which refers to the purposeful application of material. For example, the “disposal into ocean waters” of dredged material is regulated under provisions of the Ocean Dumping Act, whereas discharge of dredged material for fill, including beach nourishment, is regulated under Section 404 of the Clean Water Act. 10 In addition to the ONMS Director's approval, any proposed beneficial use of dredged material project in MBNMS would be subject to applicable permit and regulatory reviews of other Federal and State authorities with jurisdiction over the proposed project.

Finally, this action is also consistent with current State and Federal coastal management practices that favor softscape approaches to restoring and protecting beaches and shorelines over hardscape methods ( e.g., riprap, groins and seawalls). 11 The USACE Engineering and Design Manual on Dredging and Dredged Material (July 2015) states, “Interest in using dredged material as a manageable, beneficial resource, as an alternative to conventional placement practices, has increased.”  12 The USACE/EPA Beneficial Use Planning Manual states, “the promotion of beneficial uses continues to require a shift from the common perspective of dredged material as a waste product to one in which this material is viewed as a valuable resource that can provide multiple benefits to society.”  13 The planning manual further notes that in general, “clean, coarse-grained sediments (sands) are suitable for a wide variety of beneficial uses.”  14 Finally, the USACE/EPA Manual on The Role of the Federal Standard in the Beneficial Reuse of Dredged Material indicates, “a beneficial use option may be selected for a project even if it is not the Federal Standard for that project.”  15

NOAA has determined the placement in the sanctuary of local dredged material (removed from any of the four public harbors adjacent to the sanctuary) that has been determined by the Director to be suitable for habitat protection or restoration purposes is appropriate and consistent with the existing regulatory framework for dredge, fill, and disposal projects.

For the reasons explained here, NOAA is adopting this regulatory change to clarify NOAA's authority to approve the beneficial use of suitable dredged material for habitat protection or restoration purposes within MBNMS. Such use would not constitute “disposal of dredged material” within the meaning of the MBNMS terms of designation and regulations. This regulatory change does not pose additional regulatory burdens to the public, but rather, increases the availability of projects that may be permitted to help address coastal erosion and beach nourishment in the sanctuary.

Consistent with the text that appeared in the proposed rule, NOAA amends MBNMS regulations to reduce the sea state condition required for MPWC access to MPWC zone 5 at Mavericks, offshore of Half Moon Bay. NOAA is changing the current high surf warning (HSW) requirement to a less stringent high surf advisory (HSA) requirement. The MPWC zone 5 was created in 2009 primarily to allow MPWC to support big-wave surfing at Mavericks during winter months when wildlife activity is significantly reduced in this area. Currently, MPWC may access zone 5 at Mavericks only when HSW conditions (predicted breaking waves at the shoreline of 20 feet or greater) are in effect, as announced by the National Weather Service for San Mateo County during the months of December, January, and February. However, due to unique bathymetric features at Mavericks, waves can exceed 20 feet well before HSW conditions are announced county-wide. Allowing MPWC access to Mavericks during HSA conditions (predicted breaking waves at the shoreline of 15 feet or greater) allows MPWC presence at the break three to five additional days per year to provide safety assistance to surfers operating in a highly energized surf zone.

Surfers have developed new techniques for accessing larger waves, enabling surfers to now routinely surf extremely large waves at Mavericks during winter HSA conditions when MPWC access to the zone is currently prohibited. In February 2017, an MBNMS Advisory Council subcommittee recommended lowering the current conditional threshold for MPWC access to Mavericks from a HSW to a HSA condition during the months of December, January, and February to allow expanded use of MPWC for safety assistance to surfers recreating in extreme sea conditions. The MBNMS Advisory Council voted unanimously to support the subcommittee recommendation on February 17, 2017. NOAA agrees with the MBNMS Advisory Council recommendation and believes it would benefit public safety, while posing no significant added threat of disturbance to protected wildlife due to minimal wildlife activity in the area during extreme high-surf conditions in winter months.

Consistent with the text that appeared in the proposed rule, NOAA amends the MBNMS regulations to modify boundaries of four, year-round MPWC zones in a manner that maintains NOAA's original intent to provide recreational opportunities for MPWC within the sanctuary, while safeguarding sensitive sanctuary resources and habitats from unique threats of disturbance by these watercraft. NOAA is not modifying the boundaries of the seasonal/conditional zone 5 at Mavericks.

Specifically, these modifications reduce the number of deployed boundary buoys and associated navigational hazards, aesthetic impacts, and mooring failures that create public safety issues, marine debris, seafloor impacts, and excessive maintenance efforts. The zones were established in 1992 to provide recreational use areas for MPWC while safeguarding marine wildlife and habitats. MPWC have the unique capability to sharply maneuver at high speeds in the ocean environment and freely access remote and sensitive marine habitat areas, unlike any other type of motorized vessel (57 FR 43310, September 18, 1992).

The four MPWC zones were established near each of the four harbors in the sanctuary where MPWC operators typically launch. The boundaries were delineated without consideration of practical matters such as the integrity or sustainability of buoy stations. For example, buoys deployed off rocky points have experienced repeated mooring failures due to heavy wave diffraction/reflection, abrasive and mobile rocky substrate affecting mooring tackle, and a lack of soft sediments into which an anchor may be securely set. Buoys deployed in deep water have repeatedly failed due to suspected interactions with vessels and commercial fishing gear. Mooring failures cause deposition of chain and anchors on the seafloor and pose a hazard to mariners and the public from drifting buoys. Even when buoys hold station, they could present navigation obstacles. As stated above, reducing the number of boundary buoys by utilizing existing marks and geographical features ( e.g., United States Coast Guard (USCG) navigation buoys and landmarks) can markedly reduce navigational hazards and mooring failures that create public safety issues, marine debris, seafloor impacts, and excessive maintenance efforts.

Anecdotal observations of MPWC zone use over time by harbor officials, marine enforcement officers, ocean users, sanctuary staff, and volunteers indicate that the zones are rarely used by MPWC operators. Therefore, reconfiguring the zones will minimally impact a small number of users.

Relocation of marker buoys to shallower mooring depths will improve station-keeping, inspection, and maintenance of buoy moorings. Reconfiguring the four zones reduces the overall number of deployed MPWC boundary buoys from fifteen to nine, which is a 40% net reduction in the number of MPWC boundary buoy mooring sites; eliminates six existing buoy mooring stations entirely; replaces four existing mooring stations with four new shallower mooring stations; and leaves five previous mooring stations unchanged. These modifications will result in the permanent removal of anchors and chain from the seafloor at ten sites and the installation of anchors and chain at four new sites. As previously stated, the four new mooring stations will be in shallower water and deliberately sited in mud/sand substrate to avoid rocky reef habitat—a purposeful reduction of negative environmental impacts. Zone reconfigurations result in a 59% reduction of total areal coverage of the four year-round zones, resulting in an equal reduction of surface area subject to direct MPWC interactions with specially protected marine wildlife, such as migratory birds, whales, dolphins, porpoise, turtles, sea lions, and sea otters.

The reconfigured MPWC zones still provide considerable area adjacent to all four harbors for general use of MPWC, fulfilling the original goal for the zones when MBNMS was established in 1992. The four reconfigured year-round access zones offer 0.96 square miles (0.72 nmi 2 ) of riding area south of Pillar Point Harbor, 2.63 square miles (1.99 nmi 2 ) off Santa Cruz Harbor, 2.29 square miles (1.73 nmi 2 ) off Moss Landing Harbor, and 3.10 square miles (2.34 nmi 2 ) off Monterey Harbor. Maps depicting MPWC zone boundary changes can be found in the final EA.

Reconfiguring the four zones to be smaller and closer to shore provides improved MPWC access and operator safety, and also aids zone monitoring, enforcement, and planned systematic surveys of zone use described in the new MBNMS management plan. The zone reconfigurations shorten the length of the MPWC access corridors to the Santa Cruz and Monterey zones by 66% and 23% respectively, allowing MPWC operators easier and quicker access to both riding zones. The shorter access corridors lower the potential for negative interactions with marine traffic and wildlife as MPWC transit to or from harbors. Rotation of the access corridor at the Monterey zone, away from the predominant marine traffic pattern at the harbor entrance, also reduces the potential for negative interaction with other vessels there. The reconfigured zone boundaries at Santa Cruz shift that zone closer to shore, which provides MPWC operators easier and faster access to the riding area, as well as improved safety should an MPWC operator need emergency assistance. In the past, MPWC users requested that the access corridor be shortened and the zone at Santa Cruz be shifted closer to shore.

The five existing MPWC zones remain at their current general geographical location. Consistent with the proposed rule, NOAA is making the following changes to the four year-round MPWC zones:

1. Modify the year-round MPWC zone at Half Moon Bay by using existing USCG red bell buoy 2 and existing USCG green gong buoy 1S as boundary points instead of current MBNMS buoys PP2 and PP3. By re-shaping the current zone from a parallelogram to a concave pentagon, the zone's general position south of Pillar Point Harbor is maintained, increasing the zone area by 10% (from 0.87 sq mi (0.66 nmi 2 ) to 0.96 sq mi (0.73 nmi 2 )). Permanent removal of the two MBNMS buoys at this zone reduces navigational obstructions, risk of mooring failure, and buoy and tackle loss.

2. Modify the year-round MPWC zone at Santa Cruz by using existing USCG red/white whistle buoy SC as a boundary point, instead of the current MBNMS buoy SC7. By re-shaping the current zone from a rectangle to a parallelogram, the zone position rotates 45° clockwise to the NE, reducing the zone area by 59% (from 6.36 sq mi (4.80 nmi 2 ) to 2.63 sq mi (1.98 nmi 2 )). The transit route to the zone from the entrance of the Santa Cruz Small Craft Harbor is reduced from 1.35 miles (1.17 nmi) to 0.5 miles (0.43 nmi). One MBNMS buoy will be permanently removed from the waterway, one buoy will remain on station, and two buoys will be redeployed to shallower depths. The redistributed buoys will be positioned within better visible range of one another, in softer seafloor sediments, and away from rocky points, thus reducing navigational obstructions, risk of mooring failure, and buoy and tackle loss.

3. Modify the year-round MPWC zone at Moss Landing by eliminating current MBNMS buoys ML4 and ML5. By re-shaping the current zone from an irregular hexagon to a trapezoid, the eastern portion of the zone remains in its current position; the zone area is reduced by 72% (from 8.10 sq mi (6.12 nmi 2 ) to 2.29 sq mi (1.73 nmi 2 )). Permanent removal of two MBNMS buoys at this zone reduces navigational obstructions, risk of deep-water mooring failures, and buoy and tackle loss.

4. Modify the year-round MPWC zone at Monterey by using existing USCG red bell buoy 4 as a boundary point instead of MBNMS buoy MY3. By re-shaping the current zone from a trapezoid to a parallelogram, the zone position rotates 90° clockwise to the NE, and the zone area is reduced by 51% (from 6.36 sq mi (4.8 nmi 2 ) to 3.10 sq mi (2.34 nmi 2 )). One MBNMS buoy will be permanently removed from the waterway, one buoy remains on station, and two buoys will be redeployed to shallower depths. The redistributed buoys will be positioned within better visible range of one another, in softer seafloor sediments, and away from rocky points and popular commercial squid fishing grounds, which reduces navigational obstructions, risk of deep-water mooring failure, risk of disruption to commercial fisheries, and buoy and tackle loss.

The length of the prescribed zone transit route from Monterey Harbor decreases from 1.00 mile (0.87nm) to 0.77 miles (0.67 nm). In addition, the transit corridor rotates 52 degrees farther east from the harbor entrance, away from the predominant marine traffic pattern to and from the harbor.

Reducing the number of necessary MPWC boundary buoys also reduces impacts to benthic habitats, risk of wildlife entanglements, and risk of maritime collisions. Relocating buoys will make them more resistant to storm damage and buoy anchor and chain failure, thereby reducing risks to mariners from drifting buoys and marine debris from unnecessary deposition of chain and anchors on the seafloor. Utilizing mooring locations over soft seafloor sediments can reduce scarring and damage to hard-substrate benthic habitat and organisms from mooring chains.

In summary, revising locations of MPWC zone boundaries represents essential adaptive management as envisioned in the NMSA and the required management plan review process. The adjustments maintain 9 square miles (7.82 nmi 2 ) of the sanctuary for operating MPWC off all four harbors in areas with decreased likelihood of wildlife disturbance, which were goals for the original creation of the zones in 1992. Coupled with the increased operating days at the seasonal/conditional MPWC zone at Mavericks, NOAA's original intent to facilitate MPWC recreational opportunities is maintained. Maps depicting the proposed MPWC zone boundary changes can be found in the final EA.

Consistent with the text that appeared in the proposed rule, NOAA amends MBNMS regulations by modifying 15 CFR 922.132(c)(1) to correct an error. The current regulatory text at 15 CFR 922.132(c)(1) states, in part, that a list of exempted Department of Defense (DOD) activities at the Davidson Seamount Management Zone (DSMZ) is published in the 2008 Final Environmental Impact Statement (FEIS) that accompanied the 2008 MBNMS Management Plan. However, due to an administrative error, the list of exempted activities was not included in the 2008 FEIS. A December 18, 2006, letter from the U.S. Air Force (USAF) 30th Space Wing identified a list of USAF activities at the DSMZ that existed at the time of the DSMZ designation that are subject to DOD exemption. The MBNMS Superintendent confirmed in a January 5, 2009, letter to the USAF 30th Space Wing that NOAA acknowledged the list of exempted activities as valid from the effective date of inclusion of the DSMZ within MBNMS (March 9, 2009) and that NOAA would correct the administrative record and regulations to properly document the exempted DOD activities within the DSMZ. Accordingly, NOAA amends 15 CFR 922.132(c)(1) by replacing “2008 Final Environmental Impact Statement” with “2021 Final Environmental Assessment for the MBNMS Management Plan Review” and has added an appendix to the 2021 final EA to serve as the published list of exempted DOD activities within the DSMZ. NOAA herein affirms that the exemptions requested by the USAF in 2006 and confirmed by NOAA in 2009 have been valid since the effective date of the DSMZ's addition to MBNMS (March 9, 2009).

NOAA received 159 comments on the proposed rule, draft management plan, and draft environmental assessment (EA) during the July 6 through September 4, 2020, public review period. NOAA hosted three virtual public meetings with 117 total participants. NOAA received written comments from members of the public submitted at www.regulations.gov, written comments from MBNMS's Research Activity Panel, and oral and written comments provided during virtual public meetings and two sanctuary advisory council meetings. Due to the volume of comments received, the section below summarizes and addresses those comments related to the proposed rulemaking. Please refer to Appendix A in the final EA ( https://montereybay.noaa.gov/intro/mp/welcome.html ) to see summaries of and responses to all substantive issues raised in all comments for the proposed rule, draft management plan, and draft EA.

All substantive issues raised in relation to the proposed rulemaking are summarized and addressed in this section. NOAA summarized the comments according to the content of the statement or question put forward in written statements or oral testimony regarding the proposed action and alternatives. Technical or editorial comments on any of the draft documents are incorporated in the final rule, final management plan, and final EA, and are not described in further detail here.

1. Comment: NOAA should support the regulation clarifying the language in the terms of designation and MBNMS regulations prohibiting permitting the disposal of dredged material within the sanctuary (other than at sites authorized by the U.S. EPA prior to the effective date of designation) which does not preclude NOAA from authorizing the beneficial use of clean dredged material within sanctuary boundaries when suitable for habitat restoration purposes.

Response: NOAA agrees and is moving forward with the beneficial use regulation with some clarifications and modifications.

2. Comment: NOAA should clarify its definition of “clean” material and clarify the standards used to assess material appropriate for beneficial use projects.

Response: In this final rule, NOAA acknowledges that the proposed use of “clean” as a standard for beneficial use projects created challenges given how that word is defined elsewhere in MBNMS regulations ( see 15 CFR 922.131). NOAA has determined that the purpose of protection of sanctuary resources and qualities could be maintained via a revised sediment standard and implementation of permit and/or authorization review criteria. NOAA has therefore removed “clean” from the sanctuary definition of “beneficial use of dredged material.” Instead, the ONMS Director must determine that the dredged material is “suitable” as a resource for habitat protection or restoration purposes. Please see Section II. “Changes from Proposed to Final Regulations” for further information about the change from the proposed rule to the final rule, as well as a description of the standard for `suitable'.

3. Comment: NOAA should use EPA's standards for determining suitability of dredged material for placement within MBNMS for beneficial use.

Response: NOAA will apply ONMS review criteria for permits and/or authorizations. In addition to an ONMS permit or authorization, a project would also be reviewed and permitted, as appropriate, by other Federal and State regulatory authorities with jurisdiction over the proposed beneficial use project, such as the EPA, as applicable. Please see Section III A. 1. “Review and permitting of beneficial use projects” for more information on how NOAA will evaluate beneficial use projects proposed to be conducted within sanctuary boundaries.

4. Comment: NOAA received comments that the proposed beneficial use definition unnecessarily limits the origin of dredged material that can be considered for beneficial use to the four harbors adjacent to the sanctuary.

Response: NOAA provides several reasons in Section III. A. 2. b., “Sediment from local harbors immediately adjacent to the sanctuary,” why the four harbors immediately adjacent to the sanctuary, and no other harbors, are considered eligible sources of material for protecting or restoring habitats. First, the four harbors and the sanctuary are in the same local sediment transport cell, which means that the sediments that settle in the four harbor channels generally come from the same sources as those that settle in the sanctuary. Second, if the four harbors adjacent to the sanctuary did not exist, sand and other sediment would not settle in the harbors and would thus remain in the coastal transport cell. Therefore, the regulatory clarifications regarding the permitted use of suitable dredged material from the four named harbors for beneficial use projects achieve the intent of helping restore the normal transport of sediment along the coast within the sanctuary. Third, NOAA describes historical reasons why the original designation of MBNMS did not envision the sanctuary as a site to absorb dredge materials from harbors distant to MBNMS.

In addition to the four harbors, NOAA describes several other sources of material that could be approved for beneficial use projects within the sanctuary. Please see Section III. 2. “Sources of Sediment eligible for use in beneficial use projects” for more information on other eligible sources of material.

5. Comment: NOAA received comments that the proposed rule restricts the use of dredged material to “habitat restoration,” which could preclude using the dredge material to protect infrastructure threatened by coastal erosion, sea level rise, and coastal storms.

Response: In response to these comments, NOAA has modified the definition of the “beneficial use of dredged material” to clarify that beneficial use of dredged material includes habitat protection and habitat restoration purposes. As explained in Section II. “Changes from Proposed to Final Regulation” and Section III. A. 1. “Review and Permitting of Beneficial Use Projects”, proactive “protection” of natural habitats serves a beneficial purpose and, by helping to prevent future degradation of habitat, may preclude or reduce the need for habitat restoration. An ancillary benefit from restoring and protecting beach habitat could include coastal infrastructure protection.

6. Comment: NOAA should describe habitat restoration purposes to meet the criteria for beneficial use.

Response: NOAA includes managing sediment for the purpose of habitat restoration in the two Coastal Regional Sediment Management Plans (CRSMP) that pertain to MBNMS. For example, the CRSMP for the Santa Cruz Littoral Cell mentions that sediment management projects could provide several direct benefits to the region including “mitigating shoreline erosion and coastal storm damage; allowing for biological habitat restoration and protection; increasing natural sediment supply to the coast; and providing public safety, access and recreational benefits through beach restoration.”  16 Further, implementation of the two CRSMPs are included in the Coastal Erosion and Sediment Management Action Plan, Strategy CESM-1. NOAA also provides additional information in Section III. A. 1. “Review and Permitting of Beneficial Use Projects” regarding the meaning of “habitat restoration” for purposes of this final rule.

7. Comment: NOAA should clarify the process for ONMS to issue authorizations to USACE for permits to allow disposal of dredged material in the sanctuary by Santa Cruz Port District (SCPD).

