On September 29, 2023, in 88 FR 67117, the FLRA's three-Member, decisional component (the Authority) proposed to amend 5 CFR 2429.24(a) to revise the rules regarding filing documents in cases before the Authority (as distinct from the FLRA's General Counsel, Regional Directors, or Administrative Law Judges). Specifically, the Authority proposed to revise 5 CFR 2429.24(a) to eliminate the references to parties being: (1) able to file documents with CIP between 9 a.m. and 5 p.m. E.T., Monday through Friday (except federal holidays), and (2) required to file any hand-delivered documents by 5 p.m. E.T. Instead, the proposed revisions would specify that: (1) to file documents with CIP by personal delivery, parties must schedule an appointment at least one business day in advance by calling CIP; and (2) personal delivery will be accepted by appointment Monday through Friday (except federal holidays). In addition, the proposed revisions would: (1) update CIP's phone number to (771) 444-5805; (2) delete the period after “NW” in CIP's mailing address; (3) change the term “hand delivery” to “personal delivery”; (4) change the eFiling deadline from “midnight E.T.” on the due date to “11:59 p.m.” on the due date; and (5) in the second-to-last sentence of the regulation, change “federal legal documents” to “federal legal holidays.”

The FLRA invited written comments on the proposed rule, stating that any such comments must be received by the FLRA by October 30, 2023. The FLRA received only two comments: one from an individual, and the second from a union.

The individual commenter states that it is unclear from the proposed rule whether the Authority intends for the new eFiling deadline to be 11:59 p.m. “Eastern Time.” The commenter notes that the current version of 5 CFR 2429.24(a) specifies that the deadline is Eastern Time, but the proposed rule does not do so.

The proposed rule's deletion of Eastern Time in connection with eFiling was inadvertent. Therefore, the final rule revises the proposed rule to specify that the 11:59 eFiling deadline is 11:59 p.m. Eastern Time.

The union commenter opposes the proposed rule's requirement that parties who wish to file documents with CIP in person must schedule an appointment at least one business day in advance. First, the commenter notes that, in the Federal Register notice for the proposed rule, the Authority relied on the fact that no parties filed documents in person since in-person filing was reinstated on May 30, 2023. According to the union commenter, the FLRA did not publicize or tell parties about the May 30, 2023 reinstatement of in-person filing, so the absence of in-person filers since that date does not support the proposed rule. Second, the union commenter claims that the National Labor Relations Board (NLRB) allows in-person filing without an appointment, and there is no justification for the FLRA having a different rule. Third, the union commenter asserts that recent Executive Branch policies and proposed federal legislation are aimed at increasing in-person services at federal agency offices, and the proposed rule would conflict with those aims.

In response to the union commenter's first assertion, even assuming parties were unaware of the resumption of in-person-filing availability on May 30, 2023—despite the FLRA's Web site being updated to prominently note that resumption—that does not undercut the Authority's broader point that, even pre-pandemic, in-person filing was rare. In fact, even since the proposed rule was published in the Federal Register —which was also announced by a press release the same day—CIP has received only two in-person filings. As such, the alleged absence of publicity surrounding the resumption of in-person filing does not undercut the notion that in-person filing is rarely used.

With regard to the assertions concerning the NLRB, as an initial matter, it is not clear that the filing practices of the FLRA should necessarily mirror those of the NLRB—a much larger agency, with far more staff and regulated parties, than the FLRA. In any event, the NLRB's filing regulations do not set forth standard hours when parties may file in person—and, in fact, they generally require parties to eFile documents. See 29 CFR 102.5(c) (specifying that, “[u]nless otherwise permitted under this section, all documents filed in cases before the Agency must be filed electronically (`E-Filed') on the Agency's website”). In this regard, NLRB guidance provides that in-person filing is permitted “only if the filer does not have access to the means for filing electronically or filing electronically would impose an undue burden.” NLRB, Guide to Board Procedures 3 (2023), https://www.nlrb.gov/sites/default/files/attachments/pages/node-174/guide-to-board-procedures-2023.pdf. The FLRA's proposed requirement to schedule in-person filing in advance—which does not in any way limit which parties may engage in such filing—is arguably even less restrictive than the NLRB's requirements.

Finally, we acknowledge that there recently has been an increased focus on the resumption of certain in-person services at federal agency offices. However, nothing in the proposed rule would eliminate in-person filing; it would simply require one business day's advance notice in order to engage in such filing. Further, the resumption of certain in-person services does not undercut agencies' and courts' general trend of favoring eFiling over in-person filing, based on eFiling's numerous advantages for both parties and agencies. See, for example, IRS, Exempt Organizations e-file: Benefits of e-file, available at https://www.irs.gov/charities-non-profits/exempt-organizations-e-file-benefits-of-e-file.

In addition, as discussed in greater detail in the Federal Register notice for the proposed rule, there are multiple reasons for this proposed change. Specifically: even before the COVID-19 pandemic, it was rare for parties to file with CIP in person; there are multiple other, easily accessible methods of filing documents with CIP; the FLRA desires to strongly encourage parties to use eFiling whenever possible; and CIP has limited staffing, which could become even more limited if budgetary or other considerations preclude the FLRA from filling positions as they become vacant.

For these reasons, the Authority has not modified the proposed rule's requirement for parties to schedule in-person filing at least one business day in advance. Therefore, with the one minor modification discussed above—adding “Eastern Time” to the eFiling deadline—the Authority adopts the rule as originally proposed.

Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b), the Chairman of the FLRA has determined that this rule would not have a significant impact on a substantial number of small entities, because this rule would apply only to Federal agencies, Federal employees, and labor organizations representing those employees.

The FLRA is an independent regulatory agency and thus is not subject to the requirements of E.O. 12866 (58 FR 51735, Sept. 30, 1993).

The FLRA is an independent regulatory agency and thus is not subject to the requirements of E.O. 13132 (64 FR 43255, Aug. 4, 1999).

This rule would not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and it would not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

This action is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule would not result in an annual effect on the economy of $100,000,000 or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based companies to compete with foreign-based companies in domestic and export markets.

The rule contains no additional information collection or record-keeping requirements under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501, et seq.

For the reasons stated in the preamble, the FLRA amends 5 CFR part 2429 as follows:

In the face of significant and unpredictable challenges around the world, including impacts to international commodities markets in the wake of ongoing conflicts, a changing climate, an increasing agricultural trade deficit, and increased competition in U.S. export markets, USDA recognizes that additional investments in market development are needed to keep U.S. agriculture ahead of the competition. Consistent with a bipartisan request from the Senate Committee on Agriculture, Nutrition, and Forestry, USDA is utilizing CCC funds to implement the RAPP program to address the challenges related to trade impacting U.S. farmers and the international community. Continuing the work started under the Agricultural Trade Promotion Program (ATP), RAPP funding will ensure that U.S. agricultural industries are able to sustain the relationships key to effective market development and will enable exporters to break into new markets and increase market share in growth markets. RAPP Participants may receive assistance for either generic or brand promotion activities as well as assistance to conduct activities to address existing or potential non-tariff barriers to trade.

The Foreign Agricultural Service (FAS) will administer the RAPP on behalf of the CCC. Specific program requirements and details for applying for assistance under the RAPP will be set forth in NOFOs announced through the Grants.gov website.

