I. Overview

Among other sources of supervisory authority, the Bureau can supervise a nonbank covered person that the Bureau “has reasonable cause to determine, by order, after notice to the covered person and a reasonable opportunity for such covered person to respond . . . is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.”  1 The Bureau issued a procedural rule in 2013 to govern these proceedings, which is codified at 12 CFR part 1091. 2 Under the original procedures, the Director's final decision or order in the proceeding generally could not be publicly released.

The Updated Procedural Rule that the Bureau issued in April 2022 amended these procedures, creating a process for the Director to consider whether to publicly release a final decision or order. 3 The Updated Procedural Rule was exempt from the notice-and-comment requirements of the Administrative Procedure Act (APA), because it was a rule of agency organization, procedure, and practice. Consequently, it was effective upon publication. However, the Bureau invited the public to submit comments.

The Bureau received nineteen comments. Many of the comments raised substantive issues regarding the entities that commenters believe the Bureau should designate, or how the Bureau should approach the “risks to consumers” standard. These comments are welcome, but the Bureau is not addressing those substantive issues in this procedural rulemaking.

After considering the comments on the Updated Procedural Rule, the Bureau is making two changes. First, as urged by several commenters, the Bureau is codifying a standard in the rule to govern the determination of whether to publicly release a decision or order. Second, at the request of one commenter, the Bureau is extending the time period that the rule gives to respondents to file a submission on the issue of public release. Part II of this preamble discusses in more detail the significant comments that the Bureau received.

The preamble to the Updated Procedural Rule explained that a central principle of the supervisory process is confidentiality. At the same time, final decisions and orders in part 1091 proceedings present unique considerations compared to other supervisory activity. There is a public interest in transparency when it comes to these potentially significant rulings by the Director as head of the agency. Also, if a decision or order is publicly released, it would be available as a precedent in future proceedings. Accordingly, the Bureau found that there should be a procedural mechanism to determine whether all or part of a decision or order should be publicly released.

Several trade associations and a credit union supported this approach. One association stated that public release would benefit all financial institutions by providing more clear examples of the types of acts and practices that pose risks to consumers. Another association noted that it was opposed to any erosion of confidentiality in the supervisory process itself, but it agreed with the Bureau that public release in this unique context could be insightful for both the public and other stakeholders. Similarly, a third association supported the change but emphasized that examinations should be confidential.

Other trade associations, a law firm, and an individual opposed any public release. One trade association expressed concern that public release would harm the Bureau's subsequent supervisory relationship with respondents. Several comments argued that public release would harm the reputations of companies. Relatedly, some commenters argued that the Bureau's risk determinations would be based on incomplete information about the respondent's practices, so there may be uncertainty about what specific practices the Bureau would find unlawful after a full investigation. According to these commenters, this could create uncertainty in the market and discourage lawful conduct and/or products that are beneficial to consumers. One comment also argued that the possibility of public release of the final decision could discourage the respondent from being candid when responding to a notice of reasonable cause issued by the Bureau. Some comments asserted that the approach the Updated Procedural Rule takes to respondents in risk-designation proceedings is inconsistent with the approach the Bureau takes to other supervised entities. Finally, some commenters argued that the rule was inconsistent with the approach of other financial regulators, although these comments did not cite specific examples.

After considering these comments, the Bureau continues to believe that there should be a process to publicly release final decisions and orders, in whole or in part, under appropriate circumstances. As the preamble to the Updated Procedural Rule explained, the public has an interest in understanding these consequential decisions. It can also be important for both the Bureau and the respondent in a risk-determination proceeding to be able to cite publicly available precedents from previous proceedings and assess whether or not they are analogous. This promotes consistency and predictability. 4 And the Bureau is not persuaded that public release—subject to the Director's authority to withhold or redact information when appropriate—would be harmful, for the reasons explained below.

First, public release of decisions and orders should generally cause no harm to the supervisory process, and those situations where there is a risk of harm can be addressed on a case-specific basis by withholding or redacting the relevant details. As background, the D.C. Circuit has explained that supervisory examinations are an informal process, where “bank management must be open and forthcoming in response to the inquiries of bank examiners, and the examiners must in turn be frank in expressing their concerns about the bank.”  5 That informal give and take requires confidentiality. However, a final decision or order by the Bureau's Director, which requires a respondent to submit to supervision, is very different in character from the collaborative back-and-forth between examiners and company employees that is the heart of the supervisory process.

Nonetheless, after considering the comments, the Bureau does foresee one circumstance where the need for supervisory confidentiality could potentially counsel against releasing information. Hypothetically, if the Director's decision or order were to include information about specific potential violations of law by the respondent, or specific potential compliance management deficiencies, and if that information were not otherwise publicly available (such as in a prior enforcement action by the Bureau or another regulator), that could be a situation where the risk of harm to the supervisory process potentially outweighs the public interest in transparency. That is because publicly revealing this information might signal the specific focus of subsequent confidential examinations. Accordingly, redactions may be warranted in that circumstance, as discussed further in part II.C of this preamble, below.

At the same time, the Bureau notes that Congress authorized the Bureau to make a risk designation when it has “reasonable cause to determine” that there are “risks to consumers.”  6 Congress did not require the Bureau to make findings that a respondent has violated the law or has compliance management deficiencies—instead, that is part of the purpose of subsequent examinations of the respondent.

The Bureau's risk-designation authority gives the Bureau's supervision program the ability to move as quickly as the marketplace. For instance, fast-growing companies in nontraditional areas of the consumer finance market may be engaged in novel activities that warrant supervisory attention because of their risks to consumers. And there can also be supervisory gaps in more traditional areas of the market that ought to be filled. Through the supervisory process, CFPB examiners can work with the company in question to fully understand and manage its risks. This preferably would occur before there has been any violation of law or consumer harm, rather than after.

Accordingly, the Bureau does not anticipate that most decisions and orders would include the kind of specific information about potential violations of law or compliance management deficiencies that warrant redactions.

With respect to commenters' concerns about reputational harm, there is no reason to believe that proceedings under part 1091—which provide a fair opportunity for the respondent to present its position to the agency and which are subject to judicial review—are more likely than any other legal proceeding to result in inaccurate findings the release of which would unfairly harm the respondent's reputation. In addition, to the extent the Bureau redacts nonpublic information about specific potential violations of law or specific potential compliance management deficiencies, for the supervisory reasons discussed above and in part II.C below, any reputational concerns would be attenuated. 7

The Bureau emphasizes that the mere fact that the Bureau designates a nonbank covered person for supervision is not an allegation of wrongdoing. As a comparison, Congress decided that insured depository institutions and insured credit unions with more than $10 billion in assets would be subject to Bureau supervision, and the Bureau has published a list of those institutions on its website, for informational purposes, since the transfer of authority to the Bureau in 2011. 8 The fact that those depository institutions and credit unions are subject to Bureau supervision does not mean that they are engaged in violations of law. Similarly, an order designating a nonbank covered person for supervision only means that the Bureau believes that supervision is warranted, based on the statutory standard for those designations. Like with all institutions that it supervises, the Bureau will then use the confidential supervisory process to, among other things, assess the nonbank covered person's compliance with Federal consumer financial law.

The Bureau is also not persuaded by the comments arguing that public release would create uncertainty in the market. These comments assume that market participants would misunderstand the nature of the Bureau's findings, and so they would be better off having no information about the Bureau's views. But the comments do not explain why market participants cannot be trusted to read the Bureau's decisions for themselves, to assess what significance those decisions may or may not have. It seems doubtful that a regulated entity would achieve greater certainty by remaining uninformed of its regulator's activities, or that the market as a whole functions more effectively when it has to guess about the market regulator's activities. 9

The Bureau also does not believe that it is necessary, as a general matter, for the final order to be confidential in order for the initiating official to formulate a notice of reasonable cause under part 1091 and for a respondent to effectively respond to that notice. It is conceivable that a complete guarantee of confidentiality might result in respondents providing some amount of additional information in their responses. But a proceeding under part 1091 does not depend to the same degree as an examination on complete confidentiality. The Bureau believes that the public interest in transparency regarding the Director's decision or order will generally outweigh this consideration.

There is also no inconsistency between the approach that the Bureau is taking to respondents in risk-designation proceedings compared to other supervised entities. As noted above, the Bureau publicly releases a list of the insured depository institutions and insured credit unions that meet the $10 billion asset threshold to be subject to its supervisory authority. The Bureau does not currently publish such a list for the categories of nonbank covered persons that fall under its supervisory authority by statute or rule. A principal reason is that there is no available process to definitely establish whether a nonbank covered person engages in business activities that bring the nonbank covered person within those categories, other than when the Bureau initiates a specific confidential examination. That difficulty does not arise when the Bureau's Director has issued a final decision or order in a part 1091 proceeding. The Bureau emphasizes that it is committed to protecting examination confidentiality for all categories of entities that it supervises, in accordance with its confidentiality rules. 10

Finally, there is no inconsistency between the Bureau and other financial regulators in this context. Generally, the prudential regulators supervise institutions based on their status as banks or credit unions, so the role that Congress assigned to the Bureau in extending supervision to nonbank covered persons based on their risks to consumers is unique. A roughly analogous situation is when the Secretary of the Treasury, the Chair of the Federal Reserve Board, the Director of the Bureau, and the other members of the Financial Stability Oversight Council make a determination that a nonbank financial company will become subject to Federal Reserve supervision, because that company “could pose a threat to the financial stability of the United States.”  11 The Council normally publishes a detailed explanation of its reasons. Any member of the public can read those reasons on the Council's web page. 12

In summary, the Bureau is not persuaded by these commenters' arguments that public release of decisions and orders, in appropriate circumstances, would be harmful. However, as discussed in part II.C below, the Director will consider arguments that there are reasons why a particular decision or order should be withheld or redacted. 13

Some commenters who opposed public release advocated for alternatives. These included: releasing only the names of supervised nonbanks but not the final decisions and orders themselves; relying on potential lawsuits seeking judicial review of decisions and orders to make information about them publicly available; adding anonymized summaries of decisions and orders to the Bureau's Supervisory Highlights publication; or including anonymized findings from subsequent exams of designated entities in Supervisory Highlights.

Ultimately, these alternatives would be inadequate to meet the goals of the Updated Procedural Rule. Releasing only the names of designated entities, or allowing only those proceedings that are challenged in court to enter the public domain, would provide the public with much less insight into the Bureau's use of its risk-designation authority and much less in the way of precedents to inform future risk-designation proceedings. Similarly, summarizing the Director's decisions and orders in an anonymized form in Supervisory Highlights would involve removing all potentially identifying information, which would likely deprive the public of information and context to understand the Director's decision regarding whether the individual entity satisfies the statutory standard for risk designation.

The Bureau does agree with commenters that significant findings from exams of designated entities, like significant findings from other Bureau exams, will be eligible for potential inclusion in Supervisory Highlights if that is appropriate under the circumstances and can be done while maintaining the entities' anonymity. Anonymity is important in that circumstance, because exam findings for an individual entity are part of the collaborative back-and-forth of the supervisory process and do not represent a final Director decision. The Director's final decision and order is different, for the reasons explained above. And although using Supervisory Highlights to release public summaries of significant exam findings is valuable, doing so would provide no direct insight into the Director's original decision to make a risk designation, so it is not a substitute for releasing the decision.

In the preamble to Updated Procedural Rule, the Bureau noted that rule did not codify a standard to govern public release. However, the preamble explained that the Bureau generally anticipated applying Exemptions 4 and 6 of the Freedom of Information Act to information submitted by respondents that is reflected in final decisions and orders. 14 Exemption 4 applies to “trade secrets and commercial or financial information obtained from a person and privileged or confidential,” while Exemption 6 applies to “personnel and medical files and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.”  15 The Bureau stated that it would also consider (in the context of making individual determinations regarding public release) whether there are other reasons to not publicly release the decision or order, in whole or in part.

The Bureau specifically invited comments on whether it should amend the rule to codify a standard for determinations regarding public release. Commenters generally supported doing so, although there was disagreement among commenters about the best standard. One trade association stated that FOIA Exemptions 4 and 6 could reasonably apply to a wide variety of sensitive information and would give respondents ample means to limit the contents of a public order. Other commenters argued that FOIA Exemptions 4 and 6 are too limited, might not cover certain sensitive data, and are uncertain in scope.