Response: Within MBNMS, NOAA ONMS authorizes permits issued for disposal of dredged material at approved disposal sites. An authorization or permit is necessary for this prohibited activity to be conducted within the sanctuary (15 CFR 922.48, 922.49, 922.132, and 922.133). NOAA may authorize the USACE dredge disposal permit issued to SCPD and/or the California Coastal Commission (CCC) Coastal Development Permit (CDP) based on NOAA's authorization review process, including in this instance, consideration of alignment of regulated activities and mitigations to protect sanctuary resources. In summary, NOAA will continue to work closely with EPA, USACE, CCC, and other State and Federal resource agencies when assessing dredge disposal activities, and may authorize valid permits, leases, licenses, approvals or other authorizations (15 CFR 922.132(e)) pertaining to dredge disposal in approved dredge disposal sites (15 CFR 922.132(a)(2)(i)(F)).

8. Comment: NOAA received comments asking if NOAA's regulatory action regarding beneficial use of dredged material will affect how ONMS authorizes current harbor dredge disposal activities.

Response: NOAA has issued sanctuary authorizations to Santa Cruz, Moss Landing, and Monterey harbors for depositing harbor dredge at approved disposal sites in the past. NOAA's regulatory action regarding beneficial use of dredged material will not alter the sanctuary authorization or permitting process for depositing harbor dredge material at the approved disposal sites (15 CFR 922.132(a)(2)(i)(F)). If any of the four harbors identified in the “beneficial use” definition (the three listed here or Pillar Point) propose a project for which the material dredged from their harbor would be used for beneficial use to protect or restore habitat, NOAA would follow the process steps outlined in this rule.

9. Comment: NOAA should reserve the right to alter the timing and frequency of beach nourishment treatments should data and analysis indicate negative ecological impacts from excessive sediment loading or seasonal conflicts with reproductive cycles of flora and fauna.

Response: NOAA concurs. In accordance with 15 CFR 922.49(a)(4) and 15 CFR 922.132(e), authorization applicants must comply with any terms and conditions the issuing NOAA official deems reasonably necessary to protect sanctuary resources and qualities. This may include terms and conditions pertaining to the timing and frequency of dredged material placement.

10. Comment: NOAA should consider authorizing use of contaminated dredge materials for beneficial use if pre-treated to reduce toxicity levels.

Response: NOAA believes it is important for MBNMS to only rely upon dredged material that has been deemed suitable by the ONMS Director for habitat protection or restoration projects. As explained in Section III. A. 1. “Review and Permitting of Beneficial Use Projects”, the determination of suitability includes consideration of compatibility standards for water and physical quality of any sediment placed within the sanctuary to ensure protection of native habitats and ecology. If dredged material can be successfully pre-treated to reduce toxicity to suitable levels, it may be considered for beneficial use projects.

11. Comment: NOAA should consider negative effects of beach nourishment, such as introduction of invasive species and interruption of important temporal ecological processes at receiving sites.

Response: NOAA concurs and has implemented regulations that prohibit the introduction of introduced species to the ecosystem of the sanctuary (15 CFR 922.131 and 922.132(a)(12)). Ecological impacts to receiving sites will be assessed through project-specific environmental reviews, including assessments of the source sediment to ensure the absence of introduced species. Further, NOAA will consult with appropriate resource management agencies for any proposed beach nourishment project in the sanctuary using beneficial use of dredge material.

12. Comment: NOAA should authorize use of dredged material for artificial reefs, islands, and other purposes beyond habitat restoration.

Response: NOAA disagrees. Using dredged material to develop artificial reefs and islands within MBNMS is beyond the scope of this action and the intent of the original sanctuary designation. NOAA is implementing this action to protect and restore natural habitats and ecological communities and processes within sanctuaries as much as possible—not to create artificial habitats and communities for interests or development purposes that may be incompatible with the sanctuary's primary mandate of resource protection. Furthermore, the State is the lead authority for artificial reefs in California state waters and does not have a process in place for permitting artificial reefs at this time.

13. Comment: NOAA should use crushed glass for clean fill material for artificial reefs.

Response: NOAA disagrees. There are strict prohibitions regarding ocean dumping and discharges into the sanctuary and this suggestion runs counter to these prohibitions. See, as well, the response to the above comment regarding artificial reefs.

14. Comment: NOAA should rectify the omission of the list of exempted Department of Defense Activities at the Davidson Seamount Management Zone in the 2008 FEIS.

Response: NOAA is including an appendix in the 2021 final EA to serve as the published list of exempted DOD activities within the DSMZ, which is referenced and confirmed by the January 5, 2009, letter to the U.S. Air Force 30th Space Wing from the MBNMS Superintendent.

15. Comment: NOAA should ban cruise ships in the sanctuary as well as any discharges of fuel and waste from them.

Response: The NMSA facilitates multiple uses within sanctuaries, including commercial and recreational uses, compatible with the primary objective of resource protection. NOAA believes the current MBNMS regulations prohibiting discharges from within or into MBNMS of any material or other matter from a cruise ship ( e.g., fuel and waste), except clean vessel engine cooling water, clean vessel generator cooling water, vessel engine or generator exhaust, clean bilge water, or anchor wash (15 CFR 922.132(a)(2)(ii)), are adequate at this time to protect sanctuary resources while also allowing use of the resources from a cruise ship. If data become available in the future that show that these regulations are not adequate, NOAA can amend regulations affecting cruise ships in the future.

16. Comment: NOAA received a variety of comments regarding MPWCs, including recommendations to prohibit MPWC operation throughout MBNMS; close the year-round MPWC operating zone at Pillar Point due to low use by MPWC; prohibit MPWC operations in nearshore areas; and implement NOAA's planned assessment of MPWC zone use.

Response: NOAA is not closing any of the five existing zones where MPWC are allowed to operate within the sanctuary. However, Strategy RP-15 in the final management plan includes assessing MPWC use levels and impacts within the MPWC zones, as well as an evaluation of the relevance of the zones in meeting their originally intended purposes. The MPWC zones were originally sited seaward of nearshore resources such as kelp forests and rocky reefs to minimize negative impacts to coastal wildlife and habitats. Thus, MPWC are already excluded from nearshore areas of the sanctuary, except as permitted by NOAA or approved for public safety agency training and search and rescue operations.

17. Comment: NOAA should not make Sanctuary Ecologically Significant Areas (SESAs) into regulated marine protected areas.

Response: NOAA is not planning to implement additional regulated zones in the sanctuary. SESAs are areas that encompass remarkable, representative, and/or sensitive marine habitats, communities and ecological processes. SESAs are focal areas for facilitating research with partners in order to better understand natural and human-caused variation, as well as resource protection.

In accordance with NEPA, on August 27, 2015, NOAA published a notice of intent to prepare an Environmental Impact Statement (EIS) in order to identify and analyze potential impacts associated with a review of the 2008 management plan for MBNMS (80 FR 51973). NOAA's analysis of the draft management plan and proposed regulatory changes indicated no significant impacts are expected. Accordingly, NOAA determined the preparation of an EIS would not be necessary, and instead prepared a draft EA, which was made available for public review on July 6, 2020 (85 FR 40143). In that notice, NOAA also withdrew the portion of the Federal Register Notice published on August 27, 2015, that provided notice of intent to prepare an EIS.

In the draft EA, NOAA evaluated the potential impacts on the human environment of the proposed action and alternatives in compliance with NEPA, as amended (42 U.S.C. 4321 et seq. ), and its implementing regulations (40 CFR parts 1500 through 1508). NOAA prepared the EA and FONSI for this action using the 1978 Council on Environmental Quality (CEQ) regulations because this environmental review began before September 14, 2020, which was the effective date of the amendments to the CEQ regulations implementing NEPA (85 FR 43304, July 16, 2020). The draft EA considered all reasonable alternatives to the proposed Federal action that met the purpose and need for the action. These alternatives included a no action alternative and a range of reasonable alternatives for managing MBNMS according to the objectives of the NMSA.

The draft EA found that no significant impacts to resources and the human environment are expected to result from this proposed action. Following public comment on the proposed rule and draft EA and consultation under applicable natural and cultural resource statutes (described below), NOAA prepared a final EA and FONSI.

In preparing the final EA, NOAA evaluated and considered all public and agency comments received on the draft EA and notice of proposed rulemaking, which resulted in changes to the proposed regulations and draft management plan. NOAA determined that these changes to the regulations and draft management plan did not result in any changes to the determinations of the draft EA with regard to the significance of the impacts. Therefore, NOAA prepared a FONSI that concluded that implementing Alternative C ( i.e., adopt a new management plan and modify MBNMS regulations) would not have a significant impact on the quality of the human environment. Copies of the final EA and FONSI are available at the website listed in the ADDRESSES section of this final rule.

This rule has been determined to be not significant for purposes of Executive Order 12866.

NOAA has concluded this regulatory action does not have federalism implications sufficient to warrant preparation of a federalism assessment under Executive Order 13132.

The Regulatory Flexibility Act (RFA), as amended and codified at 5 U.S.C. 601 et seq., requires an agency to prepare a regulatory flexibility analysis of any rule subject to the notice and comment rulemaking requirements under the Administrative Procedure Act (5 U.S.C. 553) or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.

Under section 605(b) of the RFA, if the head of an agency (or his or her designee) certifies that a rule will not have a significant impact on a substantial number of small entities, the agency is not required to prepare a regulatory flexibility analysis. Pursuant to section 605(b), the Chief Counsel for Regulation, Department of Commerce, submitted a memorandum to the Chief Counsel for Advocacy, Small Business Administration, certifying that the original proposed rule would not have a significant impact on a substantial number of small entities. The rationale for that certification was set forth in the preamble of the proposed rule (85 FR 40143, July 6, 2020).

None of the changes NOAA has made to the regulations from the proposed rule to the final rule alter the determination that this rule will not have a significant impact on small businesses. The impact levels assessed in the original analysis remain valid ( see table summarizing impact levels, 85 FR 40143, 40150). NOAA also did not receive any comments on the certification or conclusions. Therefore, the determination that this rule will not have a significant economic impact on a substantial number of small entities remains unchanged. As a result, a final regulatory flexibility analysis was not required and none was prepared.

This final rule does not create any new information collection requirement, nor does it revise the information collection requirement that was approved by the Office of Management and Budget (OMB Control Number 0648-0141) under the Paperwork Reduction Act of 1980, 44 U.S.C. 3501 et seq. (PRA). Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.

In fulfilling its responsibility under the National Historic Preservation Act (NHPA) (54 U.S.C. 300101 et seq. ) and NEPA, NOAA identified historic properties and assessed the potential effects of the undertaking (implementation of the revised regulations and adoption of the new management plan) on such properties. NOAA determined that this undertaking would result in no adverse effects to historic properties because it is a planning and administrative effort not likely to have physically direct or indirect effects to historic properties. NOAA notified the California State Historic Preservation Officer of this determination upon publication of the proposed rule and draft management plan. The State Historic Preservation Officer reviewed NOAA's determination and notified NOAA by letter on January 15, 2021, that they have no comments for this action. NOAA has no further obligations under NHPA Section 106 at this time. If specific projects do arise out of management plan implementation, NOAA will conduct Section 106 consultation at that time, as needed.

The Endangered Species Act (ESA) of 1973 as amended (16 U.S.C. 1531, et seq. ), provides for the conservation of endangered and threatened species of fish, wildlife, and plants. Federal agencies have an affirmative mandate to conserve ESA-listed species. Section 7(a)(2) of the ESA requires Federal agencies, in consultation with the National Marine Fisheries Service (NMFS) and/or the U.S. Fish and Wildlife Service, to ensure that any action they authorize, fund, or carry out is not likely to jeopardize the continued existence of an ESA-listed species or result in the destruction or adverse modification of designated critical habitat. NOAA's ONMS completed informal consultation under Section 7 of the ESA with NOAA's Office of Protected Resources and the U.S. Fish and Wildlife Service for potential impacts of this action on ESA-listed species and designated critical habitat. The consulting agencies concurred with NOAA ONMS's determination that the action may affect, but is not likely to adversely affect, listed species and/or designated critical habitat. Additional details and correspondence related to informal consultation under ESA are included in the Final EA.

The Marine Mammal Protection Act (MMPA) of 1972 (16 U.S.C. 1361 et seq. ), as amended, prohibits the “take”  17 of marine mammals in U.S. waters. Section 101(a)(5)(A-D) of the MMPA provides a mechanism for allowing, upon request, the “incidental,” but not intentional, taking of small numbers of marine mammals by U.S. citizens who engage in a specified activity (other than commercial fishing or directed research on marine mammals) within a specified geographic region. ONMS determined that the action would not cause the take of any marine mammal protected under the MMPA and therefore potential impacts to marine mammals did not rise to a level that required consultation under MMPA.

The principal objectives of the Coastal Zone Management Act (CZMA), 16 U.S.C. 1451 et seq., are to encourage and assist states in developing coastal management programs, to coordinate state activities, and to preserve, protect, develop and, where possible, restore or enhance the resources of the Nation's coastal zone. Section 307(c) of the CZMA requires Federal activity affecting the land or water uses or natural resources of a state's coastal zone to be consistent with that state's approved coastal management program to the maximum extent practicable. 16 U.S.C. 1456(c). In July 2020, NOAA initiated Federal consistency review with the California Coastal Commission. The California Coastal Commission provided comments to NOAA on the proposed rule. On August 12, 2021, NOAA provided the California Coastal Commission with a revised description of the proposed action and a summary of changes made in response to public comment and consultations. On September 2, 2021, the California Coastal Commission issued a letter of concurrence to NOAA.

For the reasons set forth above, NOAA is amending part 922, title 15 of the Code of Federal Regulations as follows:

The Currency and Foreign Transactions Reporting Act of 1970, as amended, is the legislative framework commonly referred to as the Bank Secrecy Act (BSA). 1

In 1988, the Anti-Drug Abuse Act amended the BSA, codified in relevant part at 31 U.S.C. 5326, to authorize the Secretary to impose additional reporting and recordkeeping requirements on domestic financial institutions in a geographic area. 2 This grant of authority to the Secretary did not require the promulgation of an implementing regulation, and therefore was, and continues to be, self-executing.

Nevertheless, in 1989, Treasury issued a regulation incorporating the terms of Section 5326 that were in effect at that time. The regulation mirrored the statute, with the addition of certain clarifying and procedural language. See 54 FR 33675 (Aug. 16, 1989) (now codified at 31 CFR 1010.370). 3 For example, the regulation substituted “and/or” for “and” in the first paragraph to make clear, consistent with the statute, that the Secretary could impose reporting or recordkeeping requirements upon a finding that such requirements are necessary, but need not do both. The regulation also interpreted the statutory phrase “geographic area” to mean “any area in one or more States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, the Trust Territory of the Pacific Islands, the territories and possessions of the United States, and/or political subdivision or subdivisions thereof . . . .” In addition, the regulation specified certain procedures, including that the Secretary would direct any order to the Chief Executive Officer of a reporting financial institution and would prescribe certain information in the order.

In subsequent years, Section 5326 was amended three times in a manner that expanded the Secretary's authority. In 1992, the Annunzio-Wylie Anti-Money Laundering Act amended Section 5326 by, among other things, prohibiting financial institutions from disclosing the existence of an order to any person except as prescribed by the Secretary. 4

In 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) extensively amended the BSA, including Section 5326 by adding “nonfinancial trade or business” after “financial institution” where that phrase appears, thereby authorizing the Secretary to issue orders to nonfinancial trades or businesses in addition to financial institutions. The Act also amended Section 5326 to extend the maximum period for an order (unless renewed) from 60 days to 180 days. 5

In 2017, the Countering America's Adversaries Through Sanctions Act further amended Section 5326. This Act amended Section 5326's original title (“Records of certain coin and currency transactions”) by striking out the phrase “coin and currency” before “transactions.” The Act also replaced the reference to any “coins,” “currency,” and “monetary instrument” with the word “funds,” thereby making clear that a transaction need not involve only coin, currency, or monetary instruments to be covered under an order. The section was also amended to change the Secretary's required finding that an order be “necessary to carry out the purposes of this subtitle or to prevent evasions thereof.” In replacing “and” with “or,” this amendment thereby required one such finding, but not both. 6

The elements of the regulation that incorporated the terms of the statute in 1989 were not intended to limit the Secretary's authority under the statute. Accordingly, as subsequent amendments described above have expanded the Secretary's authority, FinCEN has understood the authority to be coextensive with the statute. To avoid any potential confusion regarding FinCEN's authority under the statute, this final rule updates the regulation to reflect the subsequent statutory amendments. This rule does not materially amend the other provisions in the regulation, except for one amendment to FinCEN's procedure for directing orders to chief executive officers. The rule amends that procedure to conform it to the amended statute by adding “nonfinancial trades or businesses” after “financial institution” in the paragraph where the procedure is described.

The section heading is changed from “Reports of certain domestic coin and currency transactions” to “Reports of certain domestic transactions” to align with the statutory Section Title.

Paragraph (a) has been divided into three parts: (a)(1), (2), and (3). The revised paragraph (a)(1) contains the language in current § 1010.370(a), but with the following additions and substitutions of terms that are reflected in 31 U.S.C. 5326(a): “chapter or to” is substituted for “chapter and to”; “, or any domestic nonfinancial trade or business or group of domestic nonfinancial trades or businesses,” is added after “group of domestic financial institutions”; “transfer of funds (as the Secretary may describe in such order)” is substituted for “transfer of United States coins or currency (or such other monetary instruments as the Secretary may describe in such order)”; and “or group of domestic financial institutions, or domestic nonfinancial trade or business or group of domestic nonfinancial trades or businesses” is added after “such financial institution”, and further adds “nonfinancial trade or business” after “financial institution” to clarify FinCEN's procedure for directing orders to chief executive officers, if any.

Paragraphs (a)(2) and (3) reflect the language set forth in 31 U.S.C. 5326(b).

Paragraph (b) contains the language in current § 1010.370(b), but substitutes “funds” for “currency” and “currency and/or monetary instruments” to reflect the use of the term “funds” throughout 31 U.S.C. 5326.

Paragraph (d)(1) contains the language in current § 1010.370(d)(1), but replaces “60 days” with “180 days,” to reflect the language in 31 U.S.C. 5326(d).

New paragraph (e) reflects the nondisclosure language that is set forth in 31 U.S.C. 5326(c).

The Administrative Procedure Act (APA) (codified in relevant part at 5 U.S.C. 553), generally requires that agencies give interested persons an opportunity to participate in a rulemaking by the submission of comments, except when, among other reasons, the agency is amending its own “rules of agency organization, procedure, or practice” or the agency finds good cause that notice and public procedure are “impracticable, unnecessary, or contrary to the public interest.” Likewise, the APA requires a delayed effective date for a rule except under certain conditions, including rules of agency procedure, and as provided by the agency for good cause found and published with the rule.

FinCEN finds that public procedure is unnecessary, as this final rule merely updates the regulation to reflect the terms set forth in the underlying statute in order to avoid any potential confusion regarding FinCEN's statutory authority under Section 5326. Because the final rule conforms the regulation to the statute and reflects no discretionary or substantive determination, public procedure would not inform this rule. For similar reasons, FinCEN also finds that a delayed effective date is unnecessary. Because FinCEN understands its authority to be coextensive with the statute, this update to the regulation does not alter FinCEN's authority and merely provides clarity to the public.

In conforming the regulation to the statute, this rule also adds the phrase “nonfinancial trades or businesses” after “financial institution” in the provision relating to FinCEN's procedure for directing orders to chief executive officers. This update does not change the procedure specified in the regulation, but only updates it to reflect the statute's inclusion of “nonfinancial trades or businesses.” FinCEN finds that public procedure and a delayed effective date are unnecessary for this amendment because it amends a rule of agency procedure, and in any event, merely conforms that rule to the statute.

Because no notice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) do not apply.

This final rule is not a significant regulatory action under section 3.f. of Executive Order 12866.

The collection of information contained in this rule has been reviewed and approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), and has been assigned OMB Control Number 1506-0056. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number.

For the reasons set forth in the preamble, part 1010 of chapter X of title 31 of the Code of Federal Regulations are amended as follows:

The Coast Guard will enforce a special local regulation for the Palm Beach Holiday Boat Parade published in 33 CFR 100.702, Table 1 to § 100.702, Line 9, on December 4, 2021 from 5:30 p.m. through 8:30 p.m. This action is being taken to provide for the safety and security of navigable waterways during this one-day event. The regulations for marine events within the Seventh Coast Guard District can be found in § 100.702(c) covers this event and Table 1 to § 100.702, Line 9, specifies the location of the special local regulation for the Palm Beach Holiday Boat Parade, which encompasses a moving buffer zone of 50 yards around the parade as it travels along the Intracoastal Waterway in Palm Beach, FL. Only event sponsor designated participants and official patrol vessels will be allowed to enter the regulated area. Spectators may contact the Coast Guard Patrol Commander to request permission to pass through the regulated area. If permission is granted, spectators must pass directly through the regulated area at a safe speed without loitering.