As with ATP, the RAPP is a cost-share program that is designed to reimburse nonprofit U.S. agricultural trade organizations, nonprofit state regional trade groups, state agencies, U.S. agricultural cooperatives, and other entities that conduct approved foreign market promotion activities. When considering applicant organizations, the CCC will give priority to organizations that have the broadest producer representation and affiliated industry participation of the commodity being promoted. Eligible activities can be generic or branded in nature. In order to be eligible for RAPP assistance, U.S. for-profit entities shall be limited to those whose size does not exceed 300 percent of the small business size standards established for their particular industry and published at 13 CFR part 121, Small Business Size Regulations. Eligible for-profit entities may participate in a RAPP Participant's brand promotion program. Any RAPP Participant that operates a brand promotion program will be required to establish brand program operational procedures. A RAPP Participant shall publicize its RAPP program and make participation possible for commercial entities throughout the relevant commodity sector or, in the case of State Regional Trade Groups (SRTGs), throughout the corresponding region.

CCC will use the Unified Export Strategy (UES) internet-based system to receive RAPP applications and to receive reimbursement requests from RAPP Participants. This is the system used for the ATP and similar CCC programs. Details about the application requirements and process will be announced in the RAPP NOFOs.

CCC will evaluate each eligible proposal against the factors described in the appropriate NOFO to identify those applications that it considers to best meet the criteria and objectives outlined in the NOFO. Based on its review and evaluation, CCC will, subject to the availability of funds, recommend an appropriate funding level for each proposal and submit the proposals and funding recommendations to the appropriate officials for decision.

As with the ATP program, participants in the RAPP will be required to contribute a total amount in goods, services, and/or cash equal to at least 10 percent of the value of resources to be provided by the CCC for all generic promotion activities proposed to be undertaken by the RAPP Participant. Brand participants will also be required to contribute an amount in goods, services, and/or cash equal to at least 50 percent of the cost of all brand promotion activities they undertake under the RAPP.

This rule includes updated lists of expenses eligible and ineligible for reimbursement under the RAPP. Procedures for requesting reimbursement for eligible expenditures, or, if appropriate, for advances of program funds, are described in the regulation. Because it is critical that program funds are managed and accounted for properly and are focused on achieving results, paragraphs regarding financial management, reporting on outcomes that tie assistance directly to increased trade, evaluation, and compliance review are included. Finally, to ensure that funds provided under the RAPP are expended in a cost-effective manner and are protected from fraud, CCC carries forward the provisions regarding ethical conduct, contracting, and anti-fraud requirements from the existing regulation.

This rule is effective upon publication in the Federal Register . The Administrative Procedure Act (APA) (5 U.S.C. 553) provides that notice and comment and a 30-day delay in the effective date of the rule are not required when the rule involves specified actions, including matters relating to grants or benefits. This rule establishes procedures and conditions related to the provision of assistance to entities conducting activities that promote U.S. agricultural commodities in foreign markets and thus falls within the exemption to the public participation requirements under the APA. Although not required by the APA, CCC has chosen to accept comments on the rule and may consider the comments when determining whether any changes to the regulations are warranted in the future.

Executive Order 12866, “Regulatory Planning and Review,” and Executive Order 13563, “Improving Regulation and Regulatory Review,” direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasized the importance of quantifying both costs and benefits of reducing costs, of harmonizing rules, and of promoting flexibility.

This rule has been determined to be non-significant and, therefore, was not reviewed by the Office of Management and Budget (OMB).

The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by the SBREFA of 1996 (SBREFA, Pub. L. 104-121), generally requires an agency to prepare a regulatory flexibility analysis of any rule whenever an agency is required by the APA or any other law to publish a proposed rule, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. This rule is not subject to the Regulatory Flexibility Act because the CCC is not required by the APA or any other law to publish a proposed rule for this rulemaking. This rule is not a major rule under SBREFA. SBREFA generally requires that an agency delay the effective date of a major rule for 60 days from the date of publication to allow for congressional review.

The CCC has determined that the RAPP does not constitute a major State or Federal action that would significantly affect the human or natural environment. Consistent with the National Environmental Policy Act (NEPA) (42 U.S.C. 4321-4347), no environmental assessment or environmental impact statement will be prepared for this regulatory action.

Executive Order 12372, “Intergovernmental Review of Federal Programs,” requires consultation with State and local officials that would be directly affect by proposed Federal financial assistance. The objectives of the Executive order are to foster an intergovernmental partnership and a strengthened federalism, by relying on State and local processes for State and local government coordination and review of proposed Federal financial assistance and direct Federal development. This program is subject to the requirements of Executive Order 12372, “Intergovernmental Review of Federal Programs,” as implemented under USDA's regulations at 2 CFR part 415, subpart C.

This rule has been reviewed under Executive Order 12988, “Civil Justice Reform.” This rule will not preempt State or local laws, regulations, or policies unless they represent an irreconcilable conflict with this rule. The rule will not have retroactive effect. Before any judicial action may be brought regarding the provisions of this rule, the administrative appeal provisions in this part must be exhausted.

This rule has been reviewed under Executive Order 13132, “Federalism.” The policies contained in this rule do not have any substantial direct effect on States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, except as required by law. Nor does this rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with the States is not required.

This rule has been reviewed for compliance with Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments.” Executive Order 13175 requires Federal agencies to consult and coordinate with tribes on a government-to-government basis on policies that have Tribal implications, including regulations, legislative comments, proposed legislation, and other policy statements or actions that 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.

FAS has assessed the impact of this rule on Indian tribes and determined that this rule does not, to the knowledge of FAS, have Tribal implications that required Tribal consultation under Executive Order 13175. If a tribe requests consultation, FAS will work with the USDA Office of Tribal Relations to ensure meaningful consultation is provided where changes, additions, and modifications identified herein are not expressly mandated by Congress.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 104-4) requires Federal agencies to assess the effects of their regulatory actions on State local, and Tribal governments or the private sector. Agencies generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with Federal mandates that may result in expenditures of $100 million or more in any 1 year for State, local, or Tribal governments, in the aggregate, or to the private sector. UMRA generally requires agencies to consider alternatives and adopt the more cost effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates, as defined in Title II of UMRA, for State, local, and Tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.

The title and number of the Assistance Listing found in the System for Award Management to which this rule applies is “Regional Agricultural Promotion Program”—10.618.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), this rule does not change the information collection approved by OMB under control number 0551-0049.

Section 11(k) of the Federal Reserve Act authorizes the Board to delegate, by published order or rule and subject to the Administrative Procedure Act, any of its functions, other than those related to rulemaking or pertaining principally to monetary and credit policies, to one or more administrative law judges, members or staff of the Board, or the Reserve Banks. 1 The Board has delegated authority to Board members (in their individual capacity and as chairs of committees of the Board), Board staff, and the Federal Reserve Banks to take certain actions under the various statutes that the Board administers. The Board's Rules Regarding Delegation of Authority (delegation rules) implement section 11(k) of the Federal Reserve Act and enumerate the actions that the Board has determined to delegate. By delegating actions that do not raise significant legal, supervisory, or policy issues, the Board can respond more efficiently to applications, requests, and other matters.

The Board published a final rule in 2022 that comprehensively revised the delegation rules. 2 The Board is amending the delegation rules to publish delegations of authority previously approved by the Board and make certain technical corrections.