After considering the comments, the Bureau is codifying a standard in the rule, which is that the Director will not release information in a decision or order to the extent it would be exempt from disclosure under FOIA Exemptions 4 and 6 or the Director determines there is other good cause. This standard is similar to the approach that the Bureau articulated in the preamble to the Updated Procedural Rule and requested comment upon. This approach will provide assurance to respondents that the Bureau will protect the categories of information included in those two FOIA exemptions, while not foreclosing respondents from raising, or the Director from invoking, other grounds that may arise. The Bureau disagrees with some commenters that the scope of Exemptions 4 and 6 is too uncertain, given that these exemptions are routinely applied by agencies and courts, or that the exemptions are too narrow, given that they are the method Congress has chosen to protect commercial interests and personal privacy interests in the FOIA context. 16 However, the standard adopted by the Bureau does not foreclose respondents from arguing that information not within those exemptions ought to be withheld for “good cause.”

A potential example of “good cause” is the supervisory considerations noted in part II.A above. The Bureau generally expects to redact information about specific potential violations of law, or specific potential compliance management deficiencies, where the information is not otherwise publicly available, and where the Bureau concludes there is a risk of harm to the supervisory process that outweighs the public interest in transparency.

Section 1091.115(c)(2) of the Updated Procedural Rule provided that, within seven business days  17 of service of the decision or order, the respondent had the option of filing a submission on the issue of public release, and then the Director would determine whether the decision or order would be released on the Bureau's website, in whole or in part. 18

A law firm argued that the Bureau should conduct a formal adjudicatory process when deciding whether to publicly release a decision or order—separate from and in addition to the substantive part 1091 proceeding—in which a decisionmaker other than the Director would conduct a hearing. The Bureau believes that the process established by the rule provides respondents with a full opportunity to raise any concerns regarding public release. The process proposed by the law firm would be cumbersome and disproportionate, resulting in excessive delay, unnecessary costs for the government, and additional legal fees for respondents. 19

The law firm argued, in the alternative, that the seven-business-day interval for respondents to file their submissions regarding public release should be extended. The law firm cited some examples where other agencies provide companies with ten business days to address confidentiality issues in those agencies' programs. While the Bureau believes that the burden on a respondent to assess whether the text of a single decision or order contains confidential information is likely to be limited, it will err on the side of caution by extending the interval to ten business days.

The preamble to the Updated Procedural Rule explained that it will have limited effects on the public. Nonbank covered persons that are respondents may incur incidental costs, if they choose to prepare submissions on the issue of public release. The preamble stated that the rule itself did not trigger public release of decisions and orders, since it simply established a procedure to consider that issue. It further noted that, if the Bureau does ultimately decide to release a decision or order, that should generally benefit covered persons, consumers, and other members of the public by giving them a better understanding of the Bureau's decisionmaking. This discussion from the Updated Procedural Rule remains applicable to this rule, which adds a standard for making the determination on public release and extends the interval for respondents to make submissions on that issue.

One trade association responded to the Bureau's observation that the Updated Procedural Rule did not itself trigger public release of decisions and orders, arguing that the Bureau was ignoring the consequences of the rule. However, the statement with which this trade association took issue is accurate: the Updated Procedural Rule did not cause public release by itself. The Bureau agrees that the procedures in that rule and this rule enable public release, and in both rules the Bureau has considered the consequences of such public release.

Other comments that relate to the impacts of public release of decisions and orders are addressed in part II.A above.

In formulating both the Updated Procedural Rule and this rule, the Bureau has consulted the prudential regulators and the Federal Trade Commission.

The preamble to the Updated Procedural Rule explained that, as a rule of agency organization, procedure, or practice, it was exempt from the notice-and-comment rulemaking requirements of the APA. 20

Because no notice of proposed rulemaking was required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 21 Moreover, the Bureau's Director certifies that this rule will not have a significant economic impact on a substantial number of small entities. Therefore, an analysis is also not required for that reason. 22 As a result of the rule, respondents in the relevant proceedings may choose to make submissions on the issue of public release. Some of these respondents may be small entities under the Regulatory Flexibility Act, but they would represent a very small fraction of small entities in consumer financial services markets. Accordingly, the number of small entities affected is not substantial.

The Bureau has also determined that this rule does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring approval by the Office of Management and Budget under the Paperwork Reduction Act. 23

Accordingly, the rule that amended 12 CFR part 1091, which was published at 87 FR 25397 on April 29, 2022, is adopted as final with the following changes:

Background

In 1991, the FAA adopted a policy of expunging records of certain closed legal enforcement actions against individuals. 1 The policy provided for the expunction of certain legal enforcement action records for individuals who hold airman certificates and those who do not, such as passengers. In 2011, the FAA suspended the expunction policy  2 based on the Airline Safety and Federal Aviation Administration Extension Act of 2010 (“Act”). 3 The Act amended the Pilot Records Improvement Act by requiring the FAA to create a pilot records database (“PRD”) for air carriers to use for pilot background checks. The Act further required the FAA to maintain in the PRD “summaries of legal enforcement actions resulting in a finding by the Administrator of a violation of this title or a regulation prescribed or order issued under this title that was not subsequently overturned.”  4 The FAA is required to retain these records until the individual is deceased. 5 The FAA, therefore, determined that continuing its expunction policy was inconsistent with the Act and proceeded to implement the PRD through rulemaking. 6

On June 10, 2021, the FAA published the final rule for the PRD in the Federal Register . 7 As stated in the final rule preamble, the Act “requires the FAA to maintain records in the PRD for the life of the pilot and does not provide the FAA with discretion to expunge records outside of that timeframe.”  8 However, records without a finding of violation are not included in the PRD. 9 When the FAA suspended the expunction policy in 2011, it stated it would determine the full effect of the PRD on the expunction policy and amend the policy accordingly. 10 The FAA has therefore reviewed all types of legal enforcement actions it issues to determine which records the FAA may expunge consistent with the Act and the PRD final rule.

Under 49 U.S.C. 46101(b), the Administrator must refer a complaint involving an apparent violation of a statute or regulation the FAA administers by a member of the U.S. Armed Forces while performing official duties to the secretary of the department concerned for action. The FAA calls these “military referrals.” In addition, the FAA refers an apparent violation of a statute or regulation it administers by an individual while exercising a foreign certificate or license (or other approval or authorization) to the appropriate foreign aviation authority for action. The FAA calls these “foreign referrals.” The FAA does not make a finding of violation as part of the military or foreign referral process. The FAA also may issue compromise orders, which involve no finding of violation, in settlement of civil penalty assessment actions and may compromise civil penalties of amounts greater than $50,000 against individuals without a finding of violation. 11

The FAA will begin expunging records of military and foreign referrals two years after the FAA closes those actions in the Enforcement Information System (“EIS”). 12 The FAA will close records of military and foreign referrals in EIS after (1) the FAA receives a response stating the action taken; or (2) 180 days from the date of the referral, whichever comes first. A two-year period before expunging military and foreign referrals comports with Privacy Act requirements that the agency maintain in its records only such information about an individual as is relevant and necessary to accomplish a statutory purpose of an agency. 13 The FAA will also expunge records of civil penalty actions against individuals settled with no finding of violation from EIS. Specifically, the FAA will expunge no-finding civil penalty actions five years after the date an individual subject to the civil penalty action or his or her representative: (1) pays the civil penalty; or (2) provides a promissory note for payment of the civil penalty to the FAA. If, at the time a record of a civil penalty action is due to be expunged, a subsequent enforcement action against the individual has been opened, the first civil penalty action record will be expunged if and when the subsequent enforcement action is expunged. This is consistent with the 1991 FAA expunction policy. If an individual who owes a civil penalty cannot be located, the FAA will maintain the record of the civil penalty action indefinitely unless or until the individual is located and the criteria in this policy statement for expunging the civil penalty action are satisfied. If a civil penalty is deemed “uncollectable,” the record will not be expunged until the civil penalty is satisfied.

The FAA will apply this expunction policy both prospectively and retrospectively, allowing for the expunction of EIS records of past actions that meet the criteria in this policy statement.

Background

Transport Canada, which is the aviation authority for Canada, has issued Transport Canada Emergency AD CF-2022-62, dated November 9, 2022 (Transport Canada Emergency AD CF-2022-62), to correct an unsafe condition for certain serial-numbered Bell Textron Canada Limited Model 505 helicopters. Transport Canada considers its emergency AD an interim action and stated that further AD action may follow.

This AD was prompted by the discovery of a potential fouling condition between the rotating swashplate outer ring and the non-rotating collective lever. The FAA is issuing this AD to address improper clearances in the collective control system installation. See Transport Canada Emergency AD CF-2022-62 for additional background information.

Transport Canada Emergency AD CF-2022-62 requires accomplishing a collective control system rigging check and, depending on the results, rigging the collective control system and then the cyclic control system.

This material 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 also reviewed Bell Alert Service Bulletin 505-22-33, dated November 3, 2022. This service information specifies procedures for a one-time rigging check of the collective control system for minimum clearances and flight control rigging.

These helicopters have been approved by the aviation authority of Canada and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with Canada, Transport Canada, its technical representative, has notified the FAA of the unsafe condition described in its emergency AD. The FAA is issuing this AD after evaluating all pertinent information and determining that the unsafe condition exists and is likely to exist or develop on other helicopters of the same type design.

This AD requires accomplishing the actions specified in Transport Canada Emergency AD CF-2022-62, described previously, as IBRed, except for any differences identified as exceptions in the regulatory text of this AD. This AD also requires reporting certain information to Bell Product Support Engineering if any of the minimum clearance parameters are not met as a result of the collective control system rigging inspection (check).

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has been coordinating this process with manufacturers and CAAs. As a result, Transport Canada Emergency AD CF-2022-62 is IBRed in this FAA final rule. This AD, therefore, requires compliance with Transport Canada Emergency AD CF-2022-62 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this AD. Using common terms that are the same as the heading of a particular section in Transport Canada Emergency AD CF-2022-62 does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the sections titled “Compliance” and “Corrective Actions” in Transport Canada Emergency AD CF-2022-62. Service information referenced in Transport Canada Emergency AD CF-2022-62 for compliance will be available at regulations.gov by searching for and locating Docket No. FAA-2022-1481 after this final rule is published.

The FAA considers this AD interim action. If final action is later identified, the FAA might consider further rulemaking then.

Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq. ) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for “good cause,” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without providing notice and seeking comment prior to issuance. Further, section 553(d) of the APA authorizes agencies to make rules effective in less than thirty days, upon a finding of good cause.

An unsafe condition exists that requires the immediate adoption of this AD without providing an opportunity for public comments prior to adoption. The FAA has found that the risk to the flying public justifies foregoing notice and comment prior to adoption of this rule because the affected parts are critical to maintaining controlled flight and failure of a part could occur as a result of the unsafe condition during any phase of flight without any previous indications. In light of this, the initial action required by this AD must be accomplished within 10 hours time-in-service or 30 days, whichever occurs first. This compliance time is shorter than the time necessary for the public to comment and for publication of the final rule. Accordingly, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b)(3)(B).

In addition, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days, for the same reasons the FAA found good cause to forego notice and comment.

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2022-1481; Project Identifier MCAI-2022-01442-R” at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend this final rule because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov , including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this final rule.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this AD contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this AD, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this AD. Submissions containing CBI should be sent to Kristi Bradley, Program Manager, COS Program Management Section, Operational Safety Branch, Compliance & Airworthiness Division, FAA, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222-5110; email kristin.bradley@faa.gov. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without notice and comment, RFA analysis is not required.

The FAA estimates that this AD affects 118 helicopters of U.S. Registry. Labor rates are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this AD.

Inspecting the collective control system rigging takes about 1.5 work-hours for an estimated cost of $128 per helicopter and $15,104 for the U.S. fleet.

If required, rigging the collective and cyclic control systems takes about 4 work-hours and tooling costs about $29,000 for an estimated cost of $29,340 per helicopter. Reporting information takes about 1 work-hour for an estimated cost of $85 per helicopter.

A federal agency may not conduct or sponsor, and a person is not required to respond to, nor shall a person be subject to penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act unless that collection of information displays a currently valid OMB Control Number. The OMB Control Number for this information collection is 2120-0056. Public reporting for this collection of information is estimated to be approximately 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. All responses to this collection of information are mandatory. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to: Information Collection Clearance Officer, Federal Aviation Administration, 10101 Hillwood Parkway, Fort Worth, TX 76177-1524.

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, I certify that this AD:

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

(2) Will not affect intrastate aviation in Alaska.

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

Background

The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to Bell Textron Inc., Model 204B, 205A, 205A-1, 205B, 210, 212, 412, 412CF, and 412EP helicopters and restricted category Model HH-1K, SW205A-1, TH-1F, TH-1L, UH-1A, UH-1B, UH-1E, UH-1F, UH-1H, UH-1L, and UH-1P helicopters.