In addition to this notice of enforcement in the Federal Register , the Coast Guard will inform the public through Local Notice to Mariners and marine information broadcasts at least 24 hours in advance of the enforcement of the special local regulation.

You may be potentially affected by this action if you manufacture, process, or use the chemical substances contained in this rule. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Manufacturers or processors of one or more subject chemical substances (NAICS codes 325 and 324110), e.g., chemical manufacturing and petroleum refineries.

This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA, which would include the SNUR requirements. Chemical importers are subject to the TSCA section 13 (15 U.S.C. 2612) import provisions. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, pursuant to 40 CFR 721.20, any persons who export or intend to export a chemical substance that is the subject of this rule are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)), and must comply with the export notification requirements in 40 CFR part 707, subpart D.

The docket includes information considered by the Agency in developing the proposed and final rules. The docket for this action, identified by docket identification (ID) number EPA-HQ-OPPT-2020-0497, is available at https://www.regulations.gov and at the Office of Pollution Prevention and Toxics Docket (OPPT Docket), Environmental Protection Agency Docket Center (EPA/DC), West William Jefferson Clinton Bldg., Rm. 3334, 1301 Constitution Ave. NW, Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the OPPT Docket is (202) 566-0280. Please review the visitor instructions and additional information about the docket available at https://www.epa.gov/dockets.

Due to the public health emergency, the EPA Docket Center (EPA/DC) and Reading Room is closed to visitors with limited exceptions. The staff continues to provide remote customer service via email, phone, and webform. For the latest status information on EPA/DC services and docket access, visit https://www.epa.gov/dockets.

EPA is finalizing SNURs under TSCA section 5(a)(2) for chemical substances which were the subject of PMNs P-18-289, P-18-330, P-18-334, P-18-335, and P-18-337. These SNURs require persons who intend to manufacture or process any of these chemical substances for an activity that is designated as a significant new use to notify EPA at least 90 days before commencing that activity.

Previously, in the Federal Register of October 20, 2020 (85 FR 66506) (FRL-10015-28), EPA proposed SNURs for these chemical substances. More information on the specific chemical substances subject to this final rule can be found in the Federal Register document proposing the SNURs. The docket includes information considered by the Agency in developing the proposed and final rules, including public comments and EPA's responses to the public comments received on the proposed rules, as described in Unit IV.

TSCA section 5(a)(2) (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule after considering all relevant factors, including the four TSCA section 5(a)(2) factors listed in Unit III.

General provisions for SNURs appear in 40 CFR part 721, subpart A. These provisions describe persons subject to the rule, recordkeeping requirements, exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the rule. Provisions relating to user fees appear at 40 CFR part 700. Pursuant to 40 CFR 721.1(c), persons subject to these SNURs must comply with the same SNUN requirements and EPA regulatory procedures as submitters of PMNs under TSCA section 5(a)(1)(A). In particular, these requirements include the information submission requirements of TSCA sections 5(b) and 5(d)(1), the exemptions authorized by TSCA sections 5(h)(1), 5(h)(2), 5(h)(3), and 5(h)(5) and the regulations at 40 CFR part 720. Once EPA receives a SNUN, EPA must either determine that the significant new use is not likely to present an unreasonable risk of injury or take such regulatory action as is associated with an alternative determination before manufacture or processing for the significant new use can commence. If EPA determines that the significant new use is not likely to present an unreasonable risk, EPA is required under TSCA section 5(g) to make public, and submit for publication in the Federal Register , a statement of EPA's findings.

TSCA section 5(a)(2) states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors, including:

• The projected volume of manufacturing and processing of a chemical substance.

• The extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance.

• The extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance.

• The reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.

In determining what would constitute a significant new use for the chemical substances that are the subject of these SNURs, EPA considered relevant information about the toxicity of the chemical substances, and potential human exposures and environmental releases that may be associated with the substances, in the context of the four bulleted TSCA section 5(a)(2) factors listed in this unit. During its review of these chemicals, EPA identified certain conditions of use that are not intended by the submitters, but reasonably foreseen to occur. EPA is designating those reasonably foreseen conditions of use as well as certain other circumstances of use as significant new uses.

By this rule, EPA is establishing certain significant new uses which have been claimed as CBI subject to Agency confidentiality regulations at 40 CFR part 2 and 40 CFR part 720, subpart E. Absent a final determination or other disposition of the confidentiality claim under 40 CFR part 2 procedures, EPA is required to keep this information confidential. EPA promulgated a procedure to deal with the situation where a specific significant new use is CBI, at 40 CFR 721.1725(b)(1) and has referenced it to apply to other SNURs.

Under these procedures a manufacturer or processor may request EPA to determine whether a specific use would be a significant new use under the rule. The manufacturer or processor must show that it has a bona fide intent to manufacture or process the chemical substance and must identify the specific use for which it intends to manufacture or process the chemical substance. If EPA concludes that the person has shown a bona fide intent to manufacture or process the chemical substance, EPA will tell the person whether the use identified in the bona fide submission would be a significant new use under the rule. Since most of the chemical identities of the chemical substances subject to these SNURs are also CBI, manufacturers and processors can combine the bona fide submission under the procedure in 40 CFR 721.1725(b)(1) with that under 40 CFR 721.11 into a single step.

If EPA determines that the use identified in the bona fide submission would not be a significant new use, i.e., the use does not meet the criteria specified in the rule for a significant new use, that person can manufacture or process the chemical substance so long as the significant new use trigger is not met. In the case of a production volume trigger, this means that the annual production volume limit is not exceeded by the amount identified in the bona fide submission to EPA. Because of confidentiality concerns, EPA does not typically disclose the actual production volume that constitutes the use trigger. Thus, if the person later intends to exceed that volume, a new bona fide submission would be necessary to determine whether that higher volume would be a significant new use.

EPA received a public comment from one identifying entity on the proposed rule. The Agency's response is described in a separate Response to Public Comments document that is available in the public docket for this rulemaking. In addition, EPA received three anonymous comments. They were either general in nature and did not pertain to the proposed rule or were broadly supportive of the rule and requested no changes to the rule itself; therefore, no response is required. EPA made no changes to the final rule based on these comments.

EPA is establishing significant new use and recordkeeping requirements for chemical substances in 40 CFR part 721, subpart E. In Unit IV. of the proposed SNUR, EPA provided the following information for each chemical substance:

• PMN number.

• Chemical name (generic name, if the specific name is claimed as CBI).

• Chemical Abstracts Service (CAS) Registry number (if assigned for non-confidential chemical identities).

• Basis for the SNUR.

• Potentially useful information.

• CFR citation assigned in the regulatory text section of this final rule.

The regulatory text section of these rules specifies the activities designated as significant new uses. Certain new uses, including production volume limits and other uses designated in the rules, may be claimed as CBI.

During review of the PMNs submitted for the chemical substances that are the subject of these SNURs and as further discussed in Unit IV. of the proposed rule, EPA identified certain other reasonably foreseen conditions of use in addition to those conditions of use intended by the submitter. EPA has determined that the chemical under the intended conditions of use is not likely to present an unreasonable risk. However, EPA has not assessed risks associated with the reasonably foreseen conditions of use. EPA is designating these conditions of use as well as certain other circumstances of use as significant new uses. As a result, those significant new uses cannot occur without going through a separate, subsequent EPA review and determination process associated with a SNUN.

EPA is issuing these SNURs because the Agency wants:

• To have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing or processing a listed chemical substance for the described significant new use.

• To be obligated to make a determination under TSCA section 5(a)(3) regarding the use described in the SNUN, under the conditions of use. The Agency will either determine under section 5(a)(3)(C) that the significant new use is not likely to present an unreasonable risk, including an unreasonable risk to a potentially exposed or susceptible subpopulation identified as relevant by the Administrator under the conditions of use, or make a determination under TSCA section 5(a)(3)(A) or (B) and take the required regulatory action associated with the determination, before manufacture or processing for the significant new use of the chemical substance can occur.

• To be able to complete its review and determination on each of the PMN substances, while deferring analysis on the significant new uses proposed in these rules unless and until the Agency receives a SNUN.

Issuance of a SNUR for a chemical substance does not signify that the chemical substance is listed on the TSCA Inventory. Guidance on how to determine if a chemical substance is on the TSCA Inventory is available on the internet at https://www.epa.gov/tsca-inventory.

To establish a significant new use, EPA must determine that the use is not ongoing. The chemical substances subject to this rule were undergoing premanufacture review at the time of signature of the proposed rule and were not on the TSCA inventory. In cases where EPA has not received a notice of commencement (NOC) and the chemical substance has not been added to the TSCA Inventory, no person may commence such activities without first submitting a PMN. Therefore, for the chemical substances subject to these SNURs, EPA concluded at the time of signature of the proposed rule that the designated significant new uses were not ongoing.

EPA designated October 7, 2020 (the date of web posting of the proposed rule) as the cutoff date for determining whether the new use is ongoing. The objective of EPA's approach is to ensure that a person cannot defeat a SNUR by initiating a significant new use before the effective date of the final rule.

Persons who began commercial manufacture or processing of the chemical substances for a significant new use identified on or after that date will have to cease any such activity upon the effective date of the final rule. To resume their activities, these persons would have to first comply with all applicable SNUR notification requirements and EPA would have to take action under TSCA section 5 allowing manufacture or processing to proceed.

EPA recognizes that TSCA section 5 does not require development of any particular new information ( e.g., generating test data) before submission of a SNUN. There is an exception: If a person is required to submit information for a chemical substance pursuant to a rule, Order or consent agreement under TSCA section 4, then TSCA section 5(b)(1)(A) requires such information to be submitted to EPA at the time of submission of the SNUN.

In the absence of a rule, Order, or consent agreement under TSCA section 4 covering the chemical substance, persons are required only to submit information in their possession or control and to describe any other information known to or reasonably ascertainable by them (see 40 CFR 720.50). However, upon review of PMNs and SNUNs, the Agency has the authority to require appropriate testing. Unit IV. of the proposed rule lists potentially useful information for all SNURs listed here. Descriptions are provided for informational purposes. The potentially useful information identified in Unit IV. of the proposed rule will be useful to EPA's evaluation in the event that someone submits a SNUN for the significant new use. Companies who are considering submitting a SNUN are encouraged, but not required, to develop the information on the substance, which may assist with EPA's analysis of the SNUN.

EPA strongly encourages persons, before performing any testing, to consult with the Agency pertaining to protocol election. Furthermore, pursuant to TSCA section 4(h), which pertains to reduction of testing in vertebrate animals, EPA encourages consultation with the Agency on the use of alternative test methods and strategies (also called New Approach Methodologies, or NAMs), if available, to generate the recommended test data. EPA encourages dialog with Agency representatives to help determine how best the submitter can meet both the data needs and the objective of TSCA section 4(h). For more information on alternative test methods and strategies to reduce vertebrate animal testing, visit https://www.epa.gov/assessing-and-managing-chemicals-under-tsca/alternative-test-methods-and-strategies-reduce.

The potentially useful information described in Unit IV. of the proposed rule may not be the only means of providing information to evaluate the chemical substance associated with the significant new uses. However, submitting a SNUN without any test data may increase the likelihood that EPA will take action under TSCA sections 5(e) or 5(f). EPA recommends that potential SNUN submitters contact EPA early enough so that they will be able to conduct the appropriate tests.

SNUN submitters should be aware that EPA will be better able to evaluate SNUNs which provide detailed information on the following:

• Human exposure and environmental release that may result from the significant new use of the chemical substances.

According to 40 CFR 721.1(c), persons submitting a SNUN must comply with the same notification requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in 40 CFR 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in 40 CFR 720.40 and 721.25. E-PMN software is available electronically at https://www.epa.gov/reviewing-new-chemicals-under-toxic-substances-control-act-tsca.

EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers and processors of the chemical substances subject to this rule. EPA's complete economic analysis is available in the docket for this rulemaking.

Additional information about these statutes and executive orders can be found at https://www.epa.gov/laws-regulations-and-executive-orders.

This action establishes SNURs for new chemical substances that were the subject of PMNs. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Orders 12866 (58 FR 51735, October 4, 1993) and 13563 (76 FR 3821, January 21, 2011).

According to PRA, 44 U.S.C. 3501 et seq., an agency may not conduct or sponsor, and a person is not required to respond to a collection of information that requires OMB approval under PRA, unless it has been approved by OMB and displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in title 40 of the CFR, after appearing in the Federal Register , are listed in 40 CFR part 9, and included on the related collection instrument or form, if applicable.

The information collection requirements related to this action have already been approved by OMB pursuant to PRA under OMB control number 2070-0012 (EPA ICR No. 574). This action does not impose any burden requiring additional OMB approval. If an entity were to submit a SNUN to the Agency, the annual burden is estimated to average between 30 and 170 hours per response. This burden estimate includes the time needed to review instructions, search existing data sources, gather and maintain the data needed, and complete, review, and submit the required SNUN.

The listing of the OMB control numbers of the collection instruments and their subsequent codification in the table in 40 CFR 9.1 satisfies the display requirements of the PRA and OMB's implementing regulations at 5 CFR part 1320. Since this ICR was previously subject to public notice and comment prior to OMB approval, and given the technical nature of the table in 40 CFR part 9, EPA finds that further notice and comment to amend it is unnecessary. As a result, EPA finds that there is “good cause” under section 553(b)(3)(B) of the Administrative Procedure Act (5 U.S.C. 553(b)(3)(B)) to amend this table in 40 CFR 9.1 without further notice and comment.

Pursuant to RFA section 605(b), 5 U.S.C. 601 et seq., I hereby certify that promulgation of this SNUR would not have a significant adverse economic impact on a substantial number of small entities. The requirement to submit a SNUN applies to any person (including small or large entities) who intends to engage in any activity described in the final rule as a “significant new use.” Because these uses are “new,” based on all information currently available to EPA, it appears that no small or large entities presently engage in such activities. A SNUR requires that any person who intends to engage in such activity in the future must first notify EPA by submitting a SNUN. Although some small entities may decide to pursue a significant new use in the future, EPA cannot presently determine how many, if any, there may be. However, EPA's experience to date is that, in response to the promulgation of SNURs covering over 1,000 chemicals, the Agency receives only a small number of notices per year. For example, the number of SNUNs received was seven in Federal fiscal year (FY) 2013, 13 in FY2014, six in FY2015, 12 in FY2016, 13 in FY2017, and 11 in FY2018. Only a fraction of these were from small businesses. In addition, the Agency currently offers relief to qualifying small businesses by reducing the SNUN submission fee from $16,000 to $2,800. This lower fee reduces the total reporting and recordkeeping of cost of submitting a SNUN to about $10,116 for qualifying small firms. Therefore, the potential economic impacts of complying with this SNUR are not expected to be significant or adversely impact a substantial number of small entities. In a SNUR that published in the Federal Register of June 2, 1997 (62 FR 29684) (FRL-5597-1), the Agency presented its general determination that final SNURs are not expected to have a significant economic impact on a substantial number of small entities, which was provided to the Chief Counsel for Advocacy of the Small Business Administration.

Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reasons to believe that any State, local, or Tribal government will be impacted by this action. As such, EPA has determined that this action does not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of UMRA sections 202, 203, 204, or 205 (2 U.S.C. 1501 et seq. ).

This action will not have federalism implications because it is not expected to have a substantial direct effect on 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, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999).

This action will not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes, significantly or uniquely affect the communities of Indian Tribal governments and does not involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175 (65 FR 67249, November 9, 2000), do not apply to this action.

This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children.

This action is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because this action is not a significant regulatory action under Executive Order 12866.

In addition, since this action does not involve any technical standards, NTTAA section 12(d), 15 U.S.C. 272 note, does not apply to this action.

This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898 (59 FR 7629, February 16, 1994).

This action is subject to the CRA, 5 U.S.C. 801 et seq., and EPA will submit a rule report containing this rule and other required information to each House of the Congress and to the Comptroller General of the United States. This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, for the reasons stated in the preamble, EPA is amending 40 CFR chapter I as follows:

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

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

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

Under FFDCA section 408(g), 21 U.S.C. 346a(g), any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2020-0512 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before January 14, 2022. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2020-0512, by one of the following methods:

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

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

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

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

In the Federal Register of October 27, 2020 (85 FR 68030) (FRL-10015-86), EPA issued a document pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 0F8870) by McLaughlin Gormley King Company D/B/A MGK, 7325 Aspen Lane N, Minneapolis, MN 55428. The petition requested that 40 CFR 180.510 be amended by establishing tolerances for residues of the insecticide pyriproxyfen in or on eggs and all tissues (except poultry fat) at 0.03 parts per million (ppm) and poultry fat at 0.04 ppm. That document referenced a summary of the petition prepared by McLaughlin Gormley King Company D/B/A MGK, the registrant, which is available in the docket for this action, docket ID EPA-HQ-OPP-2020-0512, at http://www.regulations.gov. No substantive public comments were received in response to the notice of filing.

Based upon review of the data supporting the petition and in accordance with its authority under FFDCA section 408(d)(4)(A)(i), EPA is establishing tolerances that vary from what the petitioners sought. The reasons for these changes are explained in detail in Unit IV.C.

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

Consistent with FFDCA section 408(b)(2)(D) and the factors specified therein, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for pyriproxyfen in or on egg; poultry, fat; poultry, meat; and poultry, meat byproducts. In an effort to streamline its publications in the Federal Register , EPA is not reprinting sections that repeat what has been previously published for tolerance rulemakings of the same pesticide chemical. Where scientific information concerning a particular chemical remains unchanged, the content of those sections would not vary between tolerance rulemakings and republishing the same sections is unnecessary. EPA considers referral back to those sections as sufficient to provide an explanation of the information EPA considered in making its safety determination for the new rulemaking.

EPA has previously published several tolerance rulemakings for pyriproxyfen, in which EPA concluded, based on the available information, that there is a reasonable certainty that no harm would result from aggregate exposure to pyriproxyfen and established tolerances for residues of that chemical. EPA is incorporating previously published sections from those rulemakings as described further in this rulemaking, as they remain unchanged.

Toxicological profile. For a discussion of the Toxicological Profile of pyriproxyfen, see Unit III.A. of the February 22, 2016 rulemaking (81 FR 8658) (FRL-9941-68).

Toxicological points of departure/Levels of concern. For a summary of the Toxicological Points of Departure/Levels of Concern used for the safety assessment, please refer to the September 25, 2017 risk assessment supporting the Registration Review for pyriproxyfen entitled, “Pyriproxyfen: Human Health Draft Risk Assessment for Registration Review” by going to http://www.regulations.gov. The referenced document is available in docket ID number EPA-HQ-OPP-2011-0677.

Exposure assessment. Much of the exposure assessment remains the same, although updates have occurred to accommodate exposures from the petitioned-for tolerances. These updates are discussed in this section; for a detailed description of the rest of the EPA approach to and assumptions for the exposure assessment, please refer to the 2017 draft human health risk assessment for Registration Review.

Since the recommended tolerance levels (0.1 ppm) are equal to, and not aggregated with, the existing food handling establishment (FHE) tolerance levels (0.1 ppm) for all food commodities established as part of a 2001 rulemaking (66 FR 14852) (FRL-6766-6) included in the dietary (food + drinking water) exposure and risk assessment supporting this rule, no updates to the dietary assessment are required. An unrefined chronic dietary (food + drinking water) exposure assessment was conducted using tolerance-level residues recommended under the 2017 pyriproxyfen draft human health risk assessment for Registration Review. This 2017 assessment assumed 100% crop treated and EPA's 2018 default processing factors. Drinking water was incorporated directly into the chronic dietary assessment. The chronic dietary (food + drinking water) exposures were estimated at 5.8% of the cPAD for the U.S. general population and 15% of the cPAD for the most highly exposed population subgroup (children 1 to 2 years old) and are below EPA's level of concern (LOC), less than 100% of the cPAD (<100% cPAD).