For the reasons stated in the preamble the Board of Governors of the Federal Reserve System amends 12 CFR part 265 as follows:

Section 111 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) established the Financial Stability Oversight Council (the Council). 1 The statutory purposes of the Council are “(A) to identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace; (B) to promote market discipline, by eliminating expectations on the part of shareholders, creditors, and counterparties of such companies that the Government will shield them from losses in the event of failure; and (C) to respond to emerging threats to the stability of the United States financial system.”  2

The Council's duties under section 112 of the Dodd-Frank Act reflect the range of approaches the Council may consider to respond to potential threats to U.S. financial stability, which include collecting information from regulators, requesting data and analyses from the Office of Financial Research (OFR), monitoring the financial services marketplace and financial regulatory developments, facilitating information sharing and coordination among regulators, recommending to the Council member agencies general supervisory priorities and principles, identifying regulatory gaps, making recommendations to the Board of Governors of the Federal Reserve System (Federal Reserve) or other primary financial regulatory agencies, 3 and designating certain entities or payment, clearing, and settlement activities for additional regulation.

Section 113 of the Dodd-Frank Act authorizes the Council to determine that a nonbank financial company will be subject to supervision by the Federal Reserve and prudential standards and lists the considerations that the Council must take into account in making such a determination. Designation  4 is authorized if the Council determines that either (1) material financial distress at the nonbank financial company could pose a threat to U.S. financial stability (referred to as the “first determination standard”), or (2) the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the nonbank financial company could pose a threat to U.S. financial stability (the “second determination standard”). 5 Under section 165 of the Dodd-Frank Act, the Federal Reserve is responsible for establishing the prudential standards that will be applicable to a nonbank financial company subject to a Council designation under section 113 of the Dodd-Frank Act.

The Council has previously issued rules, guidance, and other public statements regarding its process for evaluating nonbank financial companies for potential designation. On April 11, 2012, the Council issued a final rule at 12 CFR 1310.1 through 23 (the 2012 Rule) setting forth certain procedures related to designations under section 113 of the Dodd-Frank Act. Attached to the 2012 Rule as Appendix A was interpretive guidance (the 2012 Interpretive Guidance) setting forth additional information regarding the manner in which the Council made determinations under section 113 (together with the 2012 Rule, the 2012 Rule and Guidance). On February 4, 2015, the Council adopted supplemental procedures (the 2015 Supplemental Procedures) to the 2012 Rule and Guidance. 6 On March 13, 2019, the Council amended the 2012 Rule by adding a new provision at 12 CFR 1310.3. 7 On December 30, 2019, the Council replaced the 2012 Interpretive Guidance with revised interpretive guidance (the 2019 Interpretive Guidance). 8 In connection with the adoption of the 2019 Interpretive Guidance, the Council rescinded the 2015 Supplemental Procedures. 9

On April 21, 2023, the Council approved proposed interpretive guidance (the Proposed Guidance) to revise and update the 2019 Interpretive Guidance. 10 The comment period was initially set to close after 60 days; however, in response to public requests for additional time to review and comment on the Proposed Guidance, the Council extended the comment period by 30 days. 11 The comment period closed on July 27, 2023.

The Council received 47 comment letters in response to the Proposed Guidance, of which 13 were from various advocacy groups, 11 were from companies or trade associations in the investment management industry, six were from trade associations in the insurance industry, seven were from other companies or trade associations, five were from current or former state or federal government officials, two were from groups of academics, and three were from other individuals. 12

Having carefully considered the comments it received, at a public meeting on November 3, 2023, the Council adopted the final interpretive guidance below (the Final Guidance), which replaces in its entirety the 2019 Interpretive Guidance, found at Appendix A to 12 CFR part 1310. The Council's rules at 12 CFR 1310.1 through 23 remain in effect.

Also on November 3, 2023, the Council adopted a separate document explaining the Council's substantive approach to identifying, assessing, and responding to certain potential risks to U.S. financial stability (the Analytic Framework). The Analytic Framework describes the Council's analytic approach without regard to the origin of a particular risk, including whether the risk arises from widely conducted activities or from individual entities, and regardless of which of the Council's authorities may be used to address the risk. The Council approved a proposed version of the Analytic Framework (the Proposed Analytic Framework) on April 21, 2023. 13 The public comment period for the Proposed Analytic Framework ran concurrently with the comment period for the Proposed Guidance, including the 30-day extension, and most of the comment letters noted above also addressed the Proposed Analytic Framework.

With the Final Guidance, the Council aims to establish a durable process for the Council's use of its nonbank financial company designation authority, maintain rigorous procedural protections for nonbank financial companies reviewed for potential designation, and remove unwarranted hurdles to designation imposed by the 2019 Interpretive Guidance. Congress created the designation authority based on lessons learned from the financial crisis in 2007-09, when financial distress at large, complex, highly interconnected, highly leveraged, and inadequately regulated nonbank financial companies devastated the financial system. While the financial system, market participants, and risks can rapidly evolve, it remains the Council's statutory responsibility not only to monitor the financial services marketplace but to take action to respond to emerging threats to U.S. financial stability. 14

Under the Final Guidance, the Council's designation process is built on transparency and engagement with a company under review and its existing primary financial regulator (if any) during the designation process. Through this process, any Council designation of a nonbank financial company will be based on data-driven analysis that reflects the distinctive aspects of the company, its market, and its existing regulation. Further, the approach adopted in the Final Guidance does not make designation the Council's default method of addressing risks to financial stability—and the Final Guidance does not eliminate the Council's use of an activities-based approach to address risks to financial stability when the Council finds it to be appropriate. Instead, the Final Guidance puts the Council's designation authority on equal footing with its other powers. The Council expects to continue addressing most risks through its collaboration with primary financial regulators.

The Final Guidance removes three significant but inappropriate prerequisites to the exercise of the Council's nonbank financial company designation authority that were created by the 2019 Interpretive Guidance. In particular, the 2019 Interpretive Guidance stated that before considering a nonbank financial company for potential designation under section 113 of the Dodd-Frank Act, the Council would exhaust all available alternatives by prioritizing an “activities-based approach,” perform a cost-benefit analysis, and assess a company's likelihood of material financial distress. As explained below, the Council has determined that these steps are not legally required, are not useful or appropriate, and would unduly hamper the Council's ability to use the statutory designation authority in relevant circumstances:

• By prioritizing other approaches to mitigating risks to financial stability, the 2019 Interpretive Guidance generally allowed the Council to consider a nonbank financial company for potential designation only after the Council completed a multi-step process in which the Council would wait for existing regulators to address identified risks to financial stability, obstructing the Council's ability to respond to risks to financial stability in a timely fashion.

• Cost-benefit analysis is not in the list of considerations Congress specifically required the Council to consider in a designation, and due to the unpredictability of financial crises, such an analysis is not reasonably estimable, useful, or warranted in this context.

• Assessing a nonbank financial company's likelihood of material financial distress is not among the tasks Congress set for the Council and could undermine financial stability by spurring a run on a company that is designated or under review for potential designation.

Unlike the 2012 Interpretive Guidance and the 2019 Interpretive Guidance, the Final Guidance is focused on the Council's procedures for nonbank financial company designations. It therefore does not discuss the substantive analytic factors the Council applies in its assessments of nonbank financial companies. The Council has issued a separate document—the Analytic Framework—regarding its approach to identifying, assessing, and responding to potential risks to U.S. financial stability. The Analytic Framework provides additional public transparency into how the Council expects to consider any type of risk to financial stability, regardless of which of the Council's authorities may be used to address the risk.