The NPRM published in the Federal Register on April 14, 2022 (87 FR 22146). The NPRM was prompted by reports of main transmission support cases found cracked at one of the lateral mounts. In the NPRM, the FAA proposed to require, within 3,000 hours time-in-service (TIS) accumulated by the main transmission after the effective date of the AD, and thereafter at intervals not to exceed 3,000 hours TIS accumulated by the main transmission, removing certain screws and washers and visually inspecting the upper and lower transmission support case lateral mount screws for corrosion and thread damage, washers for corrosion and pitting, bushings for corrosion and pitting, and lateral mount surfaces for corrosion and mechanical damage such as any crack or pitting. If there is any corrosion, thread damage, or mechanical damage, the NPRM proposed to require removing the affected parts from service before further flight.

The NPRM also proposed to require repetitive fluorescent penetrant inspections (FPIs) of all surfaces of the main transmission support case lateral mounts for a crack. For helicopters with a main transmission that has accumulated 6,000 or more total hours TIS, the initial FPI would be required before further flight after the effective date of the AD. For helicopters with a main transmission that has accumulated less than 6,000 total hours TIS, the initial FPI would be required before the main transmission accumulates 6,000 total hours TIS. For all helicopters, following the initial FPI, the NPRM proposed to require performing an FPI at intervals not to exceed 6,000 hours TIS accumulated by the main transmission. If there is any crack, the NPRM proposed to require removing the main transmission support case from service before further flight. The FAA is issuing this AD to address the unsafe condition on these products.

The FAA received comments from one commenter, Bell Textron Inc. The following presents the comments received on the NPRM and the FAA's response to each comment.

Bell Textron Inc., commented that stress corrosion cracking of the support case that originates from a threaded hole used to secure the washer to the case lateral mount is not considered a safety of flight issue as changes to its maintenance manual and Component Repair and Overhaul (CR&O) manual address the issue. Bell Textron Inc., stated that it has revised its manuals to include a requirement to remove the washers at the scheduled 3000-hour Special Inspection for a detailed visual inspection and an FPI at the scheduled 6000-hour Overhaul to detect corrosion originating from a threaded hole under the washer that could result in cracking. Bell Textron Inc., also stated that its CR&O manual now specifies an improved washer installation procedure to minimize the risk of corrosion, as well as damage limits for the affected area.

The FAA acknowledges this comment; however, not all operators are required to accomplish a manufacturer's maintenance procedures. In order for procedures in service information, including procedures in manuals, to become mandatory when the FAA has determined the procedures are necessary to correct an identified unsafe condition, the FAA must issue an AD.

Request: Regarding the outcome of the visual inspections, Bell Textron Inc., recommended that rather than mandating the removal of parts that have any damage from service, which could ground several helicopters, the required actions of the proposed AD be revised to refer to the applicable CR&O manual for damage limits and repair procedure instead.

FAA Response: The FAA partially agrees. The FAA has revised the required actions in this final rule by specifying certain threshold limits and adding the option of repairing certain conditions in accordance with FAA-acceptable methods; however, the actions do not require referring to the CR&O manual for information.

Request: Regarding inspection and removal of hardware, Bell Textron Inc., requested the FAA revise the required actions of the proposed AD to require also determining if the case was previously repaired by Bell or a Bell Service Center (FAA or Bell approved repair with traceability), and if the case is found with a suspected unapproved repair, removing the case from service indefinitely.

FAA Response: The FAA disagrees with this request. The FAA currently has no information regarding repairs outside the scope of FAA-accepted methods having been accomplished on main transmission support cases affected by the proposed AD. Accordingly, the FAA has made no changes to this final rule based on that comment.

Request: Bell Textron Inc., requested the FAA revise the required actions of the proposed AD to require that if a case that has never been repaired exhibits corrosion on the bushing, lug face, or threaded hole(s) that is beyond repairable limits, contacting Bell Product Support for evaluation and a possible Bell approved Expanded Repair; Bell Textron Inc., added that the case can be returned to Bell or a Bell Service Center for evaluation and possible repair.

FAA Response: The FAA disagrees with this request. To require operators to contact the manufacture for repair instructions, as suggested by the commenter, would be delegating the FAA's rulemaking authority to that manufacturer. Additionally, the FAA does not have the authority to direct operators to return defective components to the manufacturer. However, operators may choose to contact Bell Product Support as this AD does not prohibit an operator from contacting a manufacturer. Additionally, operators may request approval of any specific actions, including any specific corrective actions, as an alternative method of compliance (AMOC) under the provisions of paragraph (h) of this AD.

Regarding the action to accomplish an FPI before further flight for helicopters with a main transmission that has accumulated 6,000 or more total hours TIS in paragraph (g)(2)(i) of the proposed AD, Bell Textron Inc., recommended the FAA allow a ferry flight to the nearest repair facility where the upper washers can be removed for a detailed 10X magnifying glass inspection. Bell Textron Inc., further stated that if a crack is suspected, to perform an FPI, and if a crack is found, to remove the affected support case from service. Bell Textron Inc., explained that the removal of all 8 washers for an FPI of the support case could be accomplished at the next scheduled overhaul as required by chapter 5 of the maintenance manual.

The proposed AD, as published, specifies no limitations for issuance of a special flight permit (SFP) (ferry flight). Accordingly, SFPs may be issued in accordance with 14 CFR 21.197 and 21.199. Additionally, the FAA has revised the initial action to accomplish an FPI on a main transmission that has accumulated 6,000 or more total hours TIS by extending the compliance time from “before further flight” to “within 300 hours TIS” and allowing credit if the action has previously been done within the last 6,000 hours TIS. Lastly, the FAA has revised the initial action to accomplish an FPI on a main transmission that has accumulated less than 6,000 total hours TIS from “before accumulating 6,000 total hours TIS on the main transmission” to “before accumulating 6,300 total hours TIS on the main transmission.”

The FAA reviewed the relevant data, considered any comments received, and determined that air safety requires adopting this AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. Except for removing a note, 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 estimates that this AD affects up to 621 helicopters of U.S. Registry. Labor rates are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this AD.

Visually inspecting the main transmission mount assembly takes about 1 work-hour, for an estimated cost of $85 per helicopter and $52,785 for the U.S. fleet, per inspection cycle. Accomplishing an FPI of the main transmission support case lateral mounts will take about 1 work-hour for an estimated cost of $85 per helicopter, and $52,785 for the U.S. fleet, per inspection cycle.

The FAA has no way of determining the costs pertaining to necessary repairs that are required to be done in accordance with FAA-acceptable methods. Replacing the transmission support case assembly hardware parts including 8 washers, 8 screws, and 4 bushings will take about 1 work-hour and parts will cost up to $100 per part for an estimated cost of up to $2,085 per helicopter. Replacing the main transmission support case assembly will take up to 60 work-hours and parts will cost up to $54,501 for an estimated cost of up to $59,601 per helicopter.

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:

Legal Authority

Under the Controlled Substances Act (CSA), each controlled substance is classified into one of five schedules based upon its potential for abuse, its currently accepted medical use in treatment in the United States, and the degree of dependence the drug or other substance may cause. 1 The initial schedules of controlled substances established by Congress are found at 21 U.S.C. 812(c) and the current list of scheduled substances is published at 21 CFR part 1308.

Pursuant to 21 U.S.C. 811(a)(2), the Attorney General may, by rule, “remove any drug or other substance from the schedules if he finds that the drug or other substance does not meet the requirements for inclusion in any schedule.” The Attorney General has delegated scheduling authority under 21 U.S.C. 811 to the Administrator of the Drug Enforcement Administration (DEA). 2

The CSA provides that proceedings for the issuance, amendment, or repeal of the scheduling of any drug or other substance may be initiated by the Attorney General on the petition of any interested party. 3 This action was initiated by a petition to remove [ 18 F]FP-CIT from the list of scheduled controlled substances of the CSA, and is supported by, inter alia, a recommendation from the Assistant Secretary for Health of the Department of Health and Human Services (HHS) and an evaluation of all relevant data by DEA. This action removes the regulatory controls and administrative, civil, and criminal sanctions applicable to controlled substances, including those specific to schedule II controlled substances, on persons who handle or propose to handle [ 18 F]FP-CIT.

[ 18 F]FP-CIT (chemical names: [ 18 F]N-ω-fluoropropyl-β-CIT; fluorine-18-N-3-fluoropropyl-2-beta-carbomethoxy-3-beta-(4-iodophenyl)tropane; [ 18 F]fluoropropylcarbomethoxy nortropane) is described as a diagnostic substance that is used in assisting the evaluation of adult patients with suspected Parkinsonian syndromes. It is an entity used in the visualization of striatal dopamine transporters (DAT) using positron emission tomography (PET) imaging. [ 18 F]FP-CIT is not yet approved by the United States Food and Drug Administration (FDA) and no New Drug Application (NDA) for [ 18 F]FP-CIT or any [ 18 F]FP-CIT-containing drug has been submitted to FDA.

[ 18 F]FP-CIT is structurally similar to [ 123 I]ioflupane, known as DaTscan or [ 123 I]FP-CIT. Both [ 18 F]FP-CIT and [ 123 I]ioflupane were developed as clinical diagnostic substances to visualize DAT and contain the same tracer amount of the precursor, ecgonine. The only difference between these two compounds is the radiotracer ( 123 I versus 18 F). On January 14, 2011, FDA approved the NDA for [ 123 I]ioflupane-containing drug product, DaTscan, for use to visualize striatal DAT in the brains of adult patients with suspected Parkinsonian syndromes using single photon emission computed tomography (SPECT) imaging. DEA removed [ 123 I]ioflupane from schedule II of the CSA on September 11, 2015. 4

The starting material for the synthesis of [ 18 F]FP-CIT and [ 123 I]ioflupane is N -nor-β-CIT (2β-carbomethoxy-3β -(4-iodophenyl) nortropane), which is derived from cocaine, a schedule II substance, via ecgonine (a schedule II substance). Thus, by definition  5 [ 18 F]FP-CIT is currently controlled in schedule II of the CSA. On June 28, 2018, DEA received a petition from Advanced Imaging Projects to initiate proceedings to amend 21 CFR 1308.12(b)(4) so as to decontrol [ 18 F]FP-CIT (proposed tradename Fluoroseek) from schedule II of the CSA. On October 6, 2018 and November 6, 2018, DEA received supplemental information from the Petitioner; DEA accepted the petition for filing on November 28, 2018.

Pursuant to 21 U.S.C. 811(b), on May 2, 2019, DEA provided the necessary data on [ 18 F]FP-CIT, along with the petition, to HHS with a request for a scientific and medical evaluation and scheduling recommendation for [ 18 F]FP-CIT. On April 16, 2021, DEA received from HHS a scientific and medical evaluation, conducted by FDA  6 , and a recommendation to remove [ 18 F]FP-CIT from all schedules of the CSA. Following consideration of the eight factors and findings related to the substance's abuse potential, legitimate medical use, and dependence liability, HHS recommended that [ 18 F]FP-CIT be removed from all schedules of control of the CSA. In response, DEA conducted its own eight-factor analysis of [ 18 F]FP-CIT pursuant to 21 U.S.C. 811(c). Both DEA and HHS analyses are available in their entirety in the public docket for this rule (Docket Number DEA-837) at https://www.regulations.gov under “Supporting and Related Material”.

On November 4, 2021, DEA published a notice of proposed rulemaking (NPRM) to remove [ 18 F]FP-CIT from the schedules of the CSA. 86 FR 60785. The NPRM provided an opportunity for interested persons to file a request for a hearing in accordance with DEA regulations by December 6, 2021. No requests for such a hearing were received by DEA. The NPRM also provided an opportunity for interested persons to submit comments on the proposal on or before December 6, 2021.

DEA received six comments on the NPRM to remove [ 18 F]FP-CIT from control.

Support for rulemaking: Five commenters supported decontrol of [ 18 F]FP-CIT. Four of these commenters noted the potential therapeutic benefit of this radiolabeled substance related to diagnosing Parkinson's disease.

DEA Response: DEA appreciates these comments in support of this rulemaking.

Opposition to rulemaking: One commenter opposed decontrol of [ 18 F]FP-CIT, suggesting rescheduling cocaine, or any cocaine derivative, is a safety concern and such rescheduling would wrongly signal that cocaine is less harmful than cannabis.