Since no short- or intermediate-term dermal and inhalation points of departure (PODs) were selected for pyriproxyfen and there are no long-term inhalation exposure scenarios for the registered uses of pyriproxyfen, the only exposure scenarios are for post-application incidental oral exposures for children 1 to less than 2 years old (1 to <2 years old) for all durations of exposure and long-term dermal exposures for children 1 to <2 years old and adults. Residential post-application short-, intermediate-, and long-term incidental oral risk estimates from contact with treated lawns, treated indoor areas and contact with pets treated with shampoo and spot-on applications to pets for children 1 to <2 years old result in no risks of concern ( i.e., all margins of exposure (MOEs) are greater than the LOC (> LOC of 100); MOEs range from 4,700 to 9,000,000.

With use of chemical-specific dust torsion exposure data for pyriproxyfen pet collars, long-term combined (dermal + incidental oral) risk estimates for children 1 to <2 years old also result in no risks of concern ( i.e., all combined MOEs are >100); MOEs range from 570 to 2,300. Further, long-term adult dermal risks are not of concern; MOEs range from 1,600 to 6,400.

Cumulative exposures. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.” EPA's assessment of cumulative exposures has not changed since the February 22, 2016 rulemaking (81 FR 8658) (FRL-9941-68). Unlike other pesticides for which EPA has followed a cumulative risk approach based on a common mechanism of toxicity, EPA has not found a common mechanism of toxicity as to pyriproxyfen and any other substances and pyriproxyfen does not appear to produce a toxic metabolite produced by other substances. For the purposes of this action, therefore, EPA has not assumed that pyriproxyfen has a common mechanism of toxicity with other substances.

Safety factor for infants and children. The scientific information underpinning EPA's prior safety factor determination remains unchanged from the February 22, 2016 rulemaking (81 FR 8658) (FRL-9941-68). Therefore, EPA continues to conclude that there is reliable data to support the reduction of the Food Quality Protection Act (FQPA) safety factor for pyriproxyfen. See Unit III.D. of the February 22, 2016 rulemaking for a discussion of the Agency's rationale for that determination.

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

Acute risk. An acute dietary risk assessment was not conducted because an acute endpoint could not be established.

Short-term and Intermediate-term risk. The short- and intermediate-term aggregate risk assessment remains unchanged from the 2017 draft human health risk assessment for Registration Review.

Chronic risk. In aggregating chronic risk, EPA considered background chronic dietary exposure (food + drinking water) and long-term residential combined (dermal + incidental oral) children 1 to <2 years old exposures from contact with small dogs treated with a pyriproxyfen collar. The chronic dietary (food + drinking water) exposures were estimated at 5.8% of the cPAD for the U.S. general population and 15% of the cPAD for the most highly exposed population subgroup (children 1-2 years old) and are below EPA's LOC (<100% cPAD). The total long-term dietary and residential aggregate (incidental oral + dermal) MOE is 320 for children 1 to <2 years. The total long-term dietary and residential aggregated (dermal) MOE is 1,000 for adults. As all these MOEs are greater than 100, the chronic aggregate risk is not of concern.

Aggregate cancer risk for U.S. population. Pyriproxyfen is classified as having no evidence for carcinogenicity to humans, based on the absence of evidence of carcinogenicity in male and female rats as well as in male and female mice. Therefore, cancer risk is not a concern and cancer risks are not quantified.

Based on the risk assessments and information described above, EPA concludes there is a reasonable certainty that no harm will result to the U.S. general population, or to infants and children, from aggregate exposure to pyriproxyfen residues. More detailed information on the subject action to establish tolerances in or on egg; poultry, fat; poultry, meat; and poultry, meat byproducts can be found at http://www.regulations.gov in the document entitled “Pyriproxyfen. Human Health Risk Assessment for Establishment of Permanent Tolerances in Egg and Poultry Tissue and Amendment to Remove Restrictions Against the Presence of Animals in Poultry Houses During Premise Treatment,” dated September 15, 2021. This document can be found in docket ID number EPA-HQ-OPP-2020-0512.

For a discussion of the available analytical enforcement method, see Unit IV.A. of the February 22, 2016 rulemaking (81 FR 8658) (FRL-9941-68).

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4).

No Codex maximum residue limits (MRLs) have been established for residues of pyriproxyfen in/on the proposed commodities in this action. Canada has a default tolerance of 0.1 ppm on egg and poultry tissue.

The proposed amended use involves the establishment of permanent tolerances of pyriproxyfen in/on poultry egg and tissue. While OECD calculations procedures determined overall tolerances to be 0.03 ppm for poultry egg, muscle and liver, and 0.04 ppm for poultry fat, there is already an existing tolerance of 0.1 ppm under 40 CFR 180.510(a)(2) for FHE. EPA believes it would be inappropriate to set tolerances in/on poultry egg and tissue commodities below the currently established FHE tolerance. EPA is establishing tolerances of 0.1 ppm for residues in/on egg and poultry tissue under a new listing in the CFR ( i.e., 40 CFR 180.510 (a)(3)) for residues of pyriproxyfen and its metabolite 4′-OH-Pyr (free and conjugated), which would account for additional pyriproxyfen residues that could result from any subsequent FHE use of pyriproxyfen, as well as negligible residues on feed. For egg and poultry tissue, the proposed tolerance of 0.1 ppm is equal to the FHE tolerance and would be appropriate and protective.

Additionally, based upon review of the data supporting the petition as submitted by the petitioner, EPA recommends revisions to the commodity definitions in section G of the petition to specify poultry, fat; poultry, meat; and poultry, meat byproducts, rather than poultry, tissue.

Tolerances are established for residues of pyriproxyfen, including its metabolites and degradates, in or on egg at 0.1 parts per million (ppm); poultry, fat at 0.1 ppm; poultry, meat at 0.1 ppm; and poultry, meat byproducts at 0.1 ppm.

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

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

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

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

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, for the reasons stated in the preamble, EPA is amending 40 CFR chapter I as follows:

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

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

You may access a frequently updated electronic version of 40 CFR part 180 through the Office of the Federal Register's e-CFR site at https://ecfr.federalregister.gov/current/title-40.

Under FFDCA section 408(g), 21 U.S.C. 346a(g), any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2020-0481 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing and must be received by the Hearing Clerk on or before January 14, 2022. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b), although EPA strongly encourages those interested in submitting objections or a hearing request to submit objections and hearing requests electronically. See Order Urging Electronic Service and Filing (April 10, 2020), https://www.epa.gov/sites/production/files/2020-05/documents/2020-04-10_-_order_urging_electronic_service_and_filing.pdf. At this time, because of the COVID-19 pandemic, the judges and staff of the Office of Administrative Law Judges are working remotely and not able to accept filings or correspondence by courier, personal delivery, or commercial delivery, and the ability to receive filings or correspondence by U.S. Mail is similarly limited. When submitting documents to the U.S. EPA Office of Administrative Law Judges (OALJ), a person should utilize the OALJ e-filing system at https://yosemite.epa.gov/OA/EAB/EAB-ALJ_upload.nsf.

Although EPA's regulations require submission via U.S. Mail or hand delivery, EPA intends to treat submissions filed via electronic means as properly filed submissions during this time that the Agency continues to maximize telework due to the pandemic; therefore, EPA believes the preference for submission via electronic means will not be prejudicial. If it is impossible for a person to submit documents electronically or receive service electronically, e.g., the person does not have any access to a computer, the person shall so advise OALJ by contacting the Hearing Clerk at (202) 564-6281. If a person is without access to a computer and must file documents by U.S. Mail, the person shall notify the Hearing Clerk every time it files a document in such a manner. The address for mailing documents is U.S. Environmental Protection Agency, Office of Administrative Law Judges, Mail Code 1900R, 1200 Pennsylvania Ave. NW, Washington, DC 20460.

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing (excluding any Confidential Business Information (CBI)) for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit the non-CBI copy of your objection or hearing request, identified by docket ID number EPA-HQ-OPP-2020-0481, by one of the following methods:

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

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

• Hand Delivery: To make special arrangements for hand delivery or delivery of boxed information, please follow the instructions at https://www.epa.gov/dockets/where-send-comments-epa-dockets.

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

In the Federal Register of March 22, 2021 (86 FR 15162) (FRL-10021-44), EPA issued a notice pursuant to FFDCA section 408(d)(3), 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide tolerance exemption petition (PP 0F8823) by NewLeaf Symbiotics, 1005 North Warson Rd., Ste. 102, St. Louis, MO 63132. The petition requested that 40 CFR part 180 be amended by establishing an exemption from the requirement of a tolerance for residues of the fungicide Methylorubrum populi strain NLS0089 in or on all food commodities. That notice referenced a summary of the petition prepared by the petitioner NewLeaf Symbiotics and available in the docket via https://www.regulations.gov. No comments were received on the notice of filing.

Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement of a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings but does not include occupational exposure. Pursuant to FFDCA section 408(c)(2)(B), in establishing or maintaining in effect an exemption from the requirement of a tolerance, EPA must take into account the factors set forth in FFDCA section 408(b)(2)(C), which require EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance or tolerance exemption and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. . . .” Additionally, FFDCA section 408(b)(2)(D) requires that EPA consider “available information concerning the cumulative effects of [a particular pesticide's] . . . residues and other substances that have a common mechanism of toxicity.”

EPA evaluated the available toxicological and exposure data on Methylorubrum populi strain NLS0089 and considered their validity, completeness, and reliability, as well as the relationship of this information to human risk. A full explanation of the data upon which EPA relied and its risk assessment based on those data can be found within the document entitled “Revised Human Health Risk Assessment of Methylorubrum populi strain NLS0089, a New Active Ingredient, in TS601, a new End-Use Product Proposed for Registration, and an Associated Petition Requesting a Tolerance Exemption” ( Methylorubrum populi strain NLS0089 Human Health Assessment). This document, as well as other relevant information, is available in the docket for this action as described under ADDRESSES .

The available data demonstrated that, with regard to humans, Methylorubrum populi strain NLS0089 is not anticipated to be toxic, pathogenic, or infective via any reasonably foreseeable route of exposure.

In an acute pulmonary toxicity/pathogenicity study, four test animals (one male rat and three female rats) treated with Methylorubrum populi strain NLS0089 died on days 2 or 3. Three of four of these test animals exhibited irregular respiration before death, and, upon necropsy, were found to have red mottled lungs and/or fluid-filled intestines. Further, several of the surviving test animals treated with Methylorubrum populi strain NLS0089 exhibited abnormal clinical signs through day 4 ( e.g., irregular respiration or pale color) and/or had abnormal gross findings upon necropsy up to day 23 ( e.g., red mottled lungs and/or enlarged lymph nodes). Body weight and body weight gain were not adversely affected by treatment, and no abnormal clinical signs, mortalities, or gross necropsy findings were seen in the control animals (not treated or treated with inactivated Methylorubrum populi strain NLS0089). The abnormal clinical observations, mortalities, and abnormal necropsy findings are likely consistent with and attributed to factors such as anesthesia administration and test substance administration, which was higher than the recommended maximum hazard dose, via the intratracheal route. As a result, these findings are likely attributed to a combination of anesthesia effects and overdosing, which are not indicative of toxicity or relevant to pesticide exposure concerns when used according to label directions and good agricultural practices. Overall, this study established that Methylorubrum populi strain NLS0089 is not pathogenic or infective when administered intratracheally at a single dose of 2.93 × 10 9 colony-forming units (CFU) per test animal and demonstrated a pattern of clearance of Methylorubrum populi strain NLS0089 from the blood, cecum contents, and organs of the test animals.

In an acute injection toxicity/pathogenicity study, numerous test animals treated with Methylorubrum populi strain NLS0089 and one test animal treated with inactivated Methylorubrum populi strain NLS0089 had enlarged spleens upon necropsy up to day 22. There were no adverse effects of mortality, clinical signs, body weight, or body weight gain in any of the test groups. The abnormal necropsy findings likely reflect a physiological response to a blood-borne antigen rather than a toxic effect on the spleen due to the spleen's function of filtering blood of infectious agents. The assay was testing an artificial infection and most likely indicated lymphocytes producing antibodies reacting to the infection, which were filtered by the spleen causing an enlargement. It should be noted that signs of infection, i.e., the spread of the microbial pest control agents (MPCA) across the blood/brain barrier or to other organs not involved with an immune response, were not noted, and there were no other signs of toxin production during exposure. Overall, this study established that Methylorubrum populi strain NLS0089 is not pathogenic or infective when administered intravenously at a single dose of 1.21 × 10 7 CFU per test animal and demonstrated a pattern of clearance of Methylorubrum populi strain NLS0089 from the blood, cecum contents, and organs of the test animals.

There may be some dietary and non-occupational exposures to residues of Methylorubrum populi strain NLS0089 when used in accordance with label directions and good agricultural practices, which exposures are only slightly more than environmental background levels for a short period of time after application. However, there is not a concern due to the lack of potential for adverse effects. Because there are no threshold levels of concern with the toxicity, pathogenicity, or infectivity of Methylorubrum populi strain NLS0089, EPA determined that no additional margin of safety is necessary to protect infants and children as part of the qualitative assessment conducted. Based upon its evaluation in the Methylorubrum populi strain NLS0089 Human Health Assessment, which concludes that there are no risks of concern from aggregate exposure to Methylorubrum populi strain NLS0089, EPA concludes that there is a reasonable certainty that no harm will result to the U.S. population, including infants and children, from aggregate exposure to residues of Methylorubrum populi strain NLS0089.

An analytical method is not required for Methylorubrum populi strain NLS0089 because EPA is establishing an exemption from the requirement of a tolerance without any numerical limitation.

Therefore, an exemption from the requirement of a tolerance is established for residues of Methylorubrum populi strain NLS0089 in or on all food commodities when used in accordance with label directions and good agricultural practices.

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

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

This action directly regulates growers, food processors, food handlers, and food retailers, not States or Tribes. As a result, this action does not alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, EPA has determined that this action will not have a substantial direct effect on States or Tribal Governments, on the relationship between the National Government and the States or Tribal Governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian Tribes. Thus, EPA has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), do not apply to this action. In addition, this action does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act (2 U.S.C. 1501 et seq. ).

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

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, for the reasons stated in the preamble, EPA is amending 40 CFR chapter I as follows:

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (section 701 of Pub. L. 114-74) (the “2015 Act”) amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410, 104 Stat. 890 (1990)), which is intended to improve the effectiveness of civil monetary penalties (CMPs) and to maintain the deterrent effect of such penalties, requires agencies to adjust the civil monetary penalties for inflation annually.

The Department of Health and Human Services (HHS) lists the CMP authorities and the amounts administered by all of its agencies in tabular form in 45 CFR 102.3, which was issued in an interim final rule published in the September 6, 2016, Federal Register (81 FR 61538). Annual adjustments were subsequently published on February 3, 2017 (82 FR 9175), October 11, 2018 (83 FR 51369), November 5, 2019 (84 FR 59549), and January 17, 2020 (85 FR 2869).

In the September 6, 2016 Federal Register (81 FR 61538), HHS issued a department-wide interim final rule (IFR) titled “Adjustment of Civil Monetary Penalties for Inflation” that established new regulations at 45 CFR part 102 to adjust for inflation the maximum CMP amounts for the various CMP authorities for all agencies within the Department. HHS took this action to comply with the Federal Civil Penalties Inflation Adjustment Act of 1990 (the Inflation Adjustment Act) (28 U.S.C. 2461 note 2(a)), as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (section 701 of the Bipartisan Budget Act of 2015, (Pub. L.114-74), enacted on November 2, 2015). In addition, the September 2016 IFR included updates to certain agency-specific regulations to reflect the new provisions governing the adjustment of civil monetary penalties for inflation in 45 CFR part 102.

One of the purposes of the Inflation Adjustment Act was to create a mechanism to allow for regular inflationary adjustments to federal civil monetary penalties. Section 2(b)(1) of the Inflation Adjustment Act. The 2015 amendments removed an inflation update exclusion that previously applied to the Social Security Act as well as to the Occupational Safety and Health Act. The 2015 amendments also “reset” the inflation calculations by excluding prior inflationary adjustments under the Inflation Adjustment Act and requiring agencies to identify, for each penalty, the year and corresponding amount(s) for which the maximum penalty level or range of minimum and maximum penalties was established (that is, originally enacted by Congress) or last adjusted other than pursuant to the Inflation Adjustment Act. In accordance with section 4 of the Inflation Adjustment Act, agencies were required to: (1) Adjust the level of civil monetary penalties with an initial “catch-up” adjustment through an interim final rulemaking to take effect by August 1, 2016; and (2) make subsequent annual adjustments for inflation.

In the September 2016 interim final rule, HHS adopted new regulations at 45 CFR part 102 to govern adjustment of civil monetary penalties for inflation. The regulation at 45 CFR 102.1 provides that part 102 applies to each statutory provision under the laws administered by HHS (including the Centers for Medicare & Medicaid Services (CMS)) concerning CMPs, and that the regulations in part 102 supersede existing HHS regulations setting forth CMP amounts. The CMPs and the adjusted penalty amounts administered by all HHS agencies are listed in tabular form in 45 CFR 102.3. In addition to codifying the adjusted penalty amounts identified in § 102.3, the HHS-wide interim final rule included several technical conforming updates to certain agency-specific regulations, including various CMS regulations, to identify their updated information, and incorporate a cross-reference to the location of HHS-wide regulations.

In the September 12, 2017 Federal Register (82 FR 42748), CMS published a correcting amendment that corrected a limited number of technical and typographical errors identified in the CMS provisions of the September 6, 2016 IFR.

The Medicare provisions included in the September 2016 IFR are subject to requirements of section 1871(a) of the Social Security Act (the Act) which sets forth certain procedures for promulgating regulations necessary to carry out the administration of the insurance programs under Title XVIII of the Act. Section 1871(a)(3)(A) of the Act requires the Secretary, in consultation with the Director of the Office of Management and Budget (OMB), to establish a regular timeline for the publication of final regulations based on the previous publication of a proposed rule or an interim final rule. In accordance with section 1871(a)(3)(B) of the Act, such timeline may vary among different rules, based on the complexity of the rule, the number and scope of the comments received, and other relevant factors. However, the timeline for publishing the final rule cannot exceed 3 years from the date of publication of the proposed or interim final rule, unless there are exceptional circumstances. After consultation with the Director of OMB, the Secretary published a notice, which appeared in the December 30, 2004 Federal Register (69 FR 78442), establishing a general 3-year timeline for publishing Medicare final rules after the publication of a proposed or interim final rule.

Because the conforming changes to the Medicare provisions were part of a larger, omnibus departmental interim final rule, we inadvertently missed setting a target date for the final rule to make permanent the changes to the Medicare regulations in accordance with section 1871(a)(3)(A) of the Act and the procedures outlined in the December 2004 notice. Consistent with section 1871(a)(3)(C) of the Act, we published notices of continuation extending the effectiveness of the technical conforming changes to the Medicare regulations that were implemented through interim final rule and to allow time to publish a final rule (see the January 2, 2020 (85 FR 7) and September 8, 2020 (85 FR 55385) continuation documents). The extended time was needed to allow for coordination between CMS and the Department to issue a final rule and to avoid the potential for confusion between 45 CFR part 102, which established the civil monetary payment amounts, and the Medicare regulations subject to the timing requirements in section 1871(a)(3)(C) of the Act, which would otherwise cause the regulation to revert to the language that was used prior to the Inflation Adjustment Act.

In this final rule, we are finalizing the provisions of the September 6, 2016 IFR without modification. Because the provisions were established via interim final rulemaking, finalizing the provisions is pro forma for all agencies except CMS. Given the statutory requirements specified previously, finalization of the September 2016 IFR permanently establishes the interim final regulatory provisions for the Medicare program.

The annual inflation adjustment for each applicable CMP is determined using the percent increase in the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October of the year in which the amount of each CMP was most recently established or modified. In the December 23, 2020, Office of Management and Budget (OMB) Memorandum for the Heads of Executive Agencies and Departments, M-21-10, “Implementation of the Penalty Inflation Adjustments for 2021, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015,” OMB published the multiplier for the required annual adjustment. The cost-of-living adjustment multiplier for 2021, based on the CPI-U for the month of October 2020, not seasonally adjusted, is 1.01182. The multiplier is applied to each applicable penalty amount that was updated and published for fiscal year (FY) 2020 and is rounded to the nearest dollar.