Similarly, the Final Guidance does not include the 2019 Interpretive Guidance's definition of “threat to the financial stability of the United States” as requiring “severe damage on the broader economy.”  15 The Council has determined that this definition was overly restrictive and in conflict with the Council's statutory purpose “to respond to emerging threats to the stability of the United States financial system.”  16 Instead, as described in detail below, the Analytic Framework states that events or conditions that could substantially impair the financial system's ability to support economic activity would constitute a threat to financial stability.

With respect to the Council's procedures for nonbank financial company designations and annual reevaluations of designations, the Final Guidance makes only minor changes to the 2019 Interpretive Guidance. Among other things, the Final Guidance continues to provide for significant engagement and communication between the Council and a nonbank financial company under review for potential designation, and with the company's primary financial regulator. In addition to these pre-existing features, the Final Guidance provides further detail on how the Council expects to identify nonbank financial companies for preliminary evaluation to assess the risks they could pose to U.S. financial stability. The Council believes that under these procedures, the designation process will be rigorous and transparent. 17

As described in the Final Guidance, 18 the Council expects generally to follow a two-stage process in considering a nonbank financial company for potential designation under section 113 of the Dodd-Frank Act. This process is designed to enable substantial engagement with the company under consideration and its primary financial regulator, 19 in recognition of the primary financial regulator's knowledge regarding the company and its market. The Final Guidance does not prioritize the designation authority above other approaches to mitigating risks to financial stability; instead, the Council's process explicitly contemplates that identified risks may be addressed through alternatives to designation, such as nonbinding recommendations to primary financial regulatory agencies. The Council does not expect that every company that comes under review will progress to a proposed or final designation, and it is the Council's goal that companies will have ample opportunities to provide relevant information to and engage with the Council as part of a transparent and durable designation process.

The initial identification of companies that the Council may review in the first stage of the designation process (Stage 1) is a function of the Council's staff-level committees, which are responsible for monitoring and analyzing financial markets, financial companies, the financial system, and issues related to financial stability. These committees monitor the financial system and report to the Council's Deputies Committee  20 regarding potential risks to U.S. financial stability that they identify. If an identified risk relates to one or more nonbank financial companies that may merit review, the Council may review those companies in Stage 1. Alternatively, the Deputies Committee may direct a staff-level committee or working group to further assess the identified risks or direct the Council's Nonbank Financial Companies Designations Committee  21 to conduct an initial analysis of one or more companies based on the risk-assessment approach described in the Analytic Framework. Following any such analysis, the Council may review one or more companies in Stage 1.

Stage 1 involves a preliminary analysis of nonbank financial companies to assess the risks they could pose to U.S. financial stability. Review in this stage is based on quantitative and qualitative information available to the Council primarily through public and regulatory sources and includes consultation with the company's primary financial regulator (if any), as appropriate. Among other procedural safeguards, the Final Guidance states that the company is notified of its consideration in Stage 1 at least 60 days before the Council votes on whether to evaluate the company further in the second stage of review (Stage 2). This provides the company with an opportunity voluntarily to submit relevant information to the Council and to meet with staff who are leading the Council's analysis. A nonbank financial company that is identified for review in Stage 2 will receive an additional notice that it is being considered for a proposed designation. The Council wishes to underscore, as the Final Guidance notes, that its work in Stage 1 is preliminary. A decision to commence review of a company in Stage 1, or to continue a review in Stage 2, does not constitute a final decision regarding whether the company should be designated.

Stage 2 involves an in-depth review of a nonbank financial company using information collected directly from the company through the OFR, as well as public and regulatory information. Stage 2 involves significant engagement with the company under review and its primary financial regulator. Following notice of a Council decision to evaluate the company in Stage 2, the Council will submit to the company a request that it provide information that the Council deems relevant to the Council's evaluation. The nonbank financial company will also be provided an opportunity to submit any other written information it deems relevant. The Council will make staff representing its members available to meet with the representatives of any company that enters Stage 2, to explain the evaluation process and the framework for the Council's analysis, and the Council expects that its Deputies Committee will also grant a request to meet with a company in Stage 2. Further, communication during Stage 2 will be two-way: For example, if the analysis in Stage 1 has identified specific aspects of the company's operations or activities as the primary focus for the Council's evaluation, staff will notify the company of those specific aspects, enabling the company to understand and provide information relevant to those concerns. The Council will also notify any nonbank financial company in Stage 2 if the company ceases to be considered for a determination.

At the conclusion of Stage 2, the Council may consider whether to make a proposed determination with respect to the nonbank financial company (a Proposed Determination) through a process that emphasizes transparency through additional notice, engagement, and procedural safeguards. A Proposed Determination requires a vote of two-thirds of the voting members of the Council then serving, including an affirmative vote by the Chairperson of the Council, and cannot be delegated by the Council. 22 Following a Proposed Determination, the Council will issue a written notice of the Proposed Determination to the nonbank financial company, which will include an explanation of the basis of the Proposed Determination. 23 Promptly after the Council votes to make a Proposed Determination regarding a company, the Council will also provide the company's primary financial regulator with the written explanation of the basis of the Council's Proposed Determination (subject to appropriate protections for confidential information). A nonbank financial company that is subject to a Proposed Determination may request a hearing to contest the Proposed Determination in accordance with section 113(e) of the Dodd-Frank Act and applicable Council procedures.

After making a Proposed Determination and holding any written or oral hearing if requested, the Council may vote to make a final determination that the company will be subject to supervision by the Federal Reserve and prudential standards (a Final Determination). Like a Proposed Determination, a Final Determination requires a vote of two-thirds of the voting members of the Council then serving, including an affirmative vote by the Chairperson of the Council, and cannot be delegated by the Council. 24 If the Council makes a Final Determination, it will provide the company with a written notice of its Final Determination, including an explanation of the basis for the Council's decision. 25 The Council will also provide the company's primary financial regulator with the written explanation of the basis of the Council's Final Determination (subject to appropriate protections for confidential information) and will publicly release the explanation of the Council's basis for the Final Determination. 26

After the Council makes a Final Determination regarding a nonbank financial company, the Council intends to continue to encourage the company or its regulators to take steps to mitigate the potential risks identified in the Council's written explanation of the basis for its Final Determination. The Council is required to reevaluate each Final Determination at least annually and to rescind the designation if the Council determines that the company no longer meets the statutory standards for designation under section 113 of the Dodd-Frank Act. 27 The annual reevaluation process is a key mechanism through which a company's designation may be rescinded if the company has mitigated the threat that its material financial distress or activities could pose to U.S. financial stability. Moreover, once every five years, each nonbank financial company subject to a Final Determination will have an opportunity for an oral hearing before the Council at which the company can contest the designation.

Numerous public comments on the Proposed Guidance supported the proposed approach of maintaining certain procedural steps that were set forth in the 2019 Interpretive Guidance, including the two-stage designation process, extensive engagement by the Council and staff with companies under review and their primary financial regulators, and the Council's annual reevaluations of previous designations. Some commenters stated that the two-stage process, including notice and opportunities for engagement between the Council and the company under review and its primary financial regulator, provides a balanced and transparent approach to designation. Others expressed support for specific aspects of the Proposed Guidance. For example, one commenter stated that the Council should retain the ability to consider companies and their subsidiaries either together or separately for designation because modern risk management emphasizes the importance of understanding and managing a firm's risks holistically, across the entire enterprise.