DEA Response: DEA does not agree with the commenter's concern about harm. [ 18 F]FP-CIT is derived from cocaine, a schedule II substance, via ecgonine, a schedule II substance. As described below [ 18 F]FP-CIT is manufactured as a radiopharmaceutical containing minute amounts of this radiolabeled substance in limited and specified places ( e.g., nuclear pharmacies) and distributed and handled under a highly regulatory environment.

As stated by FDA in its scientific and medical evaluation, radioligands in general are used in very dilute, or low dose formulations, and are unlikely to produce pharmacological effect and be abused, which is the case for the [ 123 I]ioflupane-containing drug product, DaTscan. Similar to [ 123 I]ioflupane, [ 18 F]FP-CIT is expected to be present in low concentration in the final drug product, thus it is unlikely that [ 18 F]FP-CIT will produce stimulant effects or be abused. Further, due to its radioactive nature and similar to the handling of [ 123 I]ioflupane, [ 18 F]FP-CIT will be restricted to nuclear medicine departments and radiopharmacies authorized to handle radioactive substances. Both nuclear medicine departments and radiopharmacies are highly regulated by multiple federal, state and local regulating agencies.

Based on the totality of the available scientific data, FDA stated that [ 18 F]FP-CIT does not conform with the findings for schedule II in 21 U.S.C. 812(b)(2) or in any other schedule as set forth in 21 U.S.C. 812(b). Based on FDA's scientific and medical review of the eight factors and findings related to the substance's abuse potential, legitimate medical use, and dependence liability, HHS recommended that [ 18 F]FP-CIT be removed from all schedules of the CSA. Pursuant to 21 U.S.C. 811(b), the recommendations of HHS shall be binding on DEA as to such scientific and medical matters and if the Secretary recommends that a drug or other substance not be controlled, DEA shall not control the drug or other substances. As stated in the NPRM, after careful review of all relevant data including HHS's scientific and medical evaluation and scheduling recommendation, DEA concurred with HHS's assessment that there is no evidence that [ 18 F]FP-CIT has a comparable potential for abuse relative to schedule V substances. DEA is therefore promulgating this final rule to remove [ 18 F]FP-CIT from control under the CSA and notes that non-radiolabeled FP-CIT remains a schedule II substance.

Based on consideration of all comments, the scientific and medical evaluation and accompanying recommendation of HHS, and based on DEA's consideration of its own eight-factor analysis, the Administrator finds that these facts and all relevant data demonstrate that [ 18 F]FP-CIT does not meet the requirements for inclusion in any schedule. As such, DEA is removing [ 18 F]FP-CIT form control under the CSA.

In accordance with 21 U.S.C. 811(a), this scheduling action is subject to formal rulemaking procedures done “on the record after opportunity for a hearing,” which are conducted pursuant to the provisions of 5 U.S.C. 556 and 557. The CSA sets forth the criteria for removing a drug or other substance from the list of controlled substances. Such actions are exempt from review by the Office of Management and Budget pursuant to section 3(d)(1) of Executive Order (E.O.) 12866 and the principles reaffirmed in E.O. 13563.

This regulation meets the applicable standards set forth in sections 3(a) and 3(b)(2) of E.O. 12988 to eliminate drafting errors and ambiguity, minimize litigation, provide a clear legal standard for affected conduct, and promote simplification and burden reduction.

This rulemaking does not have federalism implications warranting the application of E.O. 13132. This rule does not have substantial direct effects on the States, on the relationship between the Federal government and the States, or the distribution of power and responsibilities among the various levels of government.

This rule does not have tribal implications warranting the application of E.O. 13175. This rule does not have substantial direct effects on one or more Indian tribes, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes.

The Administrator, in accordance with the Regulatory Flexibility Act (5 U.S.C. 601-612), has reviewed this rule and by approving it certifies that it will not have a significant economic impact on a substantial number of small entities. The purpose of this rule is to remove [ 18 F]FP-CIT from the list of schedules of the CSA. This action will remove regulatory controls and administrative, civil, and criminal sanctions applicable to controlled substances for handlers and proposed handlers of [ 18 F]FP-CIT. Accordingly, it has the potential for some economic impact in the form of cost savings.

This rule will affect all persons who handle, or propose to handle, [ 18 F]FP-CIT. [ 18 F]FP-CIT is not currently available or marketed in any country. Due to the wide variety of unidentifiable and unquantifiable variables that potentially could influence the distribution and dispensing rates, if any, of [ 18 F]FP-CIT, DEA is unable to determine the number of entities and small entities which might handle [ 18 F]FP-CIT. In some instances where a controlled pharmaceutical drug is removed from the schedules of the CSA, DEA is able to quantify the estimated number of affected entities and small entities because the handling of the drug is expected to be limited to DEA registrants even after removal from the schedules. In such instances, DEA's knowledge of its registrant population forms the basis for estimating the number of affected entities and small entities. However, DEA does not have a basis to estimate whether [ 18 F]FP-CIT is expected to be handled by persons who hold DEA registrations, by persons who are not currently registered with DEA to handle controlled substances, or both. Therefore, DEA is unable to estimate the number of entities and small entities who plan to handle [ 18 F]FP-CIT.

Although DEA does not have a reliable basis to estimate the number of affected entities and quantify the economic impact of this final rule, a qualitative analysis indicates that this rule is likely to result in some cost savings. Any person planning to handle [ 18 F]FP-CIT will realize cost savings in the form of saved DEA registration fees, and the elimination of physical security, recordkeeping, and reporting requirements.

Because of these factors, DEA projects that this rule will not result in a significant economic impact on a substantial number of small entities.

DEA finds that good cause exists for adopting this rule as a final rule with an immediate effective date under 5 U.S.C. 553(d) because this final rule relieves a restriction.

In accordance with the Unfunded Mandates Reform Act (UMRA) of 1995, 2 U.S.C. 1501 et seq., DEA has determined that this action would not result in any Federal mandate that may result “in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any 1 year.” Therefore, neither a Small Government Agency Plan nor any other action is required under UMRA of 1995.

This action does not impose a new collection of information requirement under the Paperwork Reduction Act of 1995. 7

This rule is not a major rule as defined by the Congressional Review Act (CRA), 5 U.S.C. 804. However, pursuant to the CRA, DEA is submitting a copy of the final rule to both Houses of Congress and to the Comptroller General.

This document of the Drug Enforcement Administration was signed on November 14, 2022, by Administrator Anne Milgram. That document with the original signature and date is maintained by DEA. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DEA Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of DEA. This administrative process in no way alters the legal effect of this document upon publication in the Federal Register .

For the reasons set out above, 21 CFR part 1308 is amended to read as follows:

Legal Authority

The United States is a party to the 1971 United Nations Convention on Psychotropic Substances (1971 Convention), February 21, 1971, 32 U.S.T. 543, 1019 U.N.T.S. 175, as amended. Procedures respecting changes in drug schedules under the 1971 Convention are governed domestically by 21 U.S.C. 811(d)(2)-(4). When the United States receives notification of a scheduling decision pursuant to Article 2 of the 1971 Convention adding a drug or other substance to a specific schedule, the Secretary of the Department of Health and Human Services (HHS), 1 after consultation with the Attorney General, shall first determine whether existing legal controls under subchapter I of the Controlled Substances Act (CSA) and the Federal Food, Drug, and Cosmetic Act meet the requirements of the schedule specified in the notification with respect to the specific drug or substance. 2 Based on those determinations, as appropriate, the Secretary of HHS (Secretary) shall recommend to the Attorney General that he initiate proceedings for scheduling the drug or substance pursuant to 21 U.S.C. 811(a) and (b). 3 The CSA also stipulates that in certain circumstances where the permanent section 811(a) scheduling will not be completed in time as required by the 1971 Convention, the Attorney General shall, after satisfying other specified conditions, issue a temporary order controlling the drug or substance under schedule IV or V, whichever is most appropriate to carry out the minimum United States obligations under the 1971 Convention. 4

In the event that the Secretary did not so consult with the Attorney General to make a determination about the existing legal controls, and the Attorney General did not issue a temporary order, the procedures for permanent scheduling are set forth in 21 U.S.C. 811(a) and (b). Pursuant to 21 U.S.C. 811(a)(1), the Attorney General may, by rule, add to such a schedule or transfer between such schedules any drug or other substance, if he finds that such drug or other substance has a potential for abuse, and makes with respect to such drug or other substance the findings prescribed by 21 U.S.C. 812(b) for the schedule in which such drug or other substance is to be placed. The Attorney General has delegated this scheduling authority to the Administrator of the Drug Enforcement Administration (Administrator). 5

Zipeprol (chemical name: 1-methoxy-3-[4-(2-methoxy-2-phenylethyl)piperazin-1-yl]-1-phenylpropan-2-ol) is pharmacologically an opioid drug with some hallucinogenic properties that has no approved medical use in the United States.

In March 1995, the United Nations Commission on Narcotic Drugs, on the advice of the Director-General of the World Health Organization, placed zipeprol in Schedule II of the 1971 Convention, thus notifying all parties to the 1971 Convention.

On May 20, 2013, in accordance with 21 U.S.C. 811(b), and in response to the Drug Enforcement Administration's (DEA) August 3, 2009 request, HHS provided to DEA a scientific and medical evaluation and a scheduling recommendation for zipeprol. DEA subsequently reviewed HHS' evaluation and recommendation for schedule I placement and all other relevant data, and conducted its own analysis under the eight factors stipulated in 21 U.S.C. 811(c). DEA found, under 21 U.S.C. 812(b)(1), that this substance warrants control in schedule I. Both DEA and HHS analyses are available in their entirety under “Supporting and Related Material” of the public docket for this rule at http://www.regulations.gov under docket number DEA-477.

On May 14, 2020, DEA published a notice of proposed rulemaking (NPRM) entitled “Schedules of Controlled Substances: Placement of zipeprol in schedule I.”  6 The NPRM provided an opportunity for interested persons to file a request for a hearing in accordance with DEA regulations on or before June 15, 2020. No requests for such a hearing were received by DEA. The NPRM also provided an opportunity for interested persons to submit comments on the proposed rule on or before July 13, 2020.

DEA received eight comments on the proposed rule to control zipeprol in schedule I of the CSA.

Comments: Three commenters recognized zipeprol's high potential for abuse and adverse health effects, including reports of hallucinations, seizures, overdoses, and deaths. Thus, these commenters supported the placement of zipeprol in schedule I.

DEA Response: DEA appreciates these comments in support of this rulemaking.

Five commenters opposed the placement of zipeprol in schedule I, and provided various reasons as discussed below.

Comment: One commenter contended that it is not appropriate for DEA to schedule zipeprol as health experts, not law enforcement, should regulate and oversee all schedules I through III substances, and specifically that the Secretary of HHS is responsible for adding new substance to the CSA schedules.

DEA Response: DEA disagrees. Congress through the enactment of the CSA provided specific roles and procedures for both law enforcement (DEA) and the medical community (HHS) in controlled drugs with potential for abuse. 7 These procedures were followed in promulgating this final rule.

Comment: One commenter stated that all drugs need to be deregulated and decriminalized, and the focus of the law enforcement should be directed towards addressing social and non-drug related public health matters such as violent crime, unsolved murders, and control of obesity.

DEA Response: This comment is outside the scope of this rule insofar as it addresses drugs other than zipeprol. Regarding zipeprol, however, DEA maintains that control of zipeprol is needed and is appropriate. As stated in the background section, zipeprol is an opioid drug with some hallucinogenic properties that has no approved medical use in the United States.

In March 1995, the United Nations Commission on Narcotic Drugs, on the advice of the Director-General of the World Health Organization, placed zipeprol in Schedule II of the 1971 Convention, thus notifying all parties to the 1971 Convention. As a party to the 1971 Convention, the United States is taking action to place appropriate controls on zipeprol by scheduling it under the CSA.

Comment: One of two commenters mistakenly believe that zipeprol is a schedule II controlled substance under the CSA and that the proposed rule would reclassify zipeprol from schedule II to schedule I. The first commenter stated that reclassifying zipeprol to schedule I control does not warrant priority as it is not currently being used in the United States nor is it being actively manufactured or used in other countries, and there is a need for reclassification of many other drugs. This commenter added that marijuana needs to be reclassified from its current schedule I control.