In addition to the inflation adjustments for 2021, this final rule updates the table in 45 CFR 102.3 to add references to new, applicable civil money penalty authorities that were established or implemented since the publication of the January 17, 2020 update and that are being updated in this rule. The rule also corrects several technical errors to regulatory references in the table and updates descriptions for clarification and accuracy.

First, a CMS final rule, “Medicare and Medicaid Programs: CY 2020 Hospital Outpatient PPS Policy Changes and Payment Rates and Ambulatory Surgical Center Payment System Policy Changes and Payment Rates. Price Transparency Requirements for Hospitals to Make Standard Charges Public” (84 FR 65524, November 27, 2019), effective January 1, 2021, finalized a new provision, codified at 45 CFR 180.90. That section establishes CMPs associated with a hospital's noncompliance with price transparency disclosure and display requirements, and the table has been modified to reflect this requirement.

Second, section 3202(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136) added a requirement that each provider of a diagnostic test for COVID-19 make public the cash price for such test on the provider's public internet site, and authorized the Secretary to impose a CMP on a provider that fails to comply. Rulemaking entitled “Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency” (85 FR 71142, November 6, 2020) implemented this statutory requirement by establishing a provision at 45 CFR 182.70, allowing for imposition of a CMP, and the table has been modified to reflect this requirement.

Third, in a CMS interim final rule with comment period entitled “Medicare and Medicaid Programs, Clinical Laboratory Improvement Amendments (CLIA), and Patient Protection and Affordable Care Act; Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency” (85 FR 54873 through 54874, September 2, 2020), CMS established requirements for all CLIA laboratories to report COVID-19 test results to the Secretary in such form and manner, and at such timing and frequency, as the Secretary may prescribe during the COVID-19 Public Health Emergency. Failure to report test results as required results in condition level deficiencies for which CMPs or other penalties may apply. The table has been modified to reflect this requirement. Also in this interim final rule, CMS codified new enforcement requirements at 42 CFR 488.447 establishing CMP amounts that may be imposed against long term care facilities that fail to report COVID-19 related data as required in 42 CFR 483.80(g)(1) and (2). The table has been modified to reflect these requirements.

Finally, the following technical errors were identified and are corrected in the table at 45 CFR 102.3:

• The regulatory reference of 42 CFR. 1003.210(a)(5) implementing 42 U.S.C. 1395cc(g) which was inadvertently omitted from the regulation and is added.

• The two descriptions of 42 U.S.C. 1395dd(d)(1) are revised for more accuracy because penalties for a responsible physician, unlike penalties for a hospital, are not tied to the number of beds in the hospital (see 42 U.S.C. 1395dd(d)(1)(B)).

• The first description tied to 42 U.S.C. 1395mm(i)(6)(B)(i) is revised from “is such plan” to “if such plan”.

• The regulatory references tied to 42 U.S.C. 1395ss(a)(2), (p)(8), (p)(9)(C), (q)(5)(C), (r)(6)(A), (s)(4), (t)(2) incorrectly referred to 42 CFR part 405 and are corrected to refer to 42 CFR part 402.

• The first set of regulatory references tied to 42 U.S.C. 1395ss(p)(8) are expanded to also include 42 CFR 402.105(f)(2), which was inadvertently omitted, and the corresponding description is revised to replace “any person” with “someone other than issuer” for greater accuracy and clarification.

• The description for the second set of regulatory references tied to 42 U.S.C. 1395ss(p)(8) is revised to replace “any person” with “an issuer” for greater accuracy and clarification.

• The first set of regulatory references tied to 42 U.S.C. 1395ss(p)(9)(C) are expanded to also include 42 CFR 402.105(f)(3) and (4), which were inadvertently omitted, and the corresponding description is revised to replace “any person” with “someone other than issuer” for greater accuracy and clarification.

• The description for the second set of regulatory references tied to 42 U.S.C. 1395ss(p)(9)(C) is revised to replace “any person” with “an issuer” for greater accuracy and clarification.

• The description for 42 U.S.C. 18081(c)(2) is being revised to “Failure to comply with ACA requirements related to risk adjustment, reinsurance, risk corridors, Exchanges (including QHP standards) and other ACA Subtitle D standards; Penalty for violations of rules or standards of behavior associated with issuer compliance with risk adjustment, reinsurance, risk corridors, Exchanges (including QHP standards) and other ACA Subtitle D standards. (42 U.S.C. 300gg-22(b)(2)(C))” for greater accuracy and clarification.

• Reference to the existing CMPs authorized under 42 U.S.C. 1395m-1(a) and 42 CFR 414.504(e) for a reporting entity that has failed to report or made a misrepresentation or omission in reporting applicable information was inadvertently omitted from the prior annual updates and the regulation is modified to include this authority and the 2021 adjusted amount. CMS, in separate rulemaking, made the initial catch-up adjustment for this amount in accordance with the 2015 Act on June 23, 2016 (81 FR 41036, 41069) which was $10,017, and noted that subsequent inflationary adjustments would be made to this amount annually.

++ The adjusted amounts applying the multiplier for each year beginning in 2017 through 2020  1 are as follows:

++ The 2021 adjusted amount is calculated by applying the 2021 multiplier to $10,839 and this adjusted amount is reflected in the table of the regulation at 45 CFR 102.3.

The 2015 Act requires Federal agencies to publish annual penalty inflation adjustments notwithstanding section 553 of the Administrative Procedure Act (APA).

Section 4(a) of the 2015 Act directs Federal agencies to publish annual adjustments no later than January 15th of each year thereafter. In accordance with section 553 of the APA, most rules are subject to notice and comment and are effective no earlier than 30 days after publication in the Federal Register . However, section 4(b)(2) of the 2015 Act provides that each agency shall make the annual inflation adjustments “notwithstanding section 553” of the APA. According to OMB's Memorandum M-21-10, the phrase “notwithstanding section 553” in section 4(b)(2) of the 2015 Act means that “the public procedure the APA generally requires (that is, notice, an opportunity for comment, and a delay in effective date) is not required for agencies to issue regulations implementing the annual adjustment.”

Consistent with the language of the 2015 Act and OMB's implementation guidance, the inflation adjustments set out in this rule is not subject to notice and an opportunity for public comment and will be effective immediately upon publication. Additionally, HHS finds that notice and comment procedures would be impracticable and unnecessary under the APA for making the statutorily required inflation updates to newly established penalty amounts and for the ministerial and technical changes in this rule. In addition, HHS is waiving notice and comment for the non-substantive technical corrections set out in this final rule. HHS finds good cause for issuing these changes as a final rule without prior notice and comment because these changes only update the regulation to add the new CMP authorities that will be adjusted in accordance with the 2015 Act which were implemented since the last update and to add additional technical clarifying edits to descriptions and correcting inadvertent omissions and typographical errors. For these same reasons HHS also finds good cause to make the final rule effective upon publication.

Pursuant to OMB Memorandum M-21-10, HHS has determined that the annual inflation adjustment to the civil monetary penalties in its regulations does not trigger any requirements under procedural statutes and Executive Orders that govern rulemaking procedures.

This rule is effective on the date specified in the DATES section of this final rule. The adjusted civil monetary penalty amounts apply to penalties assessed on or after date specified in the DATES section of this final rule, if the violation occurred on or after November 2, 2015. If the violation occurred before November 2, 2015, or a penalty was assessed before September 6, 2016, the pre-adjustment civil penalty amounts in effect before September 6, 2016, will apply.

For reasons discussed in the preamble, the Department of Health and Human Services adopts the interim final rule published September 6, 2016, at 81 FR 61537, as final with the following changes to 45 CFR part 102:

In the January 14, 2021, Federal Register , we published a final rule titled “Medicare Program; Medicare Coverage of Innovative Technology (MCIT) and Definition of `Reasonable and Necessary'”(86 FR 2987) (hereinafter referred to as the “MCIT/R&N final rule”). The MCIT/R&N final rule established a Medicare coverage pathway to provide Medicare beneficiaries nationwide with faster access to recently market authorized medical devices designated as breakthrough by the Food and Drug Administration (FDA). Under the final rule, MCIT would result in 4 years of national Medicare coverage starting on the date of FDA market authorization or a manufacturer chosen date within 2 years thereafter. The MCIT/R&N final rule would also implement regulatory standards to be used in making reasonable and necessary determinations under section 1862(a)(1)(A) of the Social Security Act (the Act) for items and services that are furnished under Medicare Parts A and B.

In response to the January 20, 2021, memorandum from the Assistant to the President and Chief of Staff titled “Regulatory Freeze Pending Review” (“Regulatory Freeze Memorandum”) (86 FR 7424, January 28, 2021) and guidance on implementation of the memorandum issued by the Office of Management and Budget (OMB) in Memorandum M-21-14 dated January 20, 2021, we determined that a 60-day delay of the effective date of the MCIT/R&N final rule was appropriate to ensure that—

• The rulemaking process was procedurally adequate;

• We properly considered all relevant facts;

• We considered statutory or other legal obligations;

• We had reasonable judgment about the legally relevant policy considerations; and

• We adequately considered public comments objecting to certain elements of the rule, including whether interested parties had fair opportunities to present contrary facts and arguments.

Therefore, in an interim final rule with comment period that went on display at the Federal Register and took effect on March 12, 2021 (hereinafter referred to as the “March 2021 IFC”), and was published in the March 17, 2021, Federal Register (86 FR 14542), we—(1) delayed the MCIT/R&N final rule effective date until May 15, 2021 (that is, 60 days after the original effective date of March 15, 2021); and (2) opened a 30-day public comment period on the facts, law, and policy underlying the MCIT/R&N final rule.

Many commenters on the March 2021 IFC supported further delaying the MCIT/R&N final rule. Based upon the public comments, we did not believe that it was in the best interest of Medicare beneficiaries for the MCIT/R&N final rule to become effective on May 15, 2021. Therefore, in a final rule that went on display at the Federal Register and took effect on May 14, 2021 (hereinafter referred to as the “May 2021 final rule”), and was published in the May 18, 2021, Federal Register (86 FR 26849), we summarized the comments on the March 2021 IFC and further delayed the MCIT/R&N final rule effective date until December 15, 2021. We explained that the additional delay would provide us an opportunity to address issues raised by stakeholders, especially those related to Medicare patient protections and evidence criteria. We announced that during the delay, we would determine appropriate next steps that are in the best interest of all Medicare stakeholders, and beneficiaries in particular.

In the September 15, 2021, Federal Register (86 FR 51326) (hereinafter referred to as the “September 2021 proposed rule”), we published a proposed rule that would repeal the January 14, 2021 final rule. The September 2021 proposed rule included a 30-day public comment period on the provisions of the proposed repeal.

We received approximately 115 timely items of correspondence in response to the September 2021 proposed rule. Commenters included a broad range of stakeholders, including physicians, professional societies, manufacturers, manufacturer associations, venture capital firms, and patient advocates. In this section of this final rule, we present our proposal to repeal the January 2021 MCIT/R&N final rule, our rationale for the proposal, as well as our summation of and responses to the public comments received.

CMS developed MCIT in part due to concerns that delays and uncertainty in Medicare coverage slowed innovation and impaired beneficiary access to important new technologies, specifically those designated as breakthrough devices by FDA. In response to these concerns, the rule provided 4 years of expedited coverage to FDA market authorized Breakthrough Devices on the first day of FDA market authorization or a select date up to 2 years after the market authorization date as requested by the device manufacturer. While the final rule did not require manufacturers to develop additional scientific evidence supporting the use of the Breakthrough Devices in the Medicare population, manufacturers were aware that, upon conclusion of MCIT coverage, the existing coverage pathways would be available (that is, reasonable and necessary determinations would be made via claim-by-claim adjudication, local coverage determinations (LCDs), and national coverage determinations (NCDs), which include the coverage with evidence development pathway). The NCD and LCD development processes include reviews of publicly available clinical evidence to determine whether or not the items or services are reasonable and necessary and would be covered by Medicare.

As we noted in the September 2021 proposed rule, we believe that the finalized MCIT/R&N rule is not in the best interest of Medicare beneficiaries because the rule may provide coverage without adequate evidence that the Breakthrough Device would be a reasonable and necessary treatment for the Medicare patients that have the particular disease or condition that the device is intended to treat or diagnose. We have had a growing concern that the provisions that we established in the MCIT/R&N final rule to protect Medicare patients may not have been sufficient. We received comments on this issue again in our subsequent rules that delayed the effective date. By repealing that rule, we can better address those safety concerns in the future. As commenters have noted, the agency must balance competing interests. Although we continue to be in favor of increasing access to new technologies, we are also mindful that sometimes those devices have unknown or unexpected risks. The Medicare program will need to include adequate safeguards to act in those situations.

While the rule tried to address stakeholder concerns about accelerating coverage of new devices, concerns persist about the availability of clinical evidence on Breakthrough Devices when used in the Medicare population as well as the benefit or risks of these devices with respect to use in the Medicare population upon receipt of coverage. Based on the comments received throughout the development of the MCIT pathway, we do not believe that the final rule as currently drafted is the best way to achieve the goals of MCIT as outlined in the MCIT/R&N final rule, in particular, to more precisely meet the needs Medicare beneficiaries and other stakeholders in a timely fashion. We believe that there are other ways to achieve our stated goals. This may include better utilizing existing pathways or conducting future rulemaking.

As noted in the May 2021 final rule, our prior policies permitted the Medicare program to deny coverage for particular devices if we learned that a particular device may be harmful to Medicare beneficiaries. Specifically, Medicare Administrative Contractors (MACs) could have denied claims under certain circumstances (86 FR 26851, May 18, 2021). Under the MCIT/R&N final rule, this case-specific flexibility would have been removed. While we could remove coverage through the NCD process, we would be able to expeditiously remove a Breakthrough Device from the MCIT coverage pathway for only limited reasons, such as if FDA issued a safety communication or warning letter regarding the Breakthrough Device or removed the marketing authorization for a device. This limitation on our authority is impracticable as it may lead to preventable harm to Medicare beneficiaries and it impedes Medicare's ability to make case-by-case determinations regarding whether a device is reasonable and necessary based on clinical evidence. After reviewing Breakthrough Devices with FDA authorization that would be eligible for MCIT, we no longer believe that CMS should grant full national coverage solely based on Breakthrough Designation. While the FDA reviews a device to ensure it meets the applicable safety and effectiveness standard, there is often limited evidence regarding whether the device is clinically beneficial to Medicare patients. We believe this is a key factor in determining coverage under Medicare. The FDA's focus is the safety and effectiveness profile of devices for the intended population, and while these devices may improve symptoms for some patients, the risk-benefit profile may be different for older patients. Further evidence development is needed to better inform medical decision making generally as well as Medicare coverage under the reasonable and necessary standard.

While the MCIT/R&N final rule would have provided expedited Medicare coverage following market authorization for breakthrough designated devices, there is currently no FDA requirement that Medicare beneficiaries must be included in clinical studies needed for market-authorization. Because the MCIT/R&N final rule also did not require data concerning Medicare beneficiaries to fill this gap in evidence specific to Medicare patients, there is the potential that Medicare would cover devices, even in the absence of data demonstrating that the device is reasonable and necessary for Medicare patients. The FDA definition of a medical device is broad, and includes a wide range of products, such as surgical sutures, joint replacements, blood glucose monitors, stents, and implanted valves. After reviewing FDA-designated Breakthrough Devices that have FDA authorization and eligible for MCIT, CMS has concluded that in treating all breakthrough devices similarly, the MCIT/R&N final rule could establish insufficient beneficiary protections for certain devices. Accordingly, we have determined that repealing the MCIT/R&N final rule and revisiting the policy is in the best interest of Medicare patients.

In response to the March 2021 IFC, several medical device manufacturers suggested that, for inclusion in MCIT, FDA pivotal studies should require inclusion of sufficient numbers of Medicare beneficiaries (86 FR 26851, May 18, 2021). We note that a simple proportional requirement may be insufficient, particularly for studies with the smaller sample sizes that are typical for medical devices; valid statistical conclusions require that clinical studies be sufficiently powered to reliably assess risks and benefits in the Medicare population. Certain proponents of accelerated Medicare coverage have argued that FDA's determination that a product meets applicable safety and effectiveness standards for marketing authorization should be sufficient to support Medicare coverage of Breakthrough Devices. However, after further consideration of all public comments, we no longer agree that the FDA safety and effectiveness standards alone are sufficient to support open-ended Medicare coverage. FDA and CMS act under different statutes that have different goals. The standard for Medicare coverage (that is, a determination that a device is reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member) is not synonymous with the standards for FDA marketing authorization of devices, which are not specific to the Medicare population. Since we issued the MCIT/R&N final rule, we have a better understanding and a growing realization of the consequences of incorporating FDA standards into Medicare decision making to the degree stated in the final rule. We have fully considered the implications, especially in terms of how this would hamper CMS' ability to address unanticipated harms that may arise in the Medicare population. CMS no longer believes that it is appropriate to grant all FDA market authorized Breakthrough Devices automatic coverage solely based on its Breakthrough Designation. While the FDA reviews devices to ensure they meet applicable safety and effectiveness standards, there is often limited evidence regarding whether the device is clinically beneficial to Medicare patients. As stated earlier, this is an important consideration in determining the type of coverage under Medicare. For example, when only limited evidence on health outcomes was studied for the Medicare population, it is unclear whether Medicare should cover the device with evidence development or should only provide coverage for certain patients, practitioners, or health care facilities. Immediate, broad, unrestricted Medicare coverage under this circumstance could lead to patient harm. Information specific to Medicare populations is important to better inform medical decision making generally, as well as Medicare coverage under the reasonable and necessary standard. Among other things, FDA conducts premarket review of certain devices to evaluate their safety and effectiveness and determines if they meet the applicable standard to be marketed in the United States. In doing so, FDA relies on scientific and medical evidence that does not necessarily include patients from the Medicare population. In general, under the Medicare statute, CMS is charged with determining whether items and services are reasonable and necessary to diagnose or treat an illness or injury or to improve the functioning of a malformed body member. One consideration for CMS in making national coverage determinations under the reasonable and necessary standard is whether the item/service improves health outcomes for Medicare beneficiaries. For CMS, the evidence base underlying the FDA's decision to approve or clear a device for particular indications for use has been crucial for determining Medicare coverage through the NCD process. CMS looks to the evidence supporting FDA market authorization and the device indications for use for evidence generalizable to the Medicare population, data on improvement in health outcomes, and durability of those outcomes. If there are no data on those elements, it is difficult for CMS to make an evidence-based decision whether the device is reasonable and necessary for the Medicare population.

It is important to determine whether Medicare beneficiaries' health outcomes are improved because these individuals are often older, with multiple comorbidities, 1 and are often underrepresented or not represented in many clinical studies.

The Medicare national coverage determination process includes a robust review of available clinical evidence and focuses on the Medicare population to make reasonable and necessary determinations. In contrast, the MCIT pathway would establish an expedited 4-year coverage pathway for all Breakthrough Devices that fall under a Medicare benefit category without a specific requirement that the device must demonstrate it is reasonable and necessary for the Medicare population. In general, Medicare patients have more comorbidities and often require additional and higher acuity clinical treatments which may impact the outcomes differently than the patients generally enrolled in early clinical trials. These considerations are often not addressed in the device development process.

When we issued the MCIT/R&N final rule on January 14, 2021, we responded to commenters who suggested that CMS should take a different approach. Some commenters suggested that we should require manufacturers to provide data about Medicare outcomes before providing coverage as reasonable and necessary. Other commenters suggested that we provide incentives to manufacturers to include Medicare beneficiaries in clinical studies, similar to CMS's Coverage with Evidence Development (CED) paradigm, before coverage under section 1862(a)(1)(A) of the Act was allowed (86 FR 2990, January 14, 2021). 2 In response to the March 2021 IFC, additional commenters supported evidence development as part of the requirements to participate in the MCIT pathway. Some commenters noted that some clinical trials that were conducted to support market authorization through the Breakthrough Devices pathway lack data on patients older than 65, patients with disabilities, and patients with end stage renal disease (ESRD). They asserted that the absence of this clinical information poses some uncertainty about whether FDA's determination of safety and efficacy could be generalized to the Medicare population (86 FR 26850 and 26851, May 18, 2021).