Some commenters noted that the Proposed Guidance would increase public transparency regarding how companies are identified for review for a potential designation under section 113 of the Dodd-Frank Act. As discussed above, the Final Guidance provides additional detail, compared to the 2019 Interpretive Guidance, on how the Council expects to identify nonbank financial companies for preliminary review in Stage 1.

Other commenters suggested procedural changes to the designation process in the Proposed Guidance. For example, commenters suggested accelerating the designation process by combining Stage 1 and Stage 2 or by removing the opportunity in Stage 1 for a company under review to submit information to the Council. At least one commenter suggested adding a step in the process to determine whether existing regulation is insufficient to mitigate relevant threats to financial stability. Other commenters suggested expanding the notice periods provided in the Proposed Guidance, including a longer notice period in advance of a vote to commence Stage 2 or a 120-day period for a company to review all information before the Council  28 in advance of a Final Determination vote. The Council has declined to modify the stages or notice periods as proposed, which enable appropriate time periods for engaging with companies and their primary financial regulators while not unduly delaying the Council's ability to act to address a potential threat to U.S. financial stability. Further, the proposed two-stage process enables the Council gradually to intensify its review of a company, beginning with a review in Stage 1 based primarily on available information and potentially moving to in-depth engagement with the company and its primary financial regulator in Stage 2.

Some commenters requested that the Council further explain how companies under consideration in Stage 1 or Stage 2 can take steps that would avoid a designation. Others recommended that the guidance include language, found in the 2019 Interpretive Guidance, that the information the Council provides to a company during Stage 1 “may enable the company to act to mitigate any risks to financial stability and thereby potentially avoid becoming subject to a Council determination.”  29 The Council agrees that its engagement with a company under review may enable the company to act to mitigate the threat its material financial distress or activities could pose to financial stability. Further, if the company were to mitigate those risks before a Final Designation such that its material financial distress or activities could not pose a threat to financial stability, designation would not be warranted. Accordingly, the Council has added the language quoted above to the Final Guidance. Nonetheless, while the Council expects to communicate to companies under review regarding potential risks to financial stability that have been identified, in light of the importance of acting promptly to mitigate potential threats to financial stability, the Council does not expect to advise companies on actions they may take, delay the designation process in connection with potential actions that a company considers taking, or refrain from a proposed or final designation based on actions that a company has proposed but not completed.

With respect to the transparency measures embedded in the designation process under the Proposed Guidance, several commenters voiced support, including noting that the Council has continued the procedural transparency provided for in the 2019 Interpretive Guidance. For example, some commenters noted that the opportunities for engagement with the Council and submission of relevant information to it would facilitate transparency for companies under review. Other commenters specifically noted the importance of the Proposed Guidance's commitment to publicly release the written explanation of the Council's basis for a Final Determination.

Several commenters raised other transparency-related suggestions. Some stated that more information regarding how the Council considers threats to financial stability could give companies additional insight and help mitigate risks and avoid designation. As noted above, the Final Guidance states that engagement with a company under review may enable the company to mitigate any risks to financial stability. The Council's Analytic Framework also provides additional transparency into how the Council considers risks to financial stability. The Council believes that the numerous transparency mechanisms in the Final Guidance, which provide opportunities for engagement with companies under review and their primary financial regulators in Stage 1, in Stage 2, after a Proposed Determination, and after a Final Determination, provide an appropriate level of transparency to companies regarding the Council's reviews. Some commenters also noted that the Federal Reserve's establishment of prudential standards and an applicable supervisory regime only after a company's designation leaves opaque the consequences of designation. However, the division of authority between the Council and the Federal Reserve is an element of the statutory structure Congress adopted, not the Council's designation procedures. In developing prudential standards applicable to designated nonbank financial companies, the Federal Reserve is required to differentiate among companies on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial activities, size, and any other risk-related factors that the Federal Reserve deems appropriate. 30

Several commenters suggested the Council further emphasize the importance of the Council's engagement with primary financial regulators. The Proposed Guidance noted the Council's expectation of engagement with the primary financial regulator of a company under review at every stage of the designation process, and the Final Guidance maintains that commitment. The Council extensively engages with federal and state financial regulatory agencies to identify, assess, and respond to risks to financial stability. Nearly all the Council members represent such agencies. Many of the Council's statutory duties relate to promoting interagency collaboration, monitoring financial market developments, facilitating information sharing, and recommending that existing regulators address risks. 31 These activities comprise the foundation of the Council's work, and under the Final Guidance the Council will continue to work with regulators to identify, assess, and respond to risks to financial stability.

Other commenters suggested that the Council should notify a company's primary financial regulator that the company is under consideration in Stage 1. The Proposed Guidance and Final Guidance provide that a company's primary financial regulator will receive notice that the company is under review no later than when the company receives notice, which occurs no later than 60 days before the Council votes on whether to evaluate the company in Stage 2. In some cases, the primary financial regulator may receive earlier notice, including if the Council has been engaging with the primary financial regulator in previous efforts, unrelated to a potential designation, to evaluate the potential threat to financial stability, or if the primary financial regulator is among the Council's member agencies. In general, however, the Council believes that receiving notice simultaneously with the company during Stage 1 will enable the primary financial regulator appropriately to engage with the Council. 32

Other commenters suggested that the Council should not only engage with a company's primary financial regulator during the designation process, but should defer to the primary financial regulator's views. The Council firmly supports close engagement with primary financial regulators, but deferring to those regulators during a review under section 113 of the Dodd-Frank Act would not fulfill the Council's duty to determine whether a company under review meets the statutory standard for designation. The Council values the role of primary financial regulators due to their expertise regarding their regulated entities or markets, but Congress charged the Council with making determinations regarding threats to U.S. financial stability. The Council will engage with primary financial regulators and take their views into account, but ultimately the Council itself is responsible for determining whether a nonbank financial company meets the statutory standard for designation.

Some commenters called for additional clarity regarding the staff-level process for identifying nonbank financial companies for preliminary evaluation, or recommended that the Council adopt uniform quantitative thresholds, such as those in the 2012 Interpretive Guidance, to identify companies for review in Stage 1. The Council believes that the process set forth in the Final Guidance under “Identification of Company for Review in Stage 1” appropriately explains the Council's process. To the extent commenters seek information regarding the substantive analyses the Council and staff representing Council members expect to use in considering risks that relate to a company that may be considered in Stage 1, those analyses are described in the Analytic Framework. While quantitative thresholds such as those in the 2012 Interpretive Guidance  33 provide some clarity regarding companies that are most likely to come under review for potential designation, even that previous guidance noted that firms not captured by the thresholds could also be reviewed. Further, the Council believes that in light of the distinct nature of nonbank financial companies in diverse sectors of the financial system, uniform quantitative thresholds do not adequately align with the range of risks that nonbank financial companies' material financial distress or activities could pose. Because the activities of nonbank financial companies continuously evolve, uniform thresholds that are applicable across the financial sector may also become obsolete or less relevant to specific risks. The Council believes the approach described in the Final Guidance and the Analytic Framework will be more conducive to identifying firms for consideration for designation than uniform quantitative thresholds such as those that the Council applied in Stage 1 under the 2012 Interpretive Guidance.