DEA Response: DEA emphasizes to these commenters that zipeprol is not currently scheduled under the CSA. Perhaps the commenters are thinking of zipeprol's control status under the 1971 Convention. As noted in the background section, the Committee on Narcotic Drugs added zipeprol to Schedule II of the 1971 Convention in March 1995. DEA further notes that classification of a drug under the 1971 Convention, and its relevant schedules, is different from that of the CSA. 8

This rule makes revisions to 22 CFR part 212, USAID's regulations under the Freedom of Information Act (FOIA) and the Privacy Act. The Agency is revising its regulations to update several procedural provisions, including methods for submitting requests under the FOIA, and initial appeals of denials of requests, for records of the Office of the USAID Inspector General (OIG). The Inspector General Act of 1978, as amended (5 U.S.C. App. 3) was enacted to, “create independent and objective units,” to perform investigative and monitoring functions within Executive Departments and Agencies of the Federal Government, including USAID. These revisions will further the OIG's independence and streamline the processing of requests that seek OIG records.

For the reasons stated in the preamble, USAID revises 22 CFR part 212 to read as follows:

I. Background National Flood Insurance Program Statutory Framework and the Biggert-Waters Act of 2012

The National Flood Insurance Act of 1968 (the 1968 Act) and the FDPA, as amended, govern the National Flood Insurance Program (NFIP). 1 The 1968 Act makes federally backed flood insurance available to owners of improved real estate or manufactured homes located in special flood hazard areas (SFHAs) if their community participates in the NFIP.

Until the adoption of the FDPA in 1973, the purchase of flood insurance was voluntary. Section 102 of the FDPA made the purchase of flood insurance mandatory. Specifically, it provides that no Federal officer or agency may approve any financial assistance for acquisition or construction  2 in any area identified as having SFHAs and in which the sale of flood insurance has been made available under the 1968 Act, unless the building or mobile home and any personal property is covered by flood insurance. The National Flood Insurance Reform Act of 1994  3 (Reform Act) requires the owner of a property located in a community participating in the NFIP, and mapped in a SFHA, to purchase flood insurance as a condition of receiving a mortgage backed by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the government-sponsored enterprises or GSEs), VA, USDA, or FHA.

The Biggert-Waters Flood Insurance Reform Act of 2012, amended in 2014, (Biggert-Waters Act)  4 further amended the Federal flood insurance statutes to encourage private-sector participation. However, it does not impose requirements on FHA-insured loans. The Biggert-Waters Act requires the Federal entities for lending regulation (the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), and the Farm Credit Administration (FCA), and collectively, Federal regulators), to direct lenders to accept private flood insurance to satisfy the mandatory purchase requirement, instead of NFIP insurance, if the private flood insurance meets the conditions defined further in the statute at 42 U.S.C. 4012a(b)(7). In addition, the Biggert-Waters Act also requires Federal agency lenders and the GSEs to accept private flood insurance, as defined by the statute. The Biggert-Waters Act also mandates that federally regulated lenders, Federal agency lenders, and lenders who sell to or service loans on behalf of the GSEs must accept private flood insurance policies that meet the definition of “private flood insurance” in the Biggert Waters Act as satisfaction of mandatory purchase and flood insurance coverage requirements under the FDPA. 5 On February 20, 2019, the Federal regulators jointly issued a final rule, published at 84 FR 4953 in the Federal Register , implementing the private flood insurance provisions of the Biggert-Waters Act. For more information on the statutory framework for NFIP, see HUD's proposed rule published at 85 FR 74630 on November 23, 2020.

On November 23, 2020 (85 FR 74630), HUD proposed to amend FHA regulations at 24 CFR parts 201, 203, and 206, to allow owners the option to purchase private flood insurance on FHA-insured mortgages for properties located in SFHAs, consistent with the FDPA and in harmony with private flood insurance requirements under the Biggert-Waters Act. As explained in the proposed rule, mortgagee's acceptance of private flood insurance policies would provide borrowers with more flood insurance choices, promote consistency with industry standards, reduce the regulatory restrictions on flood insurance for FHA-insured loans, and harmonize FHA policies with the congressional intent expressed in the Biggert-Waters Act to encourage an expanded private flood insurance market.

HUD's proposed rule included a provision with a compliance aid designed to help mortgagees evaluate whether a flood insurance policy meets HUD's definition of “private flood insurance.” HUD's proposal provided, however, that a mortgagee may make its own determination and choose not to rely on this statement and that the provision would not relieve a mortgagee of the requirement to accept a policy that both meets the definition of “private flood insurance” and fulfills the flood insurance coverage requirement, even if the policy does not include the compliance aid statement. In other words, this provision would not permit mortgagees to reject policies solely because they are not accompanied by the compliance aid statement. Mortgagees that are regulated lending institutions may seek additional compliance aids on the policy.

HUD's proposed rule also sought public input on specific aspects of HUD's proposal. HUD sought public comment on whether FHA regulations should state that a mortgagee may accept a qualifying private flood insurance policy in lieu of an NFIP policy or that a mortgagee must accept a qualifying private flood insurance policy in lieu of an NFIP policy. Additionally, HUD sought public feedback on its proposed compliance aid. Specifically, HUD sought public comment on the language and option for the proposed HUD compliance aid for private flood insurance policies to demonstrate compliance with HUD's definition and requirements for private flood insurance.

HUD noted that its proposed rule differed from the Federal regulators' rule, published in the Federal Register at 84 FR 4953 on February 20, 2019, in several ways. Both rules offer a compliance aid to help mortgagees evaluate whether a flood insurance policy meets the definition of “private flood insurance.” However, as explained in HUD's proposed rule, HUD's compliance aid differs from the Federal regulators' compliance aid provided in their final rule. HUD explained that this is due to differences in authorities governing the Federal regulators and FHA. The Federal regulators rely on the governing authority of the Biggert-Waters Act, which does not cover FHA. Additionally, unlike the Federal regulators' joint rule, HUD did not propose to permit Mortgagees to exercise their discretion to accept flood insurance policies, provided by private insurers or mutual aid societies, that do not meet the definition and requirements for a private flood insurance policy as laid out in HUD's proposed rule. As stated in HUD's proposed rule, due to the differences between HUD's and the Federal regulators' rules, compliance with the Federal regulators' final rule should not be interpreted as compliance with HUD's requirements.

In consideration of the public comments, HUD's experience implementing the program, and HUD's goals of aligning with the Biggert-Waters Act while mitigating risk and protecting taxpayers' funds, this final rule adopts with minor changes HUD's proposal published on November 23, 2020 (85 FR 74630). What follows is a summary of HUD's changes to 24 CFR parts 201, 203, and 206 made by this final rule. See HUD's proposed rule for more detailed information.

HUD revises § 201.28 to better align it with the requirements of 42 U.S.C. 4012a(a) and §§ 203.16a and 206.45. Specifically, the revision adds a reference to the statutory requirements for community participation in NFIP and NFIP's availability in that community. HUD is adding this language to ensure that prospective homeowners seeking homes in communities that do not participate in NFIP are aware that they will not be able to obtain a private flood insurance policy and still meet FHA insurance requirements. In addition, HUD is adding language to clarify that lenders may rely on the compliance aid statement as provided in § 203.16a(c).

This final rule makes two changes to § 203.16a as proposed. Initially, the final rule adds § 203.16a(a)(1)(iii), and addresses the applicability of § 203.16a if a mortgage is to cover property improvements that are not otherwise covered by the flood insurance standard for condominium projects established under § 203.43b(d)(6)(iii) or (i)(1). HUD makes this technical change for clarity given the scope of properties that may constitute a condominium project.

Second, HUD's proposed rule at § 203.16a(d) stated that flood insurance must be maintained during such time as the mortgage is insured in an amount at least equal to the lowest of three possible amounts, consistent with the statutory requirements in Section 102 of the FDPA. One option proposed by paragraph (d)(1) of this section was to use the statutory language providing for coverage in an amount equal to the “Development or project cost less estimated land cost.” This final rule revises paragraph (d)(1) to clarify the meaning of “Development or project cost less estimated land cost”. HUD is now providing that paragraph (d)(1) is an amount equal to “100 percent replacement cost of the insurable value of the improvements, which consists of the development or project cost less estimated land cost.” This language is codified in HUD's Home Equity Conversion Mortgage (HECM) regulations at § 206.45(c)(3)(i). This final rule makes this technical change for clarity and consistency and alignment with HECM regulations.

This final rule makes several minor revisions to § 206.45 as proposed. Initially, HUD is adding a restatement of the definition and requirements for flood insurance to § 206.45. HUD is also revising § 206.45(c)(2) to add for HECM mortgages the loss payee and compliance aid language that is in § 203.16a(c). This final rule adds paragraph (c)(4) to § 206.45 to restate the definition of private flood insurance in § 203.16a(e). HUD is amending § 206.45 by replacing the cross references to the definition in § 203.16a with cross references to § 206.45(c)(4). HUD has determined that greater clarity can be achieved by keeping private flood insurance requirements related to HECM in part 206. Additionally, this increases consistency between HECM and forward-facing mortgage regulations and affords the same benefits to both HECM and forward-facing mortgage mortgagors.

Second, similar to § 203.16a(a)(1)(iii), this final rule adds a paragraph to § 206.45. Under this new paragraph (c)(1)(i)(C), the requirements of § 206.45(c) apply if a mortgage is to cover property improvements that are not otherwise covered by the flood insurance standard for condominium projects established under § 203.43b(d)(6)(iii) or (i)(1). HUD makes this technical change for consistency within HUD's regulations and clarity given the scope of properties that may comprise a condominium project.

Finally, this final rule reorganizes the text of § 206.45(c)(1) into new paragraphs (c)(1) and (2) for clarity and structural consistency with § 203.16a and adds a header to paragraph (c)(3).

The public comment period for the November 23, 2020, proposed rule closed on January 22, 2021. HUD received 31 (thirty-one) public comments in response to the proposed rule from brokers, homeowners, mortgagees, insurance agents, first-time home buyers, FHA borrowers, non-profit organizations, and other interested parties. This section presents the significant issues, questions, and suggestions submitted by public commenters, and HUD's responses to these issues, questions, and suggestions.

Many commenters supported HUD's proposal to permit FHA borrowers to purchase private flood insurance. Many commenters cited how the proposed rule would save homeowners money, increase affordability and options for buyers, and offer broader insurance coverage at a lower price. Some commenters urged HUD to move forward with a final rule as soon as possible for FHA borrowers to realize the intended benefit.

One commenter noted that COVID-19 has presented obstacles of its own and the proposed rule will help families save money during the pandemic.

HUD Response: HUD appreciates the feedback and is publishing this rule to align with the intention of the Biggert-Waters Act. This rule allows borrowers the option to purchase private flood insurance in lieu of an NFIP policy, where flood insurance is required. Private flood insurance policies might offer borrowers greater coverage, less expensive rates, and lower deductibles.

Many commenters stated that Federal flood insurance policies are significantly more expensive than private insurance. Moreover, commenters stated that private insurance offered more coverage for lower premiums. One commenter stated that they considered refinancing their home into a conventional loan so they could buy private insurance because of the price of Federal flood insurance policies. Another commenter quoted the premium they received for Federal flood insurance at $5,500 with a $2,000 deductible, compared to the premium for private insurance at $1,100 with a $1,000 deductible for the same coverage. One commenter stated that even though their home has not had a flood in about 70 years the premiums for required insurance are “still insanely high.” Other commenters stated that each year the cost of Federal flood insurance continues to rise significantly. These commenters generally agreed that private flood insurance would help low to middle income families save money, expand homeownership to first time homeowners, and help homeowners stay in their homes rather than having to sell because of expensive NFIP flood insurance. Another commenter said that because private flood insurance typically provides more coverage than an NFIP policy, it is less likely that FHA insurance will be required after floods.

HUD Response: HUD is encouraged that borrowers will be offered greater choice in selecting a flood insurance policy, which will reduce differences between FHA-insured mortgages and other mortgage options, while maintaining fiscal responsibility to FHA borrowers and taxpayers.

The range of flood insurance rates and deductibles varies greatly based on the characteristics of each property. A private flood insurance policy might allow some borrowers to obtain a less expensive policy.

Commenters stated that private flood insurance is more affordable and gives more individuals and families the opportunity to own or refinance homes, along with the ability to save money. For example, allowing private flood insurance for FHA-insured loans will give more consumers who do not have “extra funds to afford the current flood insurance premiums” the opportunity to become homeowners. One commenter stated that FHA-insured loans are supposed to represent “affordable housing.” The commenter continued, however by stating that borrowers are forced to get Federal flood insurance policies through FEMA which are double the cost of private flood insurance and which prohibit many prospective homeowners from buying due to costs. Another commenter noted that the high rates for Federal flood insurance could make a difference in someone being able to buy their dream home. Another commenter stated that their “elderly clients are tired of having to sell their homes because their [Federal flood insurance policy] rates are so high.”