In response to commenters' concerns about expedited coverage without adequate evidentiary support, CMS agrees that guaranteeing coverage for all Breakthrough Devices receiving market authorization for any Medicare patient could be problematic if there is insufficient evidence demonstrating a health benefit or addressing the additional risks for Medicare beneficiaries (86 FR 26850 and 26851, May 18, 2021). We noted that a Breakthrough Device may only be beneficial in a subset of the Medicare population or when used only by clinicians within a certain specialty to ensure benefit. Without additional clinical evidence on the device's clinical utility for the Medicare population or appropriate providers, it is challenging to determine appropriate Medicare coverage of newly market-authorized Breakthrough Devices (86 FR 26850 and 26851, May 18, 2021).

We recognize that the breakthrough designation may be granted by FDA before sufficient clinical evidence is available to prove there is a health benefit for Medicare patients. FDA has explained in guidance that because decisions on requests for breakthrough designation will be made prior to marketing authorization, FDA considers whether there is a “reasonable expectation that a device could provide for more effective treatment or diagnosis relative to the current standard of care (SOC) in the U.S” for purposes of the designation. This reasonable expectation can be “supported by literature or preliminary data (bench, animal, or clinical)”. 3 Without sufficient evidence developed to show the device improves health outcomes for Medicare beneficiaries, it may be challenging for the Medicare program to determine the health benefit of these devices for Medicare beneficiaries. Public comments expressed concern about how the Medicare population is often excluded from clinical trials due to age and health status.

Previously, in the MCIT/R&N final rule, we noted that “device coverage under the MCIT pathway is reasonable and necessary for a duration of time under section 1862(a)(1)(A) of the Act because the device has met the very unique criteria of the FDA Breakthrough Devices Program” (86 FR 2988, January 14, 2021). 4 Through further consideration of the breakthrough designation process, we have changed our position on this issue and determined that Breakthrough Device designation is not, by itself, sufficient for expedited Medicare coverage purposes. Rather, as explained previously, we understand that FDA may grant a device breakthrough designation when the device has shown a “reasonable expectation” of providing more effective treatment or diagnosis of a life-threatening or irreversibly debilitating disease or condition relative to the current U.S. SOC and that it meets the other criterion for designation in section 515B(b)(2) of the Federal Food, Drug, and Cosmetic Act (FD&C) Act (21 U.S.C. 360e-3(b)(2)). CMS acknowledges that we have changed our position on this issue after further consideration of public comments and after considering the full range of FDA designated Breakthrough Devices from diagnostic laboratory tests to implanted valves. As noted previously, we do not believe that granting broad national coverage solely on Breakthrough Device designation alone is in the best interest of beneficiaries or the Medicare program, as this approach does not provide CMS with the necessary flexibility to establish beneficiary safeguards, similar to the patient protections we include in NCDs, specifically CED NCDs, for some of these devices that do not have an evidence base generalizable to the Medicare population. Under the MCIT/R&N final rule, CMS would not be able to include any beneficiary safeguards until the conclusion of the 4-year expedited coverage period and upon completion of an NCD. While we acknowledge that improvements can be made to the existing coverage processes, the inability for CMS to establish beneficiary safeguards under the MCIT/R&N final rule is a significant limitation that can lead to potential beneficiary harm. For these reasons we no longer believe it is in the best interest of Medicare patients to base expedited multiyear, broad national coverage through section 1862(a)(1)(A) of the Act on Breakthrough Device designation alone.

Clinical studies that are conducted in order to gain market authorization for FDA Breakthrough Devices are not required to include information on patients with similar demographics and characteristics of the Medicare population. A potential reason there may not be a strong evidence base specific to the Medicare population could include the desire by device manufacturers to demonstrate the safety and effectiveness of a device as clearly as possible. To achieve this aim, many studies impose stringent exclusion criteria that disqualify individuals with certain characteristics, such as comorbidities and concomitant treatment, that might make the effect of the investigational device more difficult to determine. Consequently, the safety and effectiveness of a device for older patients with more comorbidities may not be well understood at the time of FDA market authorization.

Additionally, there may be devices designated as breakthrough that do not have adequate data on the effectiveness of the device for the Medicare population. Without such evidence, it is possible that Medicare would be covering and paying for devices that may have little or no Medicare relevant clinical evidence to assist physicians and patients in making treatment decisions. Separate from information and evidence submitted for breakthrough designation and market authorization, is the concept of post-market evidence development. Without requiring any evidence development specific to Medicare patients following market authorization, there may not be any evidence to demonstrate whether the device is beneficial after the conclusion of MCIT coverage after 4 years. Evidence-based coverage policy is essential to our objective of improving health outcomes while delivering greater value. Supportive clinical evidence that ensures a device is both safe and effective and reasonable and necessary in the Medicare population is crucial in order to grant coverage for a device under section 1862(a)(1)(A) of the Act. Such evidence is used to determine whether a new technology meets the appropriateness criteria of the longstanding Medicare Program Integrity Manual Chapter 13 definition of reasonable and necessary. 5 We believe that it is important to require manufacturers participating in an innovative coverage pathway, such as MCIT, to produce evidence that demonstrates the health benefit of the device and the related services for patients with demographics similar to that of the Medicare population.

In response to the March 2021 IFC, some commenters cited evidence that FDA-mandated postmarket studies are not reliably completed (less than 20 percent of required studies are completed within 3 to 5 years after market authorization), 6 and asserted that evidence demonstrating a device's health benefit in Medicare beneficiaries is essential. Commenters also recommended that CMS outline in guidance documents the types of evidence that would be acceptable for applications for national or local coverage determinations once the MCIT pathway's 4 years had expired, such as real-world data or randomized, controlled trials (86 FR 26851, May 18, 2021). By voluntarily developing this evidence during the time a device is covered under the MCIT pathway, the manufacturer could have the evidence base needed for one of the other coverage pathways after the MCIT pathway ends. The MCIT/R&N final rule did not require manufacturers of Breakthrough Devices to develop evidence as part of their participation requirements under MCIT. In the May 2021 final rule, we noted that numerous commenters, including physicians with experience in clinical research and medical specialty societies, sought modifications to the MCIT/R&N final rule regarding evidence development, including the addition of real-world evidence requirements. We agree that guidance documents or similar publications outlining the types of evidence that would be acceptable for requests for NCD and LCDs is a good idea. We are continuing to explore additional opportunities to more efficiently publish relevant health outcomes for different disease treatments. CMS is working on the best and most efficient manner to communicate what are important health outcomes. As was noted by commenters in response to the March 2021 IFC, early and unrestricted adoption of devices may have adverse consequences that may not be easy to reverse. CMS expects physicians to consider the available evidence and assess the care needs of each patient when considering the best treatment options. However, by guaranteeing coverage of devices based solely on breakthrough status and FDA marketing authorization, rather than also taking into account whether the device provides an effective, reasonable and necessary treatment for Medicare patients, there may be an incentive for physicians to use a device that has coverage under the MCIT pathway rather than a device that is not covered under the MCIT pathway but is nonetheless covered under an existing coverage pathway and that may be more beneficial to patients. We believe that providers' clinical treatment decisions should take the individual needs of the patient into account; therefore, we seek to avoid incentivizing the use of MCIT-covered devices when an alternative item or service may be more appropriate.

While the MCIT/R&N final rule may provide beneficiaries and manufacturers an assurance of national Medicare coverage, evidence development under MCIT as previously finalized is voluntary and there was no requirement that manufacturers conduct studies to generate evidence to demonstrate clinical benefit to Medicare patients. We acknowledge that we no longer believe that voluntary evidence development, as provided for in the MCIT/R&N final rule, is in the best interests of Medicare beneficiaries as we believe such evidence is key to determining the best treatments for Medicare patients to ensure that the benefits of treatments outweigh the potential harms. For devices that lack evidence that is generalizable to the Medicare population, we believe it is important for such evidence to be developed and some public commenters suggested that we establish the coverage criteria (for example, provider experience, site of service, availability of supporting services) to ensure delivery of high-quality, evidence-based care.

While we proposed to repeal the MCIT/R&N final rule, and we now finalize the repeal of the MCIT/R&N rule, this action does not prohibit coverage of Breakthrough Devices. As we noted in the May 2021 final rule, even without the MCIT/R&N final rule in effect, a review of claims data showed that Breakthrough Devices have received and are receiving Medicare coverage when medically necessary. As more Breakthrough Devices achieve market authorization, and as we continue to examine claims data, we are learning that many of the eligible Breakthrough Devices are coverable and payable through existing mechanisms, such as bundled payments. Some Breakthrough Devices may be addressed by an existing LCD or NCD. New items and services can also be adjudicated on a claim-by-claim basis and be covered and paid under the applicable Medicare payment system if the MAC determines them to be reasonable and necessary for specific patients upon a more individualized MAC assessment. The MACs may take into account a beneficiary's particular clinical circumstances to determine whether a beneficiary may benefit from the device. CMS acknowledges, among other factors, that MCIT was developed in response to stakeholder concerns about time lags and coverage uncertainty for devices subject to claim-by-claim coverage determinations. While these paths provide some coverage, it may not meet stakeholders' expectations of faster and more predictable coverage.

The MCIT/R&N final rule limited MCIT only to Breakthrough Devices. In accordance with section 515B of the FD&C (21 U.S.C. 360e-3), FDA's Breakthrough Devices Program is for certain medical devices and device-led combination products, and can include lab tests. 7 To be granted a Breakthrough Device designation under the Breakthrough Devices Program, medical devices and device-led combination products must meet two criteria. The first criterion is that the device provides for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions. The second criterion is that the device must satisfy one of the following elements:

• It represents a breakthrough technology.

• No approved or cleared alternatives exist.

• It offers significant advantages over existing approved or cleared alternatives.

• Device availability is in the best interest of patients (for more information see 21 U.S.C. 360e-3(b)(2)).

Some commenters to the September 2020 MCIT/R&N proposed rule expressed concern that the MCIT pathway could give specific technologies an unfair advantage that would be unavailable to subsequent market entrants, thereby decreasing innovation and market competition (86 FR 2998 and 2999). Commenters submitted a variety of alternative approaches to covering second-to-market and non-breakthrough designated new technology to remedy this unintended consequence. Some commenters supported that CMS cover iterative refinements of the same Breakthrough Device for the duration of the original device's MCIT term. Other commenters suggested coverage under the MCIT pathway for subsequent similar breakthrough and non-breakthrough designated devices of the same type and indication for the balance of the first device's MCIT term. Yet other commenters proposed that new market entrants that are very similar to a Breakthrough Device should each receive the full 4 years of MCIT coverage, not tied to the timeline of the original product.

We acknowledge that we have changed our policy position on this issue after further consideration of all public comments received as we have worked to develop the MCIT pathway. We carefully considered the likelihood of reliance by stakeholders, including manufacturers and patients on the MCIT/R&N final rule and our decision to repeal the rule. Because the rule has never gone into effect we believe there has been minimal, if any, reliance on the MCIT/R&N final rule. Further, we believe we can work with stakeholders to achieve appropriate coverage through existing mechanisms. We also agree with commenters that there are many drawbacks to limiting coverage through the MCIT pathway only to those devices that are part of the Breakthrough Devices Program, and we now believe that any future alternative coverage pathway should not include this limitation. As noted previously, the potential incentives created by offering immediate coverage of Breakthrough Devices may disincentivize development of innovative technologies that do not meet the criteria for the Breakthrough Devices Program, such as some non-breakthrough-designated second-to-market devices and subsequent technologies of the same type. Additionally, we now believe a more flexible coverage pathway that leverages existing statutory authorities may be better able to provide faster coverage of new technologies to Medicare beneficiaries while prioritizing patient health and outcomes.

While we proposed to repeal the MCIT/R&N final rule as it is currently written, we considered future policies and potential rulemaking to provide improved access to innovative and beneficial technologies. We are committed to exploring other policy options and statutory authorities for coverage that better suit the needs of Medicare beneficiaries and other stakeholders when the items or services are supported by adequate evidence. For example, we are planning on initiating several coverage process improvements, including engaging the Agency for Healthcare Research and Quality (AHRQ) to explore updating the CED study criteria, as well as exploring options of expediting the NCD process. It is our goal to address these issues in future rulemaking and/or subregulatory guidance.

Comment: Commenters from multiple stakeholder groups (manufacturers, physicians, associations, etc.) agreed with CMS' proposal to repeal the MCIT/R&N final rule as they believe that the MCIT pathway as originally constructed was flawed and would not achieve the intended outcome of removing delays and uncertainty to improve beneficiary access to innovative technologies.

Response: We appreciate commenters' support for our proposal to repeal the MCIT/R&N final rule. We agree with commenters that while the MCIT/R&N final rule attempted to improve timeliness and predictability of coverage for new technologies, it was flawed in a number of ways that would have prevented predictable, timely coverage for beneficial devices and technologies. We agree with commenters that one of MCIT's limitations is that the MCIT/R&N final rule would have granted up to 4 years of open-ended Medicare coverage for FDA designated Breakthrough Devices upon market authorization, with no conditions of coverage beyond the FDA approved or cleared indication(s) for use. Further, the rule only granted expedited coverage for designated Breakthrough Devices; it did not grant the same coverage to devices or technologies that may treat the same condition but are not FDA designated as a Breakthrough Device, or older devices/technologies that may be more beneficial. This uneven approach to important beneficial devices was concerning and must be addressed.

Comment: Some commenters from multiple stakeholder groups reiterated their concerns that the provision of expedited coverage for certain devices (that is, Breakthrough Devices) without adequate evidence on the Medicare population and no requirement to develop the evidence places beneficiaries at risk of significant harms. Commenters noted that this is especially problematic since Medicare beneficiaries often have comorbidities and may respond differently than other populations that comprise that majority of most clinical trial participants.

Response: We agree that the lack of requirements in the MCIT/R&N final rule for manufacturers to continue to develop evidence demonstrating improved health outcomes in the Medicare population was problematic. When there is a lack of evidence specific to the Medicare population it makes it difficult for CMS to ensure that devices are not posing additional risks in the Medicare population. Continuing to develop evidence generalizable to the Medicare population is important not only to payers, but is key to patients, their caregivers and their treating clinicians to make the most informed decisions for their treatment. We continue to believe that it is important to require manufacturers participating in any innovative coverage pathway, such as MCIT, to produce evidence that demonstrates the health benefit of the device and the related services for patients with demographics similar to that of the Medicare population. It is our intention to address this issue in future rulemaking and we intend to hold at least two stakeholder public meetings in calendar year (CY) 2022 to inform our future policy-making in this space.

Comment: Several commenters noted that CMS already has mechanisms in place to provide coverage of Breakthrough Devices and that the repeal of the MCIT/R&N final rule would not prohibit coverage of these devices.

Response: We appreciate stakeholders' acknowledgement that even without the MCIT pathway, Breakthrough Devices have received and are able to receive Medicare coverage when medically necessary. We also recognize that it is important that stakeholders have transparent, predictable coverage. We are committed to working through this issue as we explore other policy options within our statutory authorities, including future rulemaking. As noted previously, we are planning on initiating several coverage process improvements, including engaging AHRQ to explore updating the CED study criteria, as well as exploring options of expediting the NCD process, and future rulemaking.

Comment: Many commenters indicated that a multitude of revisions would be needed to overcome MCIT's limitations and achieve its intended goals of faster and more predictable Medicare coverage. Commenters cited examples of revisions such as a process that would include benefit category determination (if needed), coding, payment, timeframes for coordinating with FDA, and clinical evidence assessment and development.

Response: We agree that the final MCIT/R&N rule has significant limitations and needs modifications. We will consider these issues as we engage in future rulemaking.

Comment: Some commenters reiterated their concerns that the MCIT/R&N final rule does not specify, nor can it require, coverage criteria beyond the FDA approved or cleared indication(s) for use such as patient criteria and/or provider or facility qualifications or experience. Commenters expressed that clinical trial populations are typically different from the Medicare population, and thus, the evidence supporting those indication(s) for use are less germane to the Medicare population. Without an evidence development requirement pre or post coverage that includes Medicare patients, commenters are concerned about the absence of generalizable clinical evidence. Without information on Medicare patients, commenters are concerned about providers inferring proven performance of breakthrough devices regardless of patient characteristics or facility capabilities.

Response: We appreciate these comments. We will consider these comments as we refine our coverage processes. It is our intention to address this issue in future rulemaking and we intend to hold at least two stakeholder public meetings in CY 2022 to inform our future policy-making in this space.

Comment: There is general agreement among commenters that CMS can address the limitations of the MCIT pathway in future rulemaking. Several commenters recommended that CMS increase efforts to facilitate early engagement among manufacturers, CMS and FDA to discuss suitable trial designs, evidentiary goals, and to ensure that study populations are representative of the Medicare population.

Response: We appreciate the support for our proposal. We will consider all of these comments as we explore other policy options and statutory authorities as we explore future rulemaking to provide appropriate expedited access to innovative and beneficial technologies. We will hold at least two public stakeholder meetings in CY 2022 as we consider several initiatives to improve the coverage process.

Comment: Commenters offered suggestions for CMS to consider in the future as it develops an alternative expedited coverage pathway, including recommendations for how CMS could improve the MCIT pathway and better leverage and improve existing coverage mechanisms, such as parallel review, coverage with evidence development (CED) or the investigational device exemption (IDE) process, in addition to conducting future rulemaking. For example, commenters expressed strong support for CMS to leverage the CED paradigm to provide Medicare beneficiaries with access to new devices and technologies while additional evidence is generated to document a proven benefit for Medicare patients. These commenters noted CMS' past efforts with CED, specifically Transcatheter Aortic Valve Replacement (TAVR), and noted that CMS could require post market studies and data collection through a modified CED paradigm to ensure that beneficiaries are gaining appropriate access to new technologies that improve health outcomes. Some commenters recommended that CED be time-limited so that the access restrictions that can sometimes accompany CED decisions do not last indefinitely especially in instances when the evidentiary questions of interest have been addressed. Commenters expressed the importance of collecting real world data to fill post-market evidence gaps and encouraged CMS to incorporate such data collection in an improved coverage pathway. These commenters noted that these new technologies need careful monitoring in real world populations.

Response: We appreciate all of the submitted recommendations for CMS to consider as we develop an alternative expedited coverage pathway. It is our intention to address this issue in future rulemaking and we intend to hold at least two stakeholder public meetings in CY 2022 to inform our future policy-making in this space.

Additionally, we currently have a number of initiatives underway to leverage existing coverage mechanisms and inform our efforts to facilitate improvements in coverage pathways. For example, CMS is engaged with the AHRQ to review the current CED study criteria and determine whether the criteria should be revised or updated. Similar to the last CED revision, if a revision is needed, we will use a transparent process that will include public participation such as public comment on any proposed revisions to the CED study criteria, and we will provide as well for public participation in a Medicare Evidence Development and Coverage Advisory Committee (MEDCAC) meeting which CMS will announce a date through a Federal Register notice and on the CMS Coverage website. For general information on MEDCAC, please see https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/MEDCAC.

Comment: Many commenters representing a wide-range of stakeholder groups offered additional suggestions on improvements CMS can make to NCDs, including a recommendation that CMS should omit trial design specifications within NCDs and that CMS should address coverage of new indications in NCDs. Some commenters encouraged CMS to review NCD requests and issue NCD implementation instructions within specified timeframes. Several commenters asked that CMS prohibit concurrent NCD and LCD processes.

Response: We appreciate these comments and helpful suggestions offered by commenters on how CMS can improve the NCD process. We will consider these comments as we explore other policy options and statutory authorities to provide appropriate expedited access to innovative and beneficial technologies.

Comment: Several commenters requested that CMS ensure equity between fee-for-service and Medicare Advantage (MA) beneficiaries in an alternative expedited coverage pathway. Some of these commenters noted that MA plans often impose restrictive prior authorization requirements or decline to cover services that are routinely covered and paid for under fee-for-service Medicare, simply due to the absence of a LCD or NCD.

Response: We appreciate these comments and will consider this as we explore other policy options that may help to ensure coverage consistency among Medicare beneficiaries regardless of whether they are enrolled in fee-for-service or MA.

Comment: A few commenters suggested that as CMS takes future action to provide for an alternative expedited coverage pathway, that it provide expedited coverage for a class of devices rather than of a single device to ensure there is not inconsistent or delayed coverage of similar devices or technologies.