A few commenters recommended that the guidance prohibit the Council from delegating its authority to commence a review of a company in Stage 1. 34 Some commenters further contended that a Council vote on commencing Stage 1 is legally required by either the Dodd-Frank Act or the Administrative Procedure Act (APA). However, while the Dodd-Frank Act specifies that the Council may not delegate its vote to designate a company, it contains no such requirement regarding earlier steps in the process, such as commencing Stage 1. Indeed, the statute itself does not contemplate any procedural safeguards for companies under review prior to a Council vote on a Proposed Determination; Stage 1 and Stage 2 are investigatory processes the Council has voluntarily adopted to enhance its analytic rigor and to promote transparency. The APA likewise contains no requirement related to the delegation of authority to commence Stage 1, which involves only the interlocutory decision to initiate an investigatory process and does not determine any rights or obligations of any person or entity or cause any legal consequences. The Final Guidance does not prohibit a delegation of the vote to commence Stage 1, but it also does not mandate such a delegation. Moreover, under the Final Guidance the Council itself will vote multiple times during the designation process, including voting on commencing Stage 2, a Proposed Designation, and a Final Designation, and potentially the determination that the administrative record in Stage 2 is complete.

The Council has issued a separate document—the Analytic Framework—that describes in detail the Council's approach for identifying, assessing, and responding to potential risks to financial stability. The Analytic Framework explains how the Council analyzes risks to financial stability, regardless of both the origin of a particular risk (including whether the risk arises from widely conducted activities or from individual entities) and which of the Council's authorities may be used to address the risk. The Council believes that the Analytic Framework provides new public transparency into how the Council expects to consider risks to financial stability. Among other things, the Analytic Framework interprets terms that broadly frame the Council's work, including “financial stability” and “threat to financial stability.” Therefore, while the 2012 Interpretive Guidance and the 2019 Interpretive Guidance discussed both nonbank financial company designation procedures and also substantive analytic factors and standards the Council applies in its assessment of nonbank financial companies, the Final Guidance is limited to the Council's procedures related to nonbank financial company designations. 35 The substantive factors the Council considers in analyzing potential risks to financial stability are addressed in the Analytic Framework. The Council believes that publishing its procedures for nonbank financial company designations (the Final Guidance) separately from its explanation of how it substantively assesses potential financial stability risks (the Analytic Framework) enhances public transparency and provides clarity regarding the range of authorities the Council uses to respond to risks. 36

The 2019 Interpretive Guidance described both the Council's procedures and analytic factors that the Council expected to apply in nonbank financial company designations. For example, that guidance described channels the Council deemed most likely to facilitate the transmission of the negative effects of a nonbank financial company's material financial distress or activities to other financial firms and markets. These descriptions do not appear in the Final Guidance and will not be included in Appendix A to 12 CFR part 1310. Instead, a description of the analyses the Council expects to apply, both within and outside of the designation context, appears in its separately issued Analytic Framework.

Some commenters supported separating the Council's guidance on the nonbank financial company designation process from the discussion of the substantive analyses it uses to consider risks to financial stability, citing, among other things, the procedural nature of the Proposed Guidance (and by extension, the Final Guidance) and the benefits of establishing a unified framework for considering risks without regard to their origin. Additional commenters noted that adopting a broadly applicable Analytic Framework will help the Council and regulators take a consistent approach, regardless of the origin of a particular risk, and will provide transparency that may help nonbank financial companies identify and mitigate risks that might otherwise lead the firms to be considered for potential designation under the Final Guidance.

Other commenters argued that the Final Guidance should retain a description of the Council's analysis specifically applicable to nonbank financial company designations. 37 As explained above, the Council believes that issuing separate documents regarding the procedural aspects of the nonbank financial company designation process and the Council's substantive analysis of risks to financial stability is the better approach. History illustrates that many factors, such as leverage, liquidity risk, and operational risk, regularly recur in different forms and under different conditions to generate risks to financial stability, and the Analytic Framework describes vulnerabilities that commonly generate or exacerbate risks to financial stability and the mechanisms by which negative effects can be transmitted more broadly. 38 The Council may consider those risk factors and transmission channels in activities-based reviews, entity-specific analyses, or other work. 39 Accordingly, the Council believes that describing these substantive analytic approaches broadly, rather than in a context limited to nonbank financial company designations, is most appropriate.

A number of commenters addressed the relationship between the statutory standards and statutory considerations for nonbank financial company designations, on one hand, and the vulnerabilities, sample metrics, and transmission channels described in the Analytic Framework, on the other hand. Some commenters questioned whether the Analytic Framework would displace the statutory standards and considerations established by section 113 of the Dodd-Frank Act, and other commenters asked for more detail regarding how the Council would apply the Analytic Framework's vulnerabilities, sample metrics, and transmission channels in the nonbank financial company designation context. Some commenters stated that the Proposed Analytic Framework and the Proposed Guidance did not provide enough detail on how the Council considers risks to financial stability.

With respect to nonbank financial company designations, the Dodd-Frank Act sets forth the standard for designations and certain specific considerations that the Council must take into account in making any determination under section 113. Consistent with the statutory requirements, the Council will apply the statutory standard and each of the 10 statutory considerations in evaluations of nonbank financial companies for potential designation.

At the same time, the Analytic Framework describes the Council's approach to evaluating potential risks to U.S. financial stability, including in the context of a review under section 113 of the Dodd-Frank Act. Accordingly, the vulnerabilities and transmission channels described in the Analytic Framework will inform the Council's assessment of the designation standard and mandatory considerations under section 113. As the Proposed Guidance and Final Guidance note, in the designation process, including to identify companies for potential review in Stage 1, the Council and its staff-level committees expect to consider the vulnerabilities, types of sample metrics, and transmission channels described in the Analytic Framework.

Other commenters asked for greater detail on how the Council would assess the vulnerabilities described in the Analytic Framework. As also discussed in the preamble to the Analytic Framework, the Council has addressed these requests by adding further details to several listed vulnerabilities in the Analytic Framework regarding the types of sample metrics the Council expects to use to assess them.

Some commenters noted that the vulnerabilities described in the Analytic Framework do not restate the 10 mandatory considerations in section 113 of the Dodd-Frank Act, and several objected to the vulnerabilities on that basis. A purpose of the Analytic Framework, however, is to provide transparency into how the Council considers risks to financial stability in general. Repetition of the statutory language applicable to nonbank financial company designations specifically would not further that goal. In the context of a review of a nonbank financial company under section 113 of the Dodd-Frank Act, the vulnerabilities and transmission channels described in the Analytic Framework clarify the statutory considerations. For example:

• The section 113 considerations of leverage and concentration are both listed as vulnerabilities in the Analytic Framework, and the Analytic Framework provides additional insight into these issues.

• The section 113 consideration of “the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies” may relate to the “interconnections” vulnerability and “exposures” transmission channel in the Analytic Framework, among others.

• The section 113 consideration of “the amount and types of the liabilities of the company, including the degree of reliance on short-term funding” may relate to a number of vulnerabilities in the Analytic Framework, including “leverage,” “liquidity risk and maturity mismatch,” “interconnections,” and “inadequate risk management,” as well as the “exposures” and “asset liquidation” transmission channels, among others.

• The section 113 considerations of “the importance of the company as a source of credit for households, businesses, and State and local governments and as a source of liquidity for the United States financial system” and “the importance of the company as a source of credit for low-income, minority, or underserved communities, and the impact that the failure of such company would have on the availability of credit in such communities” may relate to the “interconnections” and “concentration” vulnerabilities and “critical function” transmission channel in the Analytic Framework, among others.

• The section 113 consideration of “the extent to which assets are managed rather than owned by the company, and the extent to which ownership of assets under management is diffuse” may relate to the “interconnections” and “concentration” vulnerabilities in the Analytic Framework, among others, and each of the transmission channels.