Several commenters supported the proposed rule because it could give homeowners and buyers financial breathing room and allow people to purchase homes without restrictions on purchasing power arising from the cost of flood insurance. One commenter noted the difficulty in advising clients that they are not eligible for a $500 private flood policy and are required to purchase a $3000 policy due to FHA requirements. The commenter also stated that in some cases the costs of FEMA insurance cause people to not be able to purchase a new home at all.

Another commenter stated that consumers should be allowed to choose their flood insurance policy, and that the current rule restricts consumer choice, creates inequities between FHA and more conventional loan holders, and raises barriers for FHA-insured loan products, which sometimes precludes first-time home buyers from closing on a home. One commenter stated, from the seller's point of view, that after potential buyers with an FHA-insured loan realize that they will be adding “over $100 to their house payment for flood insurance,” buyers choose not to go forward with the sale.

One commenter emphasized that the rule's proposal to permit private flood insurance is significant and critical to consumer choice because “about 20 percent of home purchase first liens and about 15 percent of refinance transactions on 1-4 family dwelling are FHA-insured.” The commenter stated that every year there are thousands of borrowers who are not able to choose private flood insurance that is more affordable.

One commenter supported the proposed rule explaining that it would give homeowners the option to purchase private flood insurance during periods where NFIP may lapse. Additionally, one commenter noted that the rule would grow the private flood insurance market to complement the NFIP and expand consumer flood insurance options.

HUD Response: Changes to HUD's flood insurance regulations to allow acceptance of private flood insurance policies offer access to a broader range of flood insurance options. Private flood insurance policies could provide potential cost savings to some borrowers compared to the cost of NFIP policies. 6 Additionally, in the event of a lapse in appropriations for NFIP, a private insurance option could be available to borrowers.

Some commenters stated that the proposed rule would more closely align HUD regulations with industry standards, statutory law, and principles of good governance, consumer choice, affordable housing, and fiscal prudence.

One commenter stated that the proposed rule will achieve HUD's stated goal of more closely aligning FHA regulations “with industry standards and reduc[ing] the regulatory restrictions on flood insurance for FHA-insured loans.” The commenter also stated that the proposed rule would reduce regulatory restrictions on flood insurance for FHA-insured loans, provide greater consumer choice, and enhance homeownership opportunities for its members.

Another commenter stated that HUD's rule aligns with the Biggert-Waters Act's clear direction to all Federal agency regulated mortgagees to accept certain private flood insurance. The commenter stated that, “[d]rawing a distinction between agencies that `insure' versus `lend' is a hyper-technical legal reading of the statute that does not comply with the spirit—if not the exact letter—of the law.” Similarly, the commenter stated that laws should be uniformly and consistently applied across the Federal Government, and that an “agency should not exploit a technical drafting error to avoid compliance with a statute, especially when Congressional intent is clear.” Finally, the commenter said HUD's rule is fiscally prudent because providing for FHA mortgagee acceptance of private policies not only bolsters the FHA Fund but also protects taxpayers.

HUD Response: HUD's intention is to align as much as possible with other Federal agencies, the intentions of the Biggert-Waters Act, and industry standards where appropriate, while issuing distinct regulations when necessary.

HUD is committed to removing barriers to affordable housing, supporting affordable housing opportunities, homeownership, and facilitating access to credit for borrowers. This rule could increase the entry-level housing supply in communities where flood insurance is required, while mitigating risk and protecting taxpayers' funds. This rule is not expected to have a substantial direct budgetary impact to FHA's Mutual Mortgage Insurance (MMI) Fund.

Some commenters agreed with HUD's decision to make optional mortgagees' acceptance of private flood insurance policies that meet the definition of private flood insurance under HUD's rule and the Biggert-Waters Flood Insurance Reform Act of 2012 (“Biggert-Waters Act”) (a mortgagee “may accept” a private flood insurance policy).

One commenter stated that “it is more appropriate to give [mortgagees] discretion to accept private flood policies by saying that they `may' accept a private flood policy if it meets all of the definitions. While we respect that the borrower has the freedom of choice to find a private policy (provided the policy fits all of the required definitions/parameters), it is also important that the mortgagee has a choice based on past experiences with providers and their own risk tolerance levels.”

Another commenter noted that mortgagees have greater expertise and a shared interest with borrowers in ensuring that the property is adequately covered by flood insurance. The commenter stated that directing mandatory acceptance could be warranted only in the presence of overwhelming policy reasons to do so, which are not present here. Another commenter explained that adding a mandatory acceptance requirement in HUD's regulations (“must accept”) could create additional burdens for those mortgagees and servicers that are not subject to the Biggert-Waters Act requirement to accept private flood insurance since they may have to develop new procedures and processes to review private flood insurance policies. The commenter also noted that requiring the acceptance of private flood insurance could mean that some mortgagees and servicers would continue not to accept private flood insurance which could result in higher costs and limited choices for FHA borrowers.

Some commenters supported a mandatory requirement that mortgagees accept private flood insurance policies that meet the definition and requirements for a private flood insurance policy under HUD's rule and the Biggert-Waters Act. One commenter stated that having consistency between HUD's rule and that of the Federal financial regulators is beneficial to the consumer because it “provides consumer choice and prevents [mortgagees] from competing on underwriting guidelines.”

One commenter explained that mandating the acceptance of private flood insurance would help further FEMA's “Moon Shot Initiative” to double the number of properties covered by flood insurance.

Another commenter stated that mandating private insurance would “harmonize FHA policies with Congressional intent to expand the private flood insurance market.”

Another commenter stated that changing the practice of denying property owners access to private flood insurance is long overdue and that a mortgagee should be required to accept qualifying private flood insurance in lieu of an NFIP policy.

HUD Response: HUD recognizes the value of consistency across the housing finance industry with respect to flood insurance and the importance of providing borrowers the option to select flood insurance coverage that best matches their needs.

HUD recognizes the importance of allowing mortgagees discretion to accept private flood insurance policies that meet HUD's requirements. This approach is similar to HUD's policy for accepting hazard insurance, where mortgagees have discretion to accept a policy. HUD requires the mortgagee to provide evidence of acceptable insurance coverage, where required, and does not prescribe which provider the mortgagee accepts. Under HUD's regulations for FHA-insured mortgages, HUD will not pay a claim to mortgagees for surchargeable damages that should have been covered by the required flood or hazard insurance; therefore, it is in the mortgagee's financial interest to ensure that the borrower has adequate coverage from a responsible insurance provider.

HUD does not anticipate this rule playing a role in furthering FEMA's “Moonshot Initiative” to increase the number of properties with flood insurance. Although FEMA has indicated its desire for more properties to carry flood insurance to help protect them against potential flood losses, FEMA's initiative seems targeted at homeowners who are not currently required to carry flood insurance, such as those who have paid off their mortgage. With this rule, HUD is not expanding the requirement for which FHA-insured mortgages are required to carry flood insurance.

One commenter applauded HUD for rejecting the “discretionary acceptance” option that was in the final joint rule published by the banking regulators. The Federal regulators' rule has a provision that provides that mortgagees may accept flood insurance that does not meet the definition of flood insurance in the banking regulator's joint final rule. The commenter stated the discretionary acceptance option “runs counter to Congressional intent of NFIP reforms” and that “[i]t is quite clear by the definition of private flood insurance in Section 100239 of the Biggert-Waters Flood Insurance Reform Act of 2012, that Congress wanted clear sideboards on what qualified as a private flood insurance policy for the purposes of meeting the mandatory purchase requirement under the NFIP.” The commenter found the Federal regulators' rule to circumvent “Congressional sideboards by enacting failed legislative proposals from 2016 through rulemaking.” The commenter continued that a discretionary acceptance option “could lead to excessive deductibles” which would lower premiums but increase out-of-pocket “costs for the mortgagor to then ultimately recover when an event occurs.” The commenter concluded that discretionary acceptance does not provide consumer protections and would result in taxpayers being forced to cover additional disaster losses.

Some commenters recommended that HUD provide a discretionary acceptance option. Commenters stated that if HUD does not provide FHA mortgagees with a discretionary acceptance provision, FHA borrowers effectively would be barred from the use of private insurance policies that may be available to non-FHA borrowers. This would undermine HUD's objectives of helping borrowers and providing more consumer choice in options for flood insurance products.

One commenter stated that following the Federal regulators' current framework, which includes a discretionary acceptance provision, will best protect the interest of insured borrowers and mortgagees by giving borrowers options to less expensive flood policies with the same or better coverage, and by giving mortgagees the flexibility to make their own determination of the adequacy of such policies.

Another commenter stated that without a discretionary acceptance provision, HUD's proposed rule may not actually afford consumers the options it seeks to provide because the proposal would only provide credit unions with the ability to accept private flood insurance in lieu of a Federal flood insurance policy if all the factors defining “private flood insurance” are present. The commenter stated that providing a discretionary acceptance provision would ease operations, minimize delays in the homebuying process, and enhance consumer choice. For example, without such a provision, credit unions may send private flood insurance policies to a specialist for review, if there is no expert on staff, to ensure the credit union may accept the policy. This may, in turn, lead to longer closing times and borrower frustration with the homebuying process.

One commenter pointed out that HUD's rule does not appear to allow mortgagees to accept all residential policies offered by surplus line insurers, namely nonresidential commercial policies. The commenter explained that restricting acceptance to only commercial surplus lines coverage could hinder access to additional choices for residential flood insurance products. Surplus lines carriers may also be able to offer residential consumers additional coverage features or greater limits than the NFIP at a more affordable price.

Another commenter suggested that HUD “should allow discretionary acceptance of a private flood insurance policy regardless of HUD's decision on whether accepting private flood insurance is a mandatory requirement or optional under its final regulations.” The commenter explained that this would promote harmony with the Flood Disaster Protection Act and consumer choice for FHA borrowers. Most mortgagees already “must” accept private flood insurance that meets the Biggert-Waters Act definition, under the Federal regulators' rule. So, if HUD's definition is “the same or substantially similar to the FDPA definition,” from which the Federal regulators' definition derives, then “[HUD's separate rule and definition] would appear to marginally help create the consistency and harmony with the FDPA that HUD is attempting to do.” However, if HUD uses a permissive ( e.g., “may accept”), then some mortgagees will continue to not accept private flood insurance, even if the policy meets the definition. “This could result in higher costs and limited choices for FHA borrowers.” Therefore, HUD should offer a discretionary option in either case to permit mortgagees to accept policies that do not strictly conform to the statutory, and derivative, definitions.

The commenter explained that a discretionary option is especially crucial if HUD makes it mandatory that mortgagees accept policies that meet the definitions. A discretionary option would address elements important to institutional risk and consumer protections. The commenter stated that the statutory definition of “private flood insurance” is imprecise or impractical when considering actual insurance contracts, existing state law, and state approval processes; and, therefore, the final rule “can provide further detail” by establishing discretionary acceptance criteria.

HUD Response: HUD has determined that discretionary acceptance of policies that do not meet HUD's requirements would not protect borrowers or FHA's MMI Fund. HUD appreciates the feedback but believes that permitting mortgagees the discretion to accept flood insurance policies that do not meet HUD's private flood insurance requirements would not sufficiently mitigate risk and protect taxpayers' funds.

HUD is concerned about the lack of deductible limits for discretionary acceptance of flood insurance policies in the Federal regulators' rule, which could open borrowers to significant costs. There is no requirement that a deductible under these policies be no greater than that of a comparable NFIP policy; therefore, a policy that seems less expensive may have significantly higher deductibles leading to potentially prohibitively costly out-of-pocket expenses for the borrower when an event occurs. HUD is concerned that having uncapped deductible limits could have a negative impact on the financial stability of FHA-insured borrowers, which could lead to higher risk of default and foreclosure. Furthermore, HUD does not believe that eliminating the option for discretionary acceptance will significantly reduce choice for most FHA-insured borrowers.

HUD appreciates the commenters' desire for uniformity and HUD has strived to align with other agencies' requirements where appropriate. While HUD aims to align with the Biggert-Waters Act, allowing mortgagees to permit a discretionary acceptance option does not align with the best interests of HUD's borrowers or the MMI Fund.

Some commenters that recommended HUD add a discretionary acceptance option also contended that HUD should include provisions outlining discretionary acceptance criteria identical or similar to the Federal agencies' final regulation. One commenter offered suggested revisions to the regulatory text.

One commenter stated that HUD should allow mortgagees, specifically credit unions, “to accept private flood insurance policies in lieu of NFIP policies on FHA-insured mortgages, if the compliance aid is present, if the policy meets the mandatory acceptance criteria under the definition of `private flood insurance' or if the policy meets the discretionary acceptance criteria outlined in the [Federal regulators'] Interagency Rule.”