Response: We appreciate the comment and will consider this as we explore other policy options. It is our intention to address this issue in future rulemaking and we intend to hold at least two stakeholder public meetings in CY 2022 to inform our future policy-making in this space.

Comment: Some commenters reiterated their concerns that the MCIT pathway has the unintended consequence of limiting access to competitive devices. These commenters recommended that CMS consider broadening the technologies eligible for an expedited coverage pathway to replace MCIT beyond Breakthrough Devices in order to ensure a competitive and innovative marketplace. Several commenters suggested that such an expedited coverage pathway should not only include Breakthrough Devices but also other medical products that are the subject of FDA expedited programs, such as those that receive breakthrough therapy designation or are granted accelerated approval. Commenters specifically requested that screening tests, diagnostics, drugs and biologicals be included.

Response: We appreciate the comments and will further consider these comments as we explore other policy options and statutory authorities.

Comment: As noted previously, some commenters requested that drugs and biological products be included in an alternative expedited coverage pathway as they believe that delayed access to innovative drug and biologic therapies is just as detrimental as delays to innovative devices. However, a few commenters expressed the viewpoint that drugs and biological products not be included as inclusion may lead to unnecessary delays and access issues.

Response: We appreciate the comments and will further consider these comments as we explore other policy options and statutory authorities.

Comment: Several commenters reiterated their concerns that since the MCIT/R&N final rule was solely a coverage rule, a number of operational issues that would inhibit the successful implementation of the MCIT pathway still need to be addressed, including benefit category determination, coding and payment issues. Commenters indicated that the goals of MCIT cannot be achieved until these operational issues are resolved. Several commenters offered suggestions as to how CMS could remedy these issues, including modifications to existing operational processes. For example, these commenters recommended that CMS could adapt the processes used for the IDE, new technology add-on payment (NTAP) and transitional passthrough (TPT) to establish codes and payment for technologies in an expedited coverage pathway. Some commenters requested that any future rulemaking for an alternative expedited coverage pathway include coding and payment information.

Response: We appreciate these comments and agree we should consider all of the operational issues as we work to develop an alternative expedited coverage pathway. We will consider this comment as we initiate coverage process improvements, including engaging AHRQ to explore updating the CED criteria, as well as exploring options of expediting the NCD process, including future rulemaking.

Comment: Several commenters that explicitly stated their opposition to or disappointment with our proposal to repeal the MCIT/R&N final rule provided information and examples specific to their technologies for why an expedited coverage pathway similar to MCIT is needed. These commenters lauded MCIT as a significant advancement in removing delays in national coverage after FDA market authorization and uncertainty in the timing and duration of coverage to improve beneficiary access to innovative technologies.

Response: The majority of the comments citing specific examples of how MCIT is beneficial to its specific technology would likely face the operational challenges because after review of the commenters' devices, it was not clear whether there was a benefit category for the devices. At least one commenter's device would be part of a bundled payment and not separately payable. Because the MCIT/R&N final rule did not address BCD issues, the MCIT/R&N final rule would likely not have resulted in the full coverage they were seeking. We are aware that there is concern when coverage decisions are made at the MAC level, specifically when an LCD is not applicable. This coverage uncertainty may also influence provider decision-making because they are reluctant to submit claims for services that may not be paid for by Medicare.

Comment: A commenter requested that CMS clarify how it intends to approach coverage and payment for prescribed digital therapeutics (PDTs) and include the information in the preamble to this final rule since it had not been addressed in prior MCIT/R&N rulemaking.

Response: We appreciate this comment. However, we are not responding to specific technology evaluations in this final rule as they are out of scope. We will consider this comment as we initiate several coverage process improvements.

Comment: Some commenters stated CMS should allow the MCIT/R&N final rule to go into effect on December 15, 2021, and subsequently issue a proposed rule with appropriate revisions to the MCIT pathway or release subregulatory guidance that addresses the numerous concerns rather than finalizing the repeal.

Response: We appreciate commenters sharing their belief that the rule should go into effect, but we disagree. While we acknowledge that some stakeholders are seeking a replacement pathway simultaneously upon repeal, we need time to more fully evaluate the comments received on the September 2021 proposed rule, and in particular the feedback offered by commenters on how we can improve upon the MCIT pathway.

The final MCIT/R&N rule had major flaws that must be addressed to ensure there is a balance between expedited coverage of devices and patient protections. As we discussed earlier, these flaws also included operational concerns regarding benefit category determinations, coding and payment implementation with expedited coverage. Further, Breakthrough Devices have not necessarily demonstrated a health benefit in the Medicare population. Most importantly, we believe that evidence development must be part of an expedited coverage process, as needed. Based upon these significant concerns with the MCIT pathway, both from the Agency and from several commenters, we believe it is important to move forward with repealing the MCIT/R&N final rule rather than letting it go into effect and modifying it after the fact. We believe that letting the MCIT/R&N final rule go into effect and later modifying it would cause disruptions in health care delivery as there would be confusion and uncertainty among stakeholders, most importantly beneficiaries and their treating clinicians. For example, since the January 2021 MCIT/R&N final rule is a coverage rule only, there could be confusion and disruption stemming from devices receiving MCIT approval without a clear path for appropriate coding and payment. As noted previously, under the January 2021 MCIT/R&N final rule, there is no requirement for evidence that MCIT devices will specifically benefit the Medicare target population. Additionally, the MCIT/R&N final rule limits tools the CMS has to deny coverage when it becomes apparent that a particular device can be harmful to the Medicare population. If the January 2021 MCIT/R&N final rule were to go into effect, and a device is later found to be harmful to Medicare recipients is approved under the MCIT pathway, CMS would be limited in the actions it can take to expeditiously withdraw or modify coverage to protect beneficiaries. Finally, it is not clear that CMS has legal authority under the Allina Supreme Court ruling to use subregulatory guidance to modify aspects of the MCIT/R&N final rule as some commenters suggested.

Comment: Of the commenters who disagreed with the proposed rule to repeal the MCIT/R&N rule, most acknowledged the limitations of the MCIT pathway and indicated that modifications were needed, such as the inclusion of coding and payment information and evidentiary standards. A number of these same commenters expressed that while they were disappointed with CMS' proposal to repeal MCIT, they appreciated CMS' ongoing commitment to finding solutions, including an alternative expedited coverage pathway.

Response: We appreciate the comment and will consider the suggested modifications as we move forward.

Comment: Many commenters requested that if CMS were to move forward with repealing the MCIT/R&N final rule, CMS should release a proposed rule offering an alternative expedited coverage pathway simultaneously or as soon as possible thereafter. These commenters requested that CMS provide a timeline for releasing a new rule for an alternative expedited coverage pathway. These commenters noted that an alternative expedited coverage pathway is an urgent need to address the long-standing concerns that Medicare coverage is often slow and unpredictable and impedes beneficiary access to innovative technologies. Some commenters raised concerns that following repeal, CMS would not continue with the forward momentum to create an alternative expedited coverage pathway.

Response: We appreciate these comments. As we move forward with repealing the MCIT/R&N final rule, we want to reassure stakeholders that CMS does not intend to maintain the status quo. We remain committed to our goal of establishing an alternative expedited coverage pathway that better achieve the goals of timely and predictable Medicare coverage of devices while ensuring that Medicare covers items and services on the basis of scientifically sound clinical evidence and with appropriate safeguards. CMS acknowledges that more can be done to address the current uncertainty surrounding Medicare coverage of new medical technologies and while we are unable to provide a specific timeframe for doing so, we are working expeditiously to develop an alternative expedited coverage pathway with adequate patient safeguards to ensure devices are safe for Medicare patients and an evidence base that is generalizable to Medicare beneficiaries is further generated.

Comment: Some commenters stated that CMS has received sufficient public input on potential improvements to MCIT and existing coverage pathways over the course of three public comment periods on the MCIT pathway, other commenters encouraged CMS to conduct town halls to obtain further stakeholder feedback. Numerous commenters expressed willingness to be a resource for CMS as it developed future policies.

Response: Stakeholder engagement is a vitally important component of our efforts to develop an alternative expedited coverage pathway that provides an appropriate balance of innovation and beneficiary protections. We value the diverse viewpoints, perspectives, and options offered by commenters. As we move forward, we will continue to be open and transparent and will work with stakeholders in efforts to achieve consensus whenever possible.

Even with the repeal of the MCIT/R&N final rule, we have a number of initiatives underway and in development within our existing authorities. These initiatives take into account the feedback CMS has received on the MCIT pathway to date, and we will leverage these initiatives to inform future policy making in this space.

Further, CMS has multiple pathways to facilitate engagement such as the Medicare Evidence Development and Coverage Advisory Committee (MEDCAC) and the public input process through the Federal Register . We are also receptive to informal engagement with stakeholders, including with manufacturers who are interested in the development of a new expedited coverage pathway. In addition, we are also exploring other potential avenues to facilitate timely and transparent stakeholder engagement, including listening sessions or town hall meetings, in order to receive additional feedback from stakeholders that can help inform CMS' development of an alternative expedited coverage pathway. In addition, we are initiating coverage process improvements, including engaging AHRQ to explore updating the CED study criteria, as well as exploring options of expediting the NCD process, including future rulemaking.

Comment: Some commenters who disagreed with CMS' proposal to repeal the MCIT/R&N final rule asserted that the patient protections in place in the MCIT/R&N final rule, specifically the reliance on FDA safety and efficacy requirements to grant coverage to Breakthrough Devices under MCIT, were sufficient to prevent beneficiary harm. Some of these commenters stated that CMS will be endangering the patients it is trying to protect if MCIT does not go into effect on December 15, 2021. Some commenters also noted that the data Medicare needs to evaluate a device has already been generated during the FDA approval process.

Response: We disagree that there are sufficient patient protections in the MCIT/R&N final rule. After consideration of all public comments received as we have worked to develop the MCIT pathway, and as we indicated in the September 2021 proposed rule, we no longer believe that FDA safety and effectiveness standards alone are sufficient to support open-ended Medicare coverage. FDA and CMS act under different statutes that have different goals and the standard for Medicare coverage (that is, a determination that a device is reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member) is not synonymous with the standards for FDA marketing authorization of devices, which are not specific to the Medicare population. CMS acknowledges that we have changed our position on this issue after further consideration of public comments and a review of all FDA-designated Breakthrough Devices eligible for MCIT. As noted previously, granting all eligible FDA-designated Breakthrough Devices national coverage, the MCIT/R&N final rule establishes insufficient beneficiary protections for a subset of devices and must be revised.

Further, we strongly disagree that our repeal of the MCIT/R&N final rule will cause harm to beneficiaries. While there is no guaranteed national coverage that does not mean a given FDA-designated Breakthrough Device is non-covered. CMS' MACs are empowered to make reasonable and necessary coverage determinations on any device where there is not a nationally policy in place, including FDA-designated Breakthrough Devices. We reviewed fee-for-service claims data for several recent market-authorized breakthrough devices. The majority of the FDA market authorized Breakthrough Devices that would have been eligible for the MCIT pathway: Were already paid through an existing mechanism, were directed to a pediatric population, were a diagnostic lab test, were subject to an existing NCD; or had no benefit category or an uncertain benefit category. Of those that would be separately payable by Medicare on a claim-by-claim basis, the reviewed devices were covered when reasonable and necessary and paid under the applicable Medicare payment system. Further, in general, there are typically many treatment options available in the practice of medicine and even if one particular item is not covered, beneficiaries have access to other treatment options.

Comment: Some commenters expressed that beneficiaries and their physicians should be provided with more latitude to assess the advantages and risks of a medical device to treat an individual's specific medical condition.

Response: Patients and their treating clinicians should have latitude to make informed treatment decisions. If we were to guarantee coverage of devices based solely on breakthrough status and FDA marketing authorization, rather than also consider whether the device provides an effective, reasonable and necessary treatment for Medicare patients, there may not be enough information for patients and their treating clinicians to make an adequately informed decision with respect to use of the device for Medicare beneficiaries. Further, there may be an incentive for use of a device that has coverage under the MCIT pathway rather than a device that is not covered under the MCIT pathway which may be more beneficial to patients. This could adversely impact beneficiaries if there is another item or service available to treat the patient that has an evidence-base to suggest that it may lead to better health outcomes for Medicare patients.

Comment: Commenters asserted that the repeal of the MCIT/R&N final rule will undercut evidence development as innovators hold off on study development and enrollment while waiting on CMS to conduct rulemaking with evidentiary standards and other modifications to the MCIT pathway. These commenters also contend that CMS' repeal of the MCIT/R&N final rule could further stifle innovation by undercutting incentives to encourage investment in device development.

Response: Innovation is important to CMS and we strongly encourage innovators to develop reliable evidence to demonstrate that their device is beneficial for Medicare patients. If one of the biggest impediments to innovation is uncertainty, demonstrating with reliable evidence a device's value in treating Medicare patients will largely assist in removing that uncertainty. Ultimately, it is the responsibility of the innovator or manufacturer to demonstrate the value of their device. Evidence development should continue with or without CMS support.

Final Decision: After review of the public comments received, we are finalizing the repeal of the January 2021 MCIT/R&N final rule as proposed in the September 2021 proposed rule without modification.

In general, section 1862(a)(1)(A) of the Act permits Medicare payment under Part A or Part B for items or services that are reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. The definition of “reasonable and necessary” in the MCIT/R&N final rule mirrored the longstanding CMS Program Integrity Manual's definition of “reasonable and necessary” with a modification to the appropriateness factor to specify when and how (upon publication of guidance) we would utilize commercial insurer coverage policies.

Expanding the reasonable and necessary definition to systematically consider commercial insurer coverage presents implementation and appeals process challenges that would likely persist. In the preamble to the MCIT/R&N final rule, in response to commenters concerns that the commercial insurer appropriateness criterion was vague, we stated our intention to gather additional public input on the methodology by which commercial insurers' policies are determined to be relevant to the reasonable and necessary appropriateness criteria. We stated that not later than 12 months after the effective date of the MCIT/R&N final rule (that is, December 15, 2021), we would publish for public comment, a draft methodology for determining when commercial insurers' policies could be considered to meet the reasonable and necessary definition appropriateness criterion for coverage of an item or service. Comments received in response to the March 2021 IFC expressed concern about how the commercial insurer policy provision would be implemented. Commenters also expressed concerns that the R&N definition included in the MCIT/R&N final rule, and more specifically the commercial insurance aspects of the definition, will remove existing flexibilities and potentially impact CMS' ability to ensure equitable health care access for all Medicare beneficiaries. Additionally, commenters suggested that the reasonable and necessary definition should be included in a separate rule as MCIT and R&N are independent and distinct provisions with different implications for Medicare policy. In light of our proposal to repeal the R&N definition, including the commercial insurance aspects of the MCIT/R&N final rule, we will not be issuing subregulatory guidance by March 15, 2022, on consideration of commercial insurer coverage polices when there is insufficient evidence to make a national or local coverage determination.

While we proposed to fully repeal the MCIT/R&N final rule as it is currently written, we invited comments on the R&N aspect of our proposal. In lieu of fully repealing the R&N rule, we considered whether the final rule should instead merely repeal the commercial insurance aspects of the rule. We also asked if CMS does consider future rulemaking to include defining reasonable and necessary, what criteria should CMS consider as part of the reasonable and necessary definition? For example, should CMS maintain the codification of the definition of “Reasonable and Necessary” as found in the Chapter 13 of the CMS Program Integrity Manual (PIM) or consider different criteria?

Comment: Most commenters supported the full repeal of the reasonable and necessary definition in the MCIT/R&N final rule. Similar to the past two public comment periods, many commenters requested that CMS bifurcate MCIT and R&N into separate rules because they are independent and distinct provisions with different implications for Medicare policy. Commenters noted that the codification of a R&N definition is significant because it affects all Medicare items and services and represents a change from current practice. Commenters reiterated their position that the definition needs more public input and CMS should ensure it receives feedback from all interested parties, which is a broader group than the audience with expertise and interest in the MCIT pathway.

Response: We agree that further stakeholder engagement on the topic is warranted; and therefore, we will finalize the repeal of the R&N definition. Similar to what we described previously for MCIT, we are exploring potential opportunities for obtaining additional stakeholder feedback via listening sessions, town hall meetings, or other means. We acknowledge the requests made by a number of commenters to bifurcate MCIT and R&N into separate rules for the purposes of future rulemaking. We will consider these comments as we address these issues in the future.

Comment: The commenters cited concerns that if codified, the definition of reasonable and necessary in the MCIT/R&N final rule would remove flexibility and may impact CMS's ability to ensure equitable health care. Some stated that the definition as finalized would be problematic for lab tests.

Response: Further stakeholder engagement on the topic is warranted. We will consider these comments as we address these issues in the future.

Comment: Several commenters questioned whether a codified definition is necessary as they believe that the current definition in Chapter 13 of the CMS Program Integrity Manual is a sufficient framework that preserves the necessary flexibility to provide appropriate access. A significant number of commenters indicated their support for maintaining the definition in subregulatory guidance. Commenters noted that CMS has not provided a clear rationale for why codification of the definition in regulation is necessary or beneficial and that CMS should more clearly articulate the benefits and drawbacks associated with codification as compared to the status quo.

Response: We will finalize our proposed rule to repeal the R&N definition. As noted previously, we believe further stakeholder engagement on the definition is warranted. We will consider these comments as we address these issues in the future.

Comment: The majority of commenters supported the repeal of the commercial insurer criterion in the R&N definition. Commenters reiterated that commercial coverage policies already can (and have been) reviewed by CMS as part of the NCD process. Commenters further note that formalizing their inclusion could lead to an item or service that had been covered previously becoming non-covered depending on how a specific commercial payor may have determined coverage. Commenters reiterated their concerns regarding implementation of commercial insurer policy provisions, the potential of unnecessarily restricting coverage by relying on commercial insurer policies designed for a different population with different incentives, commercial insurer policies' lack of transparency, and potential for fraud and abuse. A few commenters cited a concern that some commercial plans consider costs in their decisions which could potentially violate the Medicare statutory prohibition regarding consideration of cost in coverage determinations. Lastly, a commenter questioned why CMS would want to cede this authority to other entities.

Response: We appreciate these comments. We agree with commenters that CMS can (and has) reviewed commercial policies in recent years as part of a national coverage analysis. After further consideration of public comments, we no longer agree with our position in the January 2021 MCIT/R&N final rule that it is necessary to include regulatory language to give us clear authority to review commercial insurers' policies. Because we are finalizing the full repeal of the R&N definition, we will not be issuing subregulatory guidance on consideration of commercial insurer coverage polices when there is insufficient evidence to make a national or local coverage determination. Further, we would like to clarify that while CMS has a long-standing position to not consider costs when making coverage determinations, it is not because of a statutory prohibition.

Comment: Though commenters were largely opposed to the inclusion of the commercial insurance aspects of the R&N definition, some commenters offered alternative approaches for CMS to consider in applying commercial payer policies. Specifically, some commenters recommended commercial policies only be utilized as evidence to support expansion of coverage on a proposed policy or asking for a reconsideration of an existing one.

Response: We appreciate these comments. As noted previously, we can use the private market as a source of evidence for coverage.

Comment: A few commenters disagreed with CMS' proposal to fully repeal the definition of R&N. These commenters expressed their support for a R&N definition in line with the definition in Chapter 13 of the PIM. One of these commenters specifically encouraged CMS to codify the R&N definition stating that it is a much needed step and something that CMS has sought to do for decades.

Response: We appreciate these comments. However, after considering the totality of the comments, we believe that the overarching issues raised by commenters, in particular issues regarding the need for more clarity and broader stakeholder input, warrant further consideration and engagement before moving forward with a codified definition of R&N. As other commenters noted, a codified definition of R&N is a considerable change from current practice and will affect all Medicare services. We believe it is important to provide for additional stakeholder feedback on this topic that includes a wider group of stakeholders than those who may have offered input during rulemaking for the MCIT/R&N final rule. We look forward to engaging with stakeholders in the future as we determine appropriate next steps that are in the best interest of the Medicare program and all stakeholders.

Comment: Some commenters expressed opposition to only repealing the commercial aspects of the R&N definition. A commenter stated that trying to leave part of the rule in place now does not provide adequate opportunity for comment, as stakeholders do not truly know what is being proposed for comment.