• The section 113 consideration of “the degree to which the company is already regulated by 1 or more primary financial regulatory agencies” may relate to the vulnerability of “inadequate risk management,” among others, and each of the transmission channels in the Analytic Framework.

Although the Analytic Framework provides transparency into how the Council considers risks in general, the Council stresses that any determination regarding a nonbank financial company under section 113 of the Dodd-Frank Act will be made based on the statutory standard and considerations prescribed by Congress.

Several commenters suggested that the Council should state explicitly how it intends to weight the various statutory considerations or the vulnerabilities, including by stating whether some are more important than others. Some commenters stated that, unless the Council explains how it will consider relevant statutory considerations and vulnerabilities with sufficient detail to allow any nonbank financial company to avoid designation, the Final Guidance and Analytic Framework provide inadequate notice to companies under consideration. However, the Council must consider all of the mandatory considerations Congress set forth in section 113 of the Dodd-Frank Act, and the relevance of any particular consideration will depend on the relevant facts and circumstances. Thus, an explicit weighting scheme, determined outside the context of a specific designation, may not be suitable to analyze a range of companies or conditions. The Dodd-Frank Act itself provides notice to companies regarding the standards and considerations the Council will rely on to make determinations under section 113. Further, the Dodd-Frank Act provides that a nonbank financial company under consideration for designation must receive a written notice and an explanation of the basis of any Proposed Determination in advance of an opportunity for a hearing. 40 The Final Guidance (and Analytic Framework) go far beyond these statutory minimums to provide insight into how the Council considers risks in general and opportunities for a company under review to understand how the Council considers the threat the company's material financial distress or activities could pose to financial stability.

The Council notes that it routinely provides public transparency regarding how it assesses various particular financial stability risks. For example, since 2020, the Council has issued reports or statements regarding secondary mortgage market activities, 41 money market mutual funds, 42 climate-related financial risk, 43 nonbank financial intermediation, 44 and digital assets, 45 in addition to its annual reports, all of which detail the Council's views about various risks to financial stability and in many cases recommend steps for mitigation.

Under section 113 of the Dodd-Frank Act, the Council may designate a nonbank financial company if the Council determines that the company's material financial distress or activities “could pose a threat to the financial stability of the United States.”  46 Under the Proposed Guidance, the Council proposed to evaluate a “threat to the financial stability of the United States” with reference to the description of “financial stability” provided in the Proposed Analytic Framework. In response to public comments on this approach, the Council has included, in the Analytic Framework as adopted in final form, an interpretation of “threat to financial stability”  47 that is based on the interpretation of “financial stability” set forth in the Analytic Framework.

A number of commenters stated that they supported the Council's interpretation of “threat to the financial stability of the United States” in the 2019 Interpretive Guidance and recommended that the Council define this term in the Final Guidance. Some commenters urged the Council to retain the interpretation of this term set forth in the 2019 Interpretive Guidance or to revert to the interpretation in the 2012 Interpretive Guidance. 48 The Council believes the interpretation of “threat to the financial stability of the United States” in the 2019 Interpretive Guidance imposed an inappropriately high threshold, as discussed below. One commenter stated that the interpretation of “financial stability” in the Proposed Analytic Framework was at odds with the Financial Stability Board's interpretation of the term. The Council agrees that coordination with international bodies is important, but this consideration cannot supersede the Council's statutorily specified duties. In contrast, a number of commenters expressed concern that the 2019 definition eroded the Council's preventative role in risk mitigation. Some commenters stated that the 2019 definition effectively precluded the Council from fulfilling its statutory duties to respond to potential or emerging threats to financial stability. Some commenters noted that while the Dodd-Frank Act calls on the Council to determine whether there “could” be a threat to financial stability, the 2019 definition required the Council to determine that the economy “would” be severely damaged. 49

The Council appreciates this feedback and agrees that providing an interpretation of “threat to financial stability” provides clarity to nonbank financial companies and other stakeholders. As commenters noted, providing such an interpretation helps companies understand the substantive analytic approach the Council will use for designations under section 113 of the Dodd-Frank Act and provides an indication of the significance of a potential threat to financial stability that may warrant a designation under section 113.

The Proposed Analytic Framework interpreted “financial stability,” and the Council continues to view that interpretation as appropriate. The interpretation of “threat to financial stability” is, by its nature, closely related to the interpretation of “financial stability,” and can best be understood when considering these two terms together. Further, threats to financial stability will be evaluated within the framework of the Council's efforts to identify, assess, and respond to potential risks to financial stability, as set forth in the Analytic Framework. Therefore, the Analytic Framework offers the opportunity to situate the Council's interpretation of a threat to financial stability, whether posed by a nonbank financial company or originating from other sources, within the Council's broader approach.

As noted above, many commenters expressed varying views regarding whether the Council should maintain the definition of “threat to the financial stability of the United States,” found in the 2019 Interpretive Guidance, as “the threat of an impairment of financial intermediation or of financial market functioning that would be sufficient to inflict severe damage on the broader economy.”  50 The Council views the 2019 definition as unwarranted, and, as many commenters noted, the 2019 definition contrasts sharply with the statutory standard under section 113 of the Dodd-Frank Act. In light of the Council's statutory duty to act to address potential threats to financial stability, the purpose of the designation authority in mitigating the risks of financial crises, and the uncertainty inherent in predicting future financial market developments, requiring the Council to determine that a nonbank financial company's material financial distress or activities could inflict “severe damage” on the broader economy creates an unduly high threshold for Council action. The Council must be able to address threats that may impair the financial system before they are realized. The nature of financial crises is that the precise severity of harm posed by emerging threats may not be apparent until it is too late.

Some commenters stated that the interpretation of “financial stability” in the Proposed Analytic Framework would unduly lower the standard for designation under section 113 of the Dodd-Frank Act. The Council disagrees. The standard for designation is set forth in section 113 itself. The Analytic Framework's interpretation of “financial stability” does not expand the statutory standard. Rather, the Analytic Framework describes how the Council considers financial stability and threats to it. However, in response to public comments, the Council has included in the Analytic Framework, as adopted in final form, an interpretation of “threat to financial stability” that is based on the proposed interpretation of “financial stability” and that includes an indication of the significance of a threat to financial stability: Events or conditions that could substantially impair the ability of the financial system to support economic activity would constitute a threat to financial stability. This approach clarifies that a designation under section 113 would not be justified if a nonbank financial company's material financial distress or activities could only cause immaterial impairments of the financial system.

Some commenters indicated that the lack of concrete guidance on an interpretation of “threat to the financial stability of the United States” may dissuade nonbank financial companies from engaging in innovation and could lead to concentration risks. The Council notes that the definition of “threat to the financial stability of the United States” in the 2019 Interpretive Guidance did not specify particular activities or risk factors that could result in a designation under section 113 of the Dodd-Frank Act, but instead indicated the significance of a risk that could fall within the statutory standard for designation. The interpretation in the Analytic Framework, while reflecting different terminology than the 2019 Interpretive Guidance, maintains this type of approach. For nonbank financial companies that wish to understand the activities or business characteristics that could lead to a potential designation under section 113—or that wish to mitigate the risks their material financial distress or activities could pose to financial stability—the Council encourages those companies to consider how the vulnerabilities and transmission channels described in the Analytic Framework may apply to their companies.