Commenters recommended that the regulations permit FHA mortgagees to accept private flood insurance policies that meet discretionary acceptance criteria, even where those policies may not necessarily satisfy the technical definition of “private flood insurance” in the Biggert-Waters Act. One commenter pointed to the Federal regulators' regulations, which “require at least four criteria that must be satisfied before a mortgagee can exercise its discretion to accept [a] private flood insurance policy.”  7 The commenter reasoned that the Biggert-Waters Act was meant to create a floor for policies that must be accepted or could not be rejected, and that it remains the province of the states to determine what constitutes acceptable insurance. This commenter also stated that a discretionary provision can be drafted in a manner that provides consumer choice while maintaining the safety and integrity of the Mutual Mortgage Insurance Fund, similar to the way that the Federal regulators' rule protects the associated Federal insurance programs.

Commenters provided an example of how these principles should inform HUD's addition of a discretionary acceptance option: Under the discretionary acceptance provision of the Federal regulators' final rules and, where permitted by state insurance law, a mortgagee has the discretion to accept a private flood insurance policy that contains a 30-day notice provision rather than a 45-day notice provision as required under the Biggert-Waters Act. Commenters recommended HUD use this example to help guide its creation of discretionary option criteria.

One commenter emphasized that it is important for mortgagees to understand whether a private policy requires a separate or included disclosure with a statement of the availability of Federal flood insurance policies. The commenter said that “[Flood Disaster Protection Act] criteria require that a private policy must include a statement of the availability of flood insurance under the NFIP. In current practice this statement (when provided) is being provided by private carriers as a separate disclosure rather than embedded language in the actual policy contract. Discretionary acceptance criteria from FHA could exclude this as a required element or could clarify that this separate disclosure is satisfactory and meets the intent of the FDPA.”

HUD Response: HUD appreciates the specific feedback provided. However, HUD believes it is in the best interest of borrowers and HUD's fiduciary responsibility to the Mutual Mortgage Insurance Fund to not offer a discretionary option and to require all private flood insurance policies to meet the definition of private flood insurance under this rule.

Some commenters supported HUD's compliance aid or the inclusion of a compliance aid generally. Commenters supported HUD's compliance aid because it would assist mortgagees with the review of private flood insurance policies to ensure they are compliant with FHA's regulations, assist mortgagees in determining whether a policy meets the definition of “private flood insurance” without further review of the policy, and prove particularly helpful to smaller mortgagees that may lack resources or technical expertise to adequately review flood insurance policies.

Some commenters generally supported the addition of a compliance aid, but strongly recommended that HUD's compliance aid statement be identical or made more similar to Federal regulators' compliance aid language. Commenters wrote that this would ensure “the policy meets the definition of `private flood insurance' and fulfills the requirements of both the Federal regulators and HUD.” Further, this would enable FHA borrowers to immediately benefit from work done by the industry on the Federal regulators' compliance aid since February 2019. The commenter explained, “At this point, the specific language of the Federal regulators' compliance aid has already been incorporated into the state insurance legislative and regulatory infrastructure.” The commenter provided an example from a state that enacted a new private flood insurance act in September 2020 that requires that a private flood policy must state that it meets the private flood insurance requirements specified in 42 U.S.C. 4012a(b) and may not contain provisions that, when taken as a whole, are not in compliance with that statutory provision. The commenter also explained that the Federal regulators' compliance aid language has been incorporated into legislation being developed by the National Council of Insurance Legislators (NCOIL), titled the Private Primary Residential Flood Insurance Model Act. 8

Commenters stated that making HUD's compliance aid more similar or identical to the Federal regulators' will relieve compliance burden on FHA/HUD mortgagees and provide “certainty” and prevent confusion for both mortgagees and consumers that private flood insurance policies meet requirements and will or should be accepted “without further analysis.”

One commenter suggested that HUD clarify “at least as broad as” when it comes to deductibles and coverages, “specifically cautioning against excessive deductibles and ensuring the policy has an equivalent to Increased Cost of Coverage (ICC) that is found in an NFIP policy.” The commenter explained their concern that the private sector's equivalent to ICC is “often optional rather than mandatory as with NFIP policies.”

Some commenters pointed out that some insurers may choose not to include both HUD's and the Federal regulators' compliance aid statements, which would “narrow the pool of available private flood insurance coverage the [proposed rule] is intended to provide to FHA borrowers.” Even if insurers did include both compliance aid statements, commenters explained that the experience of implementing the Federal regulators' compliance aid demonstrates that including two sets of compliance aid language would not be a simple process. Using different language for an FHA compliance aid would require insurers and mortgagees to use different sets of insurance policies and other documentation for FHA-insured loans. Another commenter suggested that an “FHA specific compliance aid is superfluous and will add an unnecessary cost to an already costly transaction.” Similarly, another commenter explained that changes and procedures were put in place following the Federal regulators' 2019 rule and a second process for HUD's compliance aid would impose further burden.

One commenter recommended that if HUD does not adopt the Federal regulators' compliance aid, then HUD should clarify language in its compliance aid regarding the scope of coverage. This language should highlight limited utility in that the compliance aid only ensures compliance with HUD's regulations and not with the interagency rule. Placing this additional language into the compliance aid will provide clarity and put mortgagees on notice that, notwithstanding inclusion of HUD's compliance aid, if a separate compliance aid that conforms to the Federal regulators' rule is not present, they will have to review the private flood insurance policy to determine its compliance with the Federal regulators' rule.

HUD Response: HUD appreciates the feedback regarding the compliance aid. The intention of the compliance aid is to assist mortgagees in understanding when an insurance policy coverage meets the definition of private flood insurance. The compliance aid is a voluntary option that private flood insurance companies may choose to provide.

HUD believes providing a compliance aid is important to assist mortgagees to understand when a private flood insurance policy meets HUD's requirements. This will facilitate the closing process by allowing the mortgagee to rely on the compliance aid instead of the mortgagee taking the time and developing the technical expertise to review the details of each private insurance policy. This aid also ensures that lack of technical expertise regarding flood insurance does not becomes an obstacle to the implementation of this policy.

HUD recognizes the value of consistency across the housing finance industry with respect to flood insurance. However, HUD's legal authority and requirements are distinct from that of the Federal regulators. The Biggert Waters Act does not require HUD to provide a private flood insurance option; therefore, HUD cannot rely on the authority of the Biggert-Waters Act referenced in the Federal regulators' compliance aid and must rely on its own authority. Furthermore, this rule is distinct from the Federal regulators' rule regarding the “may accept” versus “must accept” requirement, the discretionary acceptance option, and mutual aid associations. Therefore, a different compliance aid is necessary to highlight this distinction; HUD's compliance aid will specify compliance with HUD's requirements.

HUD believes it is in the best interest of borrowers and HUD's fiduciary responsibility to protect taxpayers' funds to have a distinct compliance aid to help ensure the requirements in this rule are met.

While generally in support of the proposed rule, some commenters offered recommendations to improve the proposed rule. These commenters agreed that the proposed rule would substantially benefit FHA borrowers, but suggested HUD more closely align its regulations with the Federal regulators' rule.

Some commenters recommended HUD, like the Federal regulators, permit mortgagees to accept coverage provided by mutual aid societies consistent with the Biggert-Waters Act. Commenters wrote that if such provisions are excluded, “individuals and families, whose religious beliefs, or other strictures conflict with the purchase of traditional NFIP or private flood insurance policies” would be excluded from being able to take advantage of private flood insurance which was intended to benefit all Americans. One commenter recommended using a provision comparable to the Federal regulators' mutual aid society provision. This commenter cited 12 CFR 22.3(3), which was amended by the Federal regulators' joint interim rule and suggested HUD adopt similar language. The changes would conform HUD's proposed rule to the Federal regulators' joint rule and permit acceptance of coverage by mutual aid societies.

HUD Response: HUD appreciates the comments and recognizes the value of consistency across the housing finance industry and has strived to balance those interests as appropriate. Unlike the requirements for NFIP and other private flood insurance providers, mutual aid associations are not required to be licensed, admitted, or otherwise approved to engage in the business of insurance by the insurance regulator of the State or jurisdiction in which the property to be insured is located. FHA does not have the expertise or authority to evaluate the ability of mutual aid associations to fulfill their obligations with regards to their insurance policies or their demonstrated history of fulfilling the terms of agreements to cover losses to members' property caused by flooding. Without specific guidance from FHA, mortgagees would be forced to evaluate the financial soundness of mutual aid associations which might be interpreted differently, causing confusion as well as an undue burden to mortgagees.

Given that mutual aid associations, as defined in the Federal regulators' rule, are not regulated by a State Insurance Regulator and that HUD's role is not to regulate financial institutions, HUD has determined that accepting flood insurance policies provided by mutual aid associations could create a financial risk to borrowers and the MMI Fund.

One commenter noted that aligning HUD's rule with the Federal regulators' rule would allow borrowers and mortgagees to draw on the policies, documentation, and practices that mortgagees, flood insurance companies, and others have already adopted under the Federal regulators' requirements—which would reduce the risk of mortgagees misapplying FHA regulations. Other commenters recommended consistency throughout the lending process and within industry standards to maintain discretionary acceptance criteria.

Some commenters supported HUD's proposed definition of private flood insurance. However, one commenter recommended HUD better align its definition with the Federal regulators' definition in their joint final rule. The commenter reasoned that while some differences between the specific language in the two regulations are necessary and appropriate ( e.g., using “FHA” rather than “regulated lending institution”), other differences create risk that a reader could make an incorrect inference that differences are intended to have substantive impact, which appears not to be the case.

Another commenter explained that “[a]dopting identical language in [HUD's] regulation would be consistent with HUD's proposed approach to the acceptance of private flood insurance.” Then the commenter referred to the definition of “private flood insurance” in the proposed FHA regulation and the Federal regulators' final regulations and explained that both explicitly incorporate the definition at 42 U.S.C. 4012a(b)(7). The commenter stated that HUD's proposed definition of “private flood insurance” is not materially different from the definitions of “private flood insurance” in the Federal agencies' final regulations, and HUD's proposed regulation could fairly be characterized as a “corresponding regulation.”

One commenter stated it is critical that HUD implement regulations consistent with the Federal flood insurance regulations regarding the definition of “private flood insurance,” language used in the compliance aid statement, and a mortgagee's discretionary acceptance of a private flood insurance policy that is sufficient protection for the loan.

HUD Response: HUD appreciates the comments and recognizes the value of consistency across the housing finance industry and has strived to align with the other agency's requirements where possible and appropriate. The discretionary acceptance provision under the Federal regulators' rule creates financial risk for FHA borrowers and the MMI Fund.

One commenter expressed a concern for the loss of continuous coverage since private flood insurance is not seen as continuous coverage by the NFIP, meaning borrowers will lose subsidies they have with NFIP if they decide to go back after switching to private flood insurance. For example, homeowners who seek FHA mortgages may already be financially constrained and should they need to return to NFIP for flood insurance it could result in them having higher premiums. Additionally, even if the homeowner is informed of this risk, it may not prevent someone who is focused on cost savings from deciding to switch, putting them in a detrimental position that is long-term and may affect the sale of their property.

The commenter pointed out legislation that has already been introduced and seeks to “amend the definition of continuous coverage to include the provision of private flood insurance.”  9 The commenter expects this legislation to pass into law soon and to become a part of the comprehensive reform of the NFIP. The commenter stated that for these reasons, the rule is premature and should be postponed until legislation is adopted that will protect homeowners who choose to switch back to NFIP. The new legislation will ensure homeowners can have previous subsidized rates after having continuous coverage either through NFIP or private flood insurance.

HUD Response: HUD appreciates the comment and the commentator's desire to protect homeowners from increased prices under private flood insurance policies. HUD notes and appreciates commenters' concerns about proposed legislation. HUD is publishing this rule to align with the intention of the Biggert-Waters Act. HUD only has authority to act on current law; legislation cited by commenters was not signed into law. Other agencies' forthcoming rules may consider not only borrowers but all homeowners with federally backed mortgages who have the option to purchase a private flood insurance policy in lieu of an NFIP policy, where one is required.

One commenter stated that the regulatory burden analysis claims that most private flood insurance is sold on the surplus lines market as opposed to the admitted market and dominated by large international insurers. The commenter stated this is “a complete misunderstanding of the surplus lines market and refuted in a closer reading of the report cited as the source of the information.”  10

HUD Response: HUD appreciates the feedback and concern regarding data sourcing. As stated, there is limited data regarding flood insurance companies. HUD utilized a peer reviewed study published in professional risk industry journals, which is considered a reliable source of data.