Response: We appreciate these comments. We acknowledge that commenters representing a wide range of stakeholder groups want more clarity from CMS and more opportunities to provide input before we move forward with codifying a definition of R&N. As noted previously, we look forward to engaging with stakeholders on this topic.

Comment: Commenters provided many suggestions as to what criteria CMS should consider as part of the R&N definition in response to our solicitation for that information in the September 2021 proposed rule. Specifically, a commenter noted that a definition of R&N should take into consideration the perspective of providers and enhance the ability of providers to use their medical judgment. Another commenter stated that CMS should adhere to a definition that is patient-focused. Some commenters noted that Medicare should consider the definition of appropriateness for Medicare beneficiaries since not all beneficiaries are aged 65 and older, and all beneficiaries should be considered. A commenter recommended that the definition should be expanded to include maintenance or prevention of deterioration of function as well. Some commenters expressed concern with the inclusion of `safe and effective' in the definition and contend that Medicare coverage should not be dependent on meeting standards established by FDA for a different purpose. Some commenters recommended that CMS eliminate the inclusion of “at least as beneficial as an existing and available medically appropriate alternative” in the definition. A commenter stated that it was problematic as it as it appears to impose a comparative effectiveness requirement for coverage.

Response: We appreciate the informative and helpful recommendations provided by commenters. We will consider these comments for potential future policy development. As noted previously, we intend to provide additional opportunities for stakeholders to provide feedback on this topic and look forward to further engagement with stakeholders.

Final Decision: After review of the public comments received, we are finalizing the repeal of the January 2021 MCIT/R&N final rule as proposed in the September 2021 proposed rule without modification.

In the September 2021 proposed rule, we stated that if the MCIT/R&N final rule is repealed as proposed, the revisions to part 405 of title 42 of the Code of Federal Regulations would not occur and the text would remain unchanged. Specifically, a definition of “reasonable and necessary” would not be included among the terms defined at 42 CFR 405.201(b) and the guidance that the rule would have required (subregulatory guidance on the topic of utilization of commercial insurer polies) would not be introduced. Additionally, subpart F, which wholly consisted of Medicare Coverage of Innovative Technology, would not be added, and subpart F would remain reserved for other purposes.

After review of the public comments received, we are finalizing the repeal of the January 2021 MCIT/R&N final rule as proposed in the September 2021 proposed rule without modification.

The purpose of this final rule is to repeal the MCIT/R&N final rule. As stated in the preceding sections, we are repealing MCIT because this coverage policy is not in the best interest of Medicare beneficiaries. We are repealing the definition of R&N because further stakeholder engagement on the topic is warranted based on stakeholder feedback. CMS developed MCIT in part due to concerns that delays and uncertainty in Medicare coverage slowed innovation and impaired beneficiary access to important new technologies, specifically those designated as breakthrough devices by FDA. We believe that the finalized MCIT/R&N rule is not in the best interest of Medicare beneficiaries because the rule may provide coverage without adequate evidence that the Breakthrough Device would be a reasonable and necessary treatment for the Medicare patients that have the particular disease or condition that the device is intended to treat or diagnose.

The definition of “reasonable and necessary” in the MCIT/R&N final rule mirrored the longstanding CMS Program Integrity Manual's definition of “reasonable and necessary” with a modification to the appropriateness factor to specify when and how (upon publication of guidance) we would utilize commercial insurer coverage policies. This final rule to not codify the definition of R&N maintains the status quo with respect to the use of the CMS Program Integrity Manual's definition and is responsive to the numerous stakeholders who requested that, if CMS were to develop a definition of reasonable and necessary, that the stakeholder engagement process would require more than public comment via rulemaking.

Through this final rule we repeal the MCIT/R&N final rule and, as stated previously, intend to work with stakeholders to develop a coverage policy and definition for R&N that addresses the concerns they raised. CMS plans on hosting at least two stakeholder meetings with several audiences, including, but not limited to, manufacturers, clinicians, patients, and disability groups.

This final rule repeals the MCIT pathway and codification of the definition of “reasonable and necessary.” Because the January 2021 final rule effective date was delayed until December 15, 2021, the MCIT coverage pathway and definition of “reasonable and necessary” have not been implemented, and no payments for items and services have been made in relation to these provisions because they have not taken effect. In the January 2021 final rule, we included a robust regulatory impact analysis of these provisions. Because the final rule did not go into effect, and this final rule repeals the provisions, there has not been an impact from these provisions nor will there be an impact, relative to current coverage practice, upon repeal; however, effects would be non-negligible relative to the future trajectory without this repeal.

In the September 2021 proposed rule, we examined the impact of the repealing the MCIT/R&N final rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C. 804(2)).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action that is likely to result in a rule: (1) Having an annual effect on the economy of $100 million or more in any 1 year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local or tribal governments or communities (also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive order.

A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). The MCIT/R&N 2021 final rule reached the economic threshold and thus was considered a major rule. Because this final rule completely repeals the provisions, this rule also reaches the economic threshold and its finalization is a major rule. Accordingly, we have prepared a Regulatory Impact Analysis that to the best of our ability presents the costs and benefits of the rulemaking. Therefore, based on our estimates, OMB's Office of Information and Regulatory Affairs has determined that this rulemaking is “economically significant” as measured by the $100 million threshold, and hence also a major rule under Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act).

CMS considered alternatives to repealing the MCIT pathway and the definition of reasonable and necessary, such as maintaining the provisions of the MCIT/R&N final rule and further delaying the effective date. For the reasons described in detail in section II. of this rule such as patient safety and need for further public engagement, we chose to repeal the provisions. We note that further delay of the MCIT/R&N final rule would not alter the patient safety concerns inherent in the MCIT pathway.

As described in the MCIT/R&N final rule, the impacts of the MCIT pathway and defining “reasonable and necessary” were hard to quantify without knowing the specific Breakthrough Devices that would seek MCIT and other items and services that would be included in future NCDs and LCDs and the criteria that CMS would use for determining which commercial insurers will be considered.

In the MCIT/R&N final rule specifically for MCIT, we considered regulatory alternatives to combine Medicare coverage with clinical evidence development under section 1862(a)(1)(E) of the Act, to take no regulatory action, or to adjust the duration of the MCIT pathway.

The impact of implementing the MCIT pathway was difficult to determine without knowing the specific Breakthrough Devices that would be covered. In addition, many of these devices would be eligible for coverage in the absence of the rule, such as through a local or national coverage determination, so the impact for certain items may be the acceleration of coverage by just a few months. Furthermore, some of these devices would be covered immediately if the MACs decide to pay for them, which would result in no impact on Medicare spending for devices approved under this pathway. However, it is possible that some of these Breakthrough Devices would not otherwise be eligible for coverage in the absence of the rule. Because it was not known how these new technologies would otherwise come to market and be reimbursed, it was not possible to develop a point estimate of the impact. In general, we believed the MCIT coverage pathway would have ranged in impact from having no impact on Medicare spending to a temporary cost for innovations that are adopted under an accelerated basis.

The decision to enter the MCIT pathway would have been voluntary for the manufacturer. Because manufacturers typically join the Medicare coverage pathway that is most financially beneficial to them, this could result in selection against the existing program coverage pathways (to what degree is unknown at this point). In addition, the past trend of new technology costing more than existing technology could lead to a higher cost for Medicare if this trend continued for technologies enrolling in the MCIT pathway. Nevertheless, new technology may also mitigate ongoing chronic health issues or improve efficiency of services thereby reducing some costs for Medicare.

To demonstrate the potential impact on Medicare spending, for MCIT the CMS Office of the Actuary (OACT) developed three hypothetical scenarios that illustrate the impact of implementing the MCIT pathway. Scenarios two and three assumed that the device would not have been eligible for coverage in the absence of MCIT (see Table 1). The illustration used the new devices that applied for a NTAP in fiscal year (FY) 2020 as a proxy for the new devices that would utilize the MCIT pathway. The submitted cost and anticipated utilization for these devices was published in the Federal Register . 8 In addition, we assumed that two manufacturers would elect to utilize the MCIT pathway in the first year, three manufacturers in the second year, four manufacturers in the third year, and five manufacturers in the fourth year each year for all three scenarios. This assumption is based on the number of medical devices that received FY 2020 NTAP and were non-covered in at least one MAC jurisdiction by LCDs and related articles and our impression from the FDA that the number of devices granted breakthrough status is increasing. For the first scenario, the no-cost scenario, we assumed that all the devices would be eligible for coverage in the absence of MCIT. If the devices received coverage and payment nationally and at the same time then there would be no additional cost under this pathway. For the second scenario, the low-cost scenario, we assumed that the new technologies would have the average costs ($2,044) and utilization (2,322 patients) of similar technologies included in the FY 2020 NTAP application cycle. Therefore, to estimate the first year of MCIT, we multiplied the add-on payment for a new device by the anticipated utilization for a new device by the number of anticipated devices in the pathway ($2,044 × 2,322 × 2 = $ 9.5 million). For the third scenario, the high-cost scenario, we assumed the new technologies would receive the maximum add-on payment from the FY 2020 NTAP application cycle ($22,425) and the highest utilization of a device (6,500 patients). Therefore, to estimate for the first year of MCIT, we estimated similarly ($22,425 × 6,500 patients × 2 = $ 291.5 million). For subsequent years, we increased the number of anticipated devices in the pathway by three, four, and five in the last two scenarios until 2024. 9 In addition to not taking into account inflation, the illustration does not reflect any offsets for the costs of these technologies that would be utilized through existing authorities nor the cost of other treatments (except as noted). It is not possible to explicitly quantify these offsetting costs but they could substantially reduce or eliminate the net program cost. However, by assuming that only two to five manufacturers would elect MCIT coverage, we implicitly assumed that, while more manufacturers could potentially elect coverage under MCIT, the majority of devices would have been covered under a different coverage pathway. Therefore, a substantial portion of the offsetting costs are implicitly reflected.

Based on this analysis, there was a range of potential impacts of MCIT as shown in Table 1. The difference between the three estimates demonstrates how sensitive the impact is to the cost and utilization of these unknown devices.

Because MCIT has not yet been implemented, we lack evidence with which to update the earlier estimates, so Table 1, only differs from the analogous table accompanying the MCIT/R&N final rule in terms of the sign (that is, the direction) on the estimates and a shifting of the time horizon by one year so as to avoid stating this MCIT would have effects in the nearly-ended FY 2021.

The RFA requires agencies to analyze options for regulatory relief of small entities. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Some hospitals and other providers and suppliers are small entities, either by nonprofit status or by having revenues of less than $7.5 million to $38.5 million in any 1 year. Individuals and States are not included in the definition of a small entity. For the MCIT/R&N final rule, we reviewed the Small Business Administration's Table of Small Business Size Standards Matched to North American Industry Classification System (NAICS) Codes to determine the NAICS U.S. industry titles and size standards in millions of dollars and/or number of employees that apply to small businesses that could be impacted by this rule. We determined that small businesses potentially impacted by that rule include surgical and medical instrument manufacturers (NAICS code 339112, dollars not provided/1,000 employees), Offices of Physicians (except Mental Health Specialists) (NAICS code 621111, $12 million/employees not provided), and Freestanding Ambulatory Surgical and Emergency Centers (NAICS code 621493, $16.5 million/employees not provided). Because the impact of this final rule is ultimately no change in current coverage policy, we determined that small businesses identified would not be impacted by this final rule. Given the nature of the breakthrough devices market authorized thus far and the timely notification of the MCIT/R&N final rule's delay of effective date, we do not anticipate that small businesses would have made investment decisions or experienced a loss of anticipated positive reimbursement as a result of the MCIT/R&N final rule. Because MCIT has not gone into effect, and we are repealing the rule, payments have not occurred under MCIT; therefore, the impact of this final rule is neither an increase nor decrease in revenue for providers. We are not preparing a further analysis for the RFA because we have determined, and the Secretary of the Department of Health and Human Services (the Secretary) certifies, that this final rule will not have a significant negative economic impact on a substantial number of small entities because small entities are not being asked to undertake additional effort or take on additional costs outside of the ordinary course of business.

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area for Medicare payment regulations and has fewer than 100 beds. We are not preparing an analysis for section 1102(b) of the Act because we have determined, and the Secretary certifies, that this final rule would not have a significant impact on the operations of a substantial number of small rural hospitals because small rural hospitals are not being asked to undertake additional effort or take on additional costs outside of the ordinary course of business. Obtaining Breakthrough Devices for patients is at the discretion of providers. We are not requiring the purchase and use of Breakthrough Devices. Providers should continue to work with their patients to choose the best treatment. For small rural hospitals that provide Breakthrough Devices to their patients, this final rule would not change the way they are currently covered through the Medicare program.

In order to demonstrate the potential impact on Medicare spending for the definition of “reasonable and necessary” in the MCIT/R&N final rule we developed scenarios that illustrated the impact of implementing the two alternatives considered (no change/not codifying a definition and codifying a definition). One of the options was making no change, that is not codifying the definition of “reasonable and necessary” in regulations. The number of NCDs and LCDs finalized in a given year can vary and the cost of items and services within the coverage decisions varies. Further, while we reviewed coverage of items and services, we did not take into account unique Medicare rules regarding which type of providers/clinicians may furnish certain services, place of service requirements, or payment rules. Our analysis was based on whether Medicare covered or non-covered an item or service and based on the numbers of NCDs and LCDs finalized in 2020 (see Table 1). In 2020, CMS and the MACs finalized 3 NCDs and 31 LCDs. (This number represents new LCDs in 2020 and made publicly available via the Medicare Coverage Database. If more than one MAC jurisdiction issued an LCD on the same item or service with the same coverage decision, only 1 of the LCDs was included in the count.) Of the NCDs finalized in 2020, all 3 resulted in expanded national Medicare coverage. Because none of those NCDs resulted in non-coverage, we did not evaluate whether commercial insurers would have covered the item or service. Therefore, based on 2020 data for NCDs only, the impact would be $0.

Of the 31 LCDs, 27 provided Medicare positive coverage and 4 resulted in non-coverage. For these non-covered items and services, we established that the possible range of the cumulative cost of covering them could be from $0 to $3.4 billion for a single year (based on price and approximate Medicare beneficiary utilization). Because our analysis looked for any commercial insurer that covered the item or service, the cost may be less when utilizing commercial insurer polices that represent a majority of covered lives. In addition, even if a commercial insurer covers an item or service, the final rule did not require automatic Medicare coverage. Therefore, not all items and services that are non-covered by Medicare but covered by commercial insurance would be presumed covered under the MCIT/R&N final rule. Rather, commercial insurer coverage would have been a factor that CMS would have taken into account as part of the body of evidence in determining coverage through the NCD and LCDs processes. Because not all commercial insurer positive coverage will necessarily translate to Medicare coverage and because CMS was to define which types of commercial insurers (based on majority of covered lives) would be relevant, we believe that commercial insurer coverage impact is likely much smaller, closer to 15 to 25 percent of $3.4 billion, that is, $51 to $880 million.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 2021, that threshold was approximately $158 million. This final rule would not impose a mandate that will result in the expenditure by State, local, and Tribal Governments, in the aggregate, or by the private sector, of more than $158 million in any one year.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a final rule that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has federalism implications. Since this final rule does not impose any costs on State or local governments, the requirements of Executive Order 13132 are not applicable.

Comment: A few commenters expressed concerns regarding the financial impact of the MCIT/R&N final rule, including that CMS' impact estimate of $0 to $4 billion over the first several years indicated that CMS could not assess the potential impact given the multiple variables involved. Another commenter asserted that the MCIT/R&N final rule significantly underestimated anticipated spending and would accelerate Medicare Trust Fund insolvency.

Response: We acknowledge that assessing the financial impact of MCIT, with multiple variables and limited access to publicly available data to derive impacts, makes it difficult to estimate precise spending on the policy. For future rulemaking, we anticipate this estimate to become more finely tuned as more public-facing data about Breakthrough Devices becomes available.

CMS considered alternatives to repealing the MCIT pathway and the definition of reasonable and necessary, such as maintaining the provisions of the MCIT/R&N final rule and further delaying the effective date. For the reasons described in detail in section II. of this final rule such as patient safety and need for further public engagement, we chose to repeal the provisions. We described the impact of these MCIT alternatives in Table 1. The alternative considered for not codifying the definition of “reasonable and necessary” was to codify the definition. We describe the impact of codifying the definition in Table 2.

We have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this final rule. This table addresses the costs that would have been incurred through implementing the MCIT/R&N final rule, but, due to this final rule repealing that rule, reflects that those costs will not be incurred under the policies.

As required by OMB Circular A-4 (available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf ), we have prepared an accounting statement in Table 3 showing the classification of the impact associated with the provisions of this final rule.

This final rule is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq. ) and has been transmitted to the Congress and the Comptroller General for review.

Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & Medicaid Services, approved this document on November 9, 2021.

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR part 405 as set forth below:

The Regional Administrator of the Greater Atlantic Regional Office monitors Atlantic herring fishery catch in each Management Area based on vessel and dealer reports, state data, and other available information. Regulations at 50 CFR 648.201(a)(1)(i)(A) require that we implement a 2,000-lb (907.2-kg) possession limit for herring for Area 1A beginning on the date that catch is projected to reach 92 percent of the sub-annual catch limit (ACL) for that area.

Based on vessel reports, dealer reports, and other available information the Regional Administrator projects that the herring fleet will have caught 92 percent of the Area 1A sub-ACL by November 8, 2021. Therefore, effective 00:01 hr local time November 11, 2021, through December 31, 2021, a person may not attempt or do any of the following: Fish for; possess; transfer; purchase; receive; land; or sell more than 2,000 lb of herring per trip or more than once per calendar day in or from Area 1A.

Vessels that enter port before 00:01 hr local time on November 11, 2021, may land and sell more than 2,000 lb (907.2 kg) of herring from Area 1A from that trip, provided that catch is landed in accordance with state management measures. Vessels may transit or land in Area 1A with more than 2,000 lb (907.2 kg) of herring on board, provided that: The herring were caught in an area not subject to a 2,000-lb (907.2-kg) limit; all fishing gear is stowed and not available for immediate use; and the vessel is issued a permit appropriate to the amount of herring on board and the area where the herring was harvested.

Also effective 00:01 hr local time, November 11, 2021, through 24:00 hr local time, December 31, 2021, federally permitted dealers may not attempt or do any of the following: Purchase; receive; possess; have custody or control of; sell; barter; trade; or transfer more than 2,000 lb (907.2 kg) of herring per trip or calendar day from Area 1A, unless it is from a vessel that enters port before 00:01 hr local time on November 11, 2021, and catch is landed in accordance with state management measures.

This action is required by 50 CFR part 648 and is exempt from review under Executive Order 12866.

NMFS finds good cause pursuant to 5 U.S.C. 553(b)(3)(B) to waive prior notice and the opportunity for public comment because it is unnecessary, contrary to the public interest, and impracticable. Ample prior notice and opportunity for public comment has been provided for the required implementation of this action. The requirement to implement this possession limit was developed by the New England Fishery Management Council using public meetings that invited public comment on the measures when they were developed and considered along with alternatives. Further, the regulations requiring NMFS to implement this possession limit also were subject to public notice and opportunity to comment, when they were first adopted in 2014. Herring fishing industry participants monitor catch closely and anticipate potential directed fishery closures as catch totals approach Area sub-ACLs. The regulation provides NMFS with no discretion and is designed for implementation as quickly as possible to prevent catch from exceeding limits designed to prevent overfishing while allowing the fishery to achieve optimum yield.

The 2021 herring fishing year began on January 1, 2021, and Area 1A opened to fishing on June 13, 2021. Data indicating that the herring fleet will have landed at least 92 percent of the 2021 sub-ACL allocated to Area 1A only recently became available. High-volume catch and landings in this fishery can increase total catch relative to the sub-ACL quickly, especially in this fishing year where annual catch limits are unusually low. If implementation of this closure is delayed to solicit prior public comment, the 2021 sub-ACL for Area 1A will likely be exceeded; thereby undermining the conservation objectives of the Herring Fishery Management Plan (FMP). If sub-ACLs are exceeded, the excess must be deducted from a future sub-ACL and would reduce future fishing opportunities. The public expects these actions to occur in a timely way consistent with the FMP's objectives. For the reasons stated above, NMFS also finds good cause to waive the 30-day delayed effectiveness in accordance with 5 U.S.C 553(d)(3).