This data was taken from Kousky et al. (2018). The authors' paper is among the limited existing studies on residential private flood insurance. The authors stated that “more policies are written by surplus lines carriers than by admitted carriers. . . . This is unsurprising, since surplus lines firms tend to cover new or catastrophic risks for which consumers may have trouble finding coverage in the admitted market.”  11 In addition, “the largest US homeowners insurance companies have generally been hesitant to enter the flood [insurance] market, although a few have begun to enter through subsidiaries.”  12

HUD expects that more private insurers—either admitted carriers or surplus lines carriers, and of any company size—will be offering flood insurance soon or have already started offering flood insurance, especially after the Federal regulators passed their rule on the acceptance of private flood insurance. “As insurers' familiarity with flood catastrophe models grows, as underwriting experience develops, and as state regulatory structures evolve, the number of private flood policies in force could continue to grow, including among admitted carriers.”  13

Some commenters stated that the proposed rule would help address an issue raised by HUD's Office of Inspector General (OIG) in a report issued January 5, 2021. 14 The recent report found that at least 3,870 FHA-insured loans totaling $940 million “had private flood insurance coverage instead of the required national flood insurance program coverage, coverage that did not meet the minimum required amount, or no coverage at the time the loan was closed and endorsed.”  15 Every other Federal lending authority now allows, and in many cases requires, the acceptance of private flood insurance, leaving FHA mortgagees with an untenable choice: follow their regulator's private flood insurance requirement and risk the FHA insurance down the road, or walk away from FHA loan products entirely. The commenters stated that this is an unacceptable situation.

HUD Response: HUD agrees that this rule should help reduce confusion for borrowers and mortgagees, who may not have realized that HUD did not previously accept private flood insurance policies in lieu of NFIP policies, although other Federal agencies did. This issue was identified in a recent HUD OIG audit. 16 This rule should remove that source of confusion and non-compliance by allowing FHA borrowers to purchase a flood insurance policy that meets HUD's requirements.

Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are “outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.” Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public.

This rule was determined to be a “significant regulatory action” under section 3(f) of Executive Order 12866 (but not an economically significant action under section 3(f)(1) of the Executive order).

The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. As explained in HUD's November 23, 2020, proposed rule, supervised mortgagees are among FHA-approved lenders. These mortgagees are supervised by the Federal regulators. Based on the analysis developed by the Federal regulators and published as part of their final rule (see 84 FR 4953), the Federal regulators determined that allowing private flood insurance in mortgage transactions conducted by these mortgagees would not have a significant economic impact on a substantial number of small entities they supervised. This finding is also true for the share of regulated lending institutions supervised by the Federal regulators that are FHA-approved lenders.

Small entities also include small businesses, small not-for-profit organizations, and small governmental jurisdictions. This rule, however, offers a benefit to all FHA-approved mortgagees regardless of the size of the firm. Allowing private insurers to compete provides business opportunities to those private insurers. The rule provides a compliance aid which will allow all mortgagees, including small mortgagees that may lack technical expertise regarding flood insurance policies, to conclude that a policy meets the definition of “private flood insurance” without further review of the policy if the policy, or an endorsement to the policy, states: “This policy meets the definition of private flood insurance contained in 24 CFR 203.16a(e) for FHA-insured mortgages.” This proposed rule would also reduce the burden to all mortgagees, including those small entities, by aligning FHA's regulations with those issued by the Federal regulators.

For flood insurance companies, there is less data. However, existing analysis by Kousky et al. (2018)  17 on private insurers that are currently providing flood insurance shows that these private insurance companies are mostly surplus line carriers that operate globally. This finding implies that such carriers cannot be considered as small entities. Taking advantage of the business opportunities is more difficult for small firms because large firms are inherently favored by their ability to spread flood risk. However, as the private flood insurance market expands, it is expected to become less concentrated, to the benefit of small entities. Overall, HUD believes that this rule will not have a significant impact on a substantial number of small entities, and the impact of the rule on those small entities impacted will be beneficial rather than adverse. Therefore, HUD certifies that this rule is not expected to have a significant economic impact on small entities.

A Finding of No Significant Impact (FONSI) with respect to the environment was made at the proposed rule stage in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The FONSI remains applicable and is available for public inspection on www.regulations.gov.

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either (i) imposes substantial direct compliance costs on state and local governments and is not required by statute, or (ii) preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. This rule does not have federalism implications and would not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive order.

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments, and on the private sector. This rule does not impose any Federal mandates on any state, local, or tribal governments, or on the private sector, within the meaning of the UMRA.

For the reasons discussed in the preamble, HUD amends 24 CFR parts 201, 203, and 206 as follows:

The Coast Guard will enforce the special local regulation in 33 CFR 100.704, Table 1 to § 100.704, Item 10, for the Charleston Parade of Boats from 4 p.m. until 8 p.m. on December 10, 2022. This action is being taken to provide for the safety of life on navigable waterways during this event. Our regulation for marine events within the Captain of the Port Charleston, § 100.704, specifies the location of the regulated area for the Charleston Parade of Boats which encompasses portions of the Charleston Harbor including Anchorage A, Shutes Folly, Bennis Reach, Horse Reach, Hog Island Reach, Town Creek Lower Reach, and Ashley River. During the enforcement periods, as reflected in § 100.100(c), if you are the operator of a vessel in the regulated area you must comply with directions from the Patrol Commander or any official patrol vessel.

In addition to this notice of enforcement in the Federal Register , the Coast Guard plans to provide notification of this enforcement period via the Local Notice to Mariners, Broadcast Notice to Mariners, and on-scene designated representatives.

Background

VA published a proposed rule in the Federal Register at 87 FR 10158 on February 23, 2022, to amend the VAAR to implement and supplement the FAR. VA provided a 60-day comment period for the public to respond to the proposed rule and submit comments. The public comment period closed on April 25, 2022. VA received two comments from one respondent.

This rulemaking is issued under the authority of the Office of Federal Procurement Policy (OFPP) Act which provides the authority for an agency head to issue agency acquisition regulations that implement or supplement the FAR.

The VAAR has been revised to add new policy or regulatory requirements, to update existing policy, and to remove any redundant guidance where it may exist in affected parts, and to place guidance that is applicable only to VA's internal operating processes or procedures in the VAAM.

This rule adopts as a final rule the proposed rule published in the Federal Register on February 23, 2022, except for one technical non-substantive change to update terminology in accordance with FAR final rules as shown below.

The respondent alleged that the proposed rule could “. . .unlawfully Amend U.S. Code to facilitate illegal land use at the WLA VA Soldiers Home.” This issue has no relevance to the proposed rule. The respondent also expressed dismay that Department did not extend the “Public a Comment Period on the WLA VA Soldiers Home's “Master Plan” and “Community Plan.” This comment did not have any application to AQ23 which deals with the Department of Veterans Affairs Acquisition Regulation System and Research and Development. VA appreciates the respondent's interest in the rule but the two comments do not pertain to the content of the regulation. Therefore, VA is taking no action to revise the rule based on these comments.

VA proposes to make the following changes to the VAAR in this phase of its revision and streamlining initiative. For procedural guidance cited below that is proposed to be deleted from the VAAR, each section cited for removal has been considered for inclusion in VA's internal agency operating procedures in accordance with FAR 1.301(a)(2). Similarly, delegations of authority that are removed from the VAAR will be included in the VAAM as internal agency guidance. The VAAM is being created in parallel with these revisions to the VAAR and is not subject to the rulemaking process as they are internal VA procedures and guidance. The VAAM will not be finalized until corresponding VAAR parts are finalized.

This rule makes one non-substantive change to the rule to provide clarity, eliminate confusion, and to ensure compliance with the Federal Acquisition Regulation (FAR). Specifically, VA is revising the section covering the ratification of unauthorized commitments to clarify the delegation authority level for unauthorized commitments below $25,000.

VA is revising the final rule at 801.602-3 as reflected in the amendatory text as follows:

“801.602-3, Ratification of unauthorized commitments.

(a) This section applies to unauthorized commitments, including any commitment made by a contracting officer that exceeds that contracting officer's contracting authority and unauthorized commitments made by a Government representative who lacked the authority to enter into that agreement on behalf of the Government.

(b) The approving authority and ratification official for unauthorized commitments is the HCA. This authority may be delegated to the chief of the contracting office or the equivalent for unauthorized commitments below $25,000.”

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). E.O. 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. The Office of Information and Regulatory Affairs has determined that this final rule is not a significant regulatory action under Executive Order 12866. The Regulatory Impact Analysis associated with this rulemaking can be found as a supporting document at www.regulations.gov.

This final rule contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

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

This rulemaking does not change VA's policy regarding small businesses and does not have a significant economic impact to individual businesses. The overall impact of the proposed rule would be of benefit to small businesses owned by Veterans or service-disabled Veterans as the VAAR is being updated to remove outdated guidance and to clarify and simplify the acquisition regulations VA's contractors must comply with. VA estimates no substantial cost impact to individual businesses will result from these rule updates. In total, this rulemaking does not change VA's policy regarding small businesses, does not have a substantial economic impact to individual businesses, and does not significantly increase or decrease costs small business were already required to bear when performing contracts.

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

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

Denis McDonough, Secretary of Veterans Affairs, approved this document on October 27, 2022, and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs.

For the reasons set out in the preamble, VA amends 48 CFR chapter 8 as follows:

The Atlantic Surfclam and Ocean Quahog Fishery Management Plan (FMP) requires that NMFS issue notice in the Federal Register of the upcoming year's quota, even if the quota remains unchanged from the previous year. At its June 2022 meeting, the Mid-Atlantic Fishery Management Council recommended no change to the quota specifications for Atlantic surfclams and ocean quahogs for the 2023 fishing year. We are announcing 2023 quota levels of 3.4 million bushels (bu) (181 million L) for Atlantic surfclams, 5.36 million bu (288 million L) for ocean quahogs, and 100,000 Maine bu (3.52 million L) for Maine ocean quahogs. These quotas were published as projected 2023 limits in the Federal Register on May 13, 2021 (86 FR 26186). This rule establishes these quotas as unchanged from 2021 and final.

The regulations at 50 CFR 648.75(b)(3) allow the Regional Administrator to annually suspend the minimum size limit for Atlantic surfclams unless discard, catch, and biological sampling data indicate that 30 percent or more of the Atlantic surfclams have a shell length less than 4.75 inches (in) (121 millimeters (mm)) and the overall reduced size is not attributable to harvest from beds where growth of the individual clams has been reduced because of density-dependent factors. The default minimum size limit is intended to prevent the fishery from harvesting too many small clams that it could harm the overall population. The size limit is unnecessary if small clams are not a significant portion of overall catch. At its June 2022 meeting, the Council reviewed recent developments in the fishery and recommended the Regional Administrator once again suspend the minimum size limit for Atlantic surfclams for the 2023 fishing year. Commercial surfclam data for 2022 indicated that 27.6 percent of the overall commercial landings were composed of surfclams that were less than the 4.75-in (121-mm) default minimum size.

Based on the information available, the Regional Administrator concurs with the Council's recommendation and is suspending the minimum size limit for Atlantic surfclams for the upcoming fishing year (January 1 through December 31, 2023).

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the Assistant Administrator for Fisheries, NOAA, has determined that this rule is consistent with the Atlantic Surfclam and Ocean Quahog FMP, other provisions of the Magnuson-Stevens Act, and other applicable law.

This action does not introduce any new reporting, recordkeeping, or other compliance requirements. This rule does not duplicate, overlap, or conflict with other Federal rules.

Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive prior notice and an opportunity for public comment on this action, as notice and comment would be unnecessary and contrary to the public interest. This rule is routine and formulaic. The public was given the opportunity to comment on the proposed rule for the 2021-2026 specifications (86 FR 9901, February 17, 2021), including the projected 2023 specifications, which remain unchanged. Delaying this action would prolong public uncertainty about the final quotas for the 2023 fishing year, and could delay issuance of 2023 ITQ cage tags to quota shareholders. The public and industry participants expect this action because we previously alerted the public that we would conduct this review in interim years of the multi-year specifications and announce the final quotas before or as close as possible to the January 1 start of the fishing year. This rule could not be published earlier because of the time necessary to collect data and conduct the analysis to support suspending the minimum size limit for Atlantic surfclams.

This rule is exempt from the requirements of Executive Order 12866.

Because prior notice and opportunity for public comment are not required for this rule by 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., are inapplicable. Accordingly, no Regulatory Flexibility Analysis is required and none has been prepared.