The Final Guidance sets forth the process the Council expects to follow when considering nonbank financial companies for potential designation. The Council's analytic approach to identifying, assessing, and responding to risks to financial stability and the substantive considerations it will take into account in determining whether to designate a company for prudential standards and supervision by the Federal Reserve are set forth in section 113 of the Dodd-Frank Act and the Analytic Framework. Neither the Proposed Guidance nor the Final Guidance addresses the suitability of designation with respect to any particular entity, sector, or circumstances. Nevertheless, the Council received a number of comments regarding the suitability of designation for certain sectors, entities, or circumstances as well as the merits and disadvantages of entity-based designation in general.

Several commenters stated that designation under section 113 of the Dodd-Frank Act is not generally a suitable response to a threat to financial stability. Some stated that designation would result in regulation that may be ill-fitting for some types of nonbank financial companies, their products or services, or for financial risk channels that are different from those of bank holding companies. Some commenters stated that designations under section 113 are generally inadvisable because they would distort or disrupt markets or increase burdens for the designated nonbank financial company. However, the Dodd-Frank Act authorizes the Council to designate nonbank financial companies if their material financial distress or activities could pose a threat to financial stability. Further, the statute requires the Federal Reserve to adopt regulatory requirements applicable to a designated nonbank financial company and provides for the Federal Reserve to differentiate “among companies on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial activities (including the financial activities of their subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate.”  51 Therefore, the Council will not reject in advance the use of its statutory authority and is adopting the Final Guidance to explain the process it would use in considering nonbank financial companies for designation.

As noted above, Congress created the designation authority based on lessons learned from the financial crisis in 2007-09, when financial distress at large, complex, highly interconnected, highly leveraged, and inadequately regulated nonbank financial companies devastated the financial system. Potential risks to financial stability may often be addressed by existing regulators; however, if one or more nonbank financial companies, though their material financial distress or activities, could pose a threat to financial stability, Congress determined that designation of the relevant companies for Federal Reserve supervision and prudential standards is an appropriate response.

Some commenters stated that the Proposed Guidance does not set forth with sufficient clarity the analyses the Council will conduct during the designation process or the prudential standards that will apply after designation. While the Council appreciates these comments, the Final Guidance does not address the substantive analytic factors to be used in designations because the Council has issued a separate document—the Analytic Framework—regarding its analytic approach for identifying and assessing potential risks to U.S. financial stability more broadly. Further, as noted above, Congress assigned responsibility to the Federal Reserve to determine the prudential standards that apply to a designated nonbank financial company, although the Council can recommend standards.

Other commenters stated that the Council should make climate-related financial risks a factor in the designation analysis of a nonbank financial company that may be subject to physical or transition climate-related risks. The Council appreciates these comments and has published a number of analyses regarding the emerging and increasing risks that climate change poses to the financial system. However, the Council believes that potential risks related to climate change may be assessed under the vulnerabilities, sample metrics, and transmission channels in the Analytic Framework. For example, to the extent that climate-related financial risks could result in defaults on a company's outstanding obligations, those risks may be considered, in part, through the “interconnections” vulnerability and the “exposures” transmission channel.

Some commenters requested that the Council tailor the Final Guidance to one or more particular industries. As noted above, the Final Guidance does not set forth the substantive analyses the Council intends to apply in designation determinations. Instead, the Analytic Framework explains how the Council expects to consider any type of risk to financial stability, regardless of which of the Council's authorities may be used to address the risk. This approach seeks to strengthen the Council's ability to identify, assess, and respond to risks to U.S. financial stability, regardless of whether those risks originate from individual companies or widely conducted activities. The Council further notes that it expects to take into account relevant differences among various sectors, markets, or activities in the designation process, and to consult with a company's existing primary financial regulator. For example, the Council would take into account the extent to which assets are managed rather than owned by the company. 52

Finally, some commenters stated that entity-based designation is not suitable for their industry, including life insurers, property and casualty insurers, reinsurers, asset managers, nonbank mortgage lenders, nonbank mortgage servicers, mutual funds (including money market mutual funds), private funds, fintech companies (including certain payment providers), and issuers of asset-backed securities. These commenters indicated that the Council should exclude certain types of companies from potential review. As it did in the 2019 Interpretive Guidance, the Council declines to categorically exclude any particular financial sectors or types of nonbank financial companies from its assessment of potential threats to financial stability. The Council expects that any analysis of a nonbank financial company for potential designation will be tailored to reflect the unique attributes of the company and its existing regulatory framework, but assessing the suitability of designation of any class of nonbank financial companies would be premature. The substantive rigor under the Analytic Framework, the transparency under the Final Guidance, and the Council's adherence to the statutory requirements for designations will provide nonbank financial companies under review for potential designation with ample opportunities to raise risk-related factors during the Council's evaluation.

The Dodd-Frank Act gives the Council a range of authorities and broad discretion to determine how to respond to potential threats to U.S. financial stability, and the statute does not prioritize among the Council's authorities. For example, pursuant to section 113 of the Dodd-Frank Act, the Council may determine that an individual nonbank financial company will be subject to supervision by the Federal Reserve and prudential standards if the Council determines that the company's material financial distress or activities could pose a threat to financial stability. The Dodd-Frank Act also gives the Council various authorities to make nonbinding recommendations to regulators. 53

The Council's response to a particular risk to financial stability depends on the nature of the risk. For example, vulnerabilities originating from activities that are widely conducted in a particular sector or market may be well-suited for activity-based or industry-wide regulation. In contrast, in cases where the financial system relies on the ongoing financial activities of a small number of entities, such that the impairment of one of the entities could threaten financial stability, or where a particular financial company's material financial distress or activities could pose a threat to financial stability, entity-based action may be appropriate.

The Council's history provides instructive examples of the Council's use of different authorities and approaches for different types of risks. For example, the Council has taken an activities-based approach in recommending actions to address risks relating to crypto-assets, climate-related financial risks, and other topics. In 2012, the Council used an activities-based approach in issuing for public comment proposed recommendations for money market mutual fund reforms. Further, all of the Council's annual reports have identified and recommended actions regarding various risks to U.S. financial stability, 54 many in the form of an activities-based approach. The Council has also used entity-specific approaches in designating eight financial market utilities in 2012 under Title VIII of the Dodd-Frank Act and in designating four nonbank financial companies in 2013 and 2014 under section 113 of the Dodd-Frank Act.

However, the statute does not contemplate that one of the Council's authorities takes precedence over others, or that the Council must make recommendations to existing regulators before commencing a review of a company for potential designation. Financial crises have illustrated the importance of ensuring that the Council can exercise its authorities as needed. For example, the 2007-09 financial crisis showed that material financial distress at a small number of large, interconnected, and highly leveraged nonbank financial companies could threaten the stability of the U.S. financial system. Many commenters cited the failure of American International Group (AIG), where regulators had not identified or addressed the risk the company ultimately posed to financial stability. In light of the experience during the financial crisis in 2007-09, the Dodd-Frank Act recognizes that relying on existing regulators is not sufficient in some circumstances. Congress did not structure the Dodd-Frank Act to deprioritize the Council's nonbank financial company designation authority.

Nonetheless, the 2019 Interpretive Guidance stated that the Council would identify, assess, and address potential risks and threats to U.S. financial stability through a process that began with what it called an “activities-based approach.” Under that guidance, the activities-based approach meant the Council would rely on existing regulators to address potential threats to financial stability before the Council could consider designating a nonbank financial company. 55 The 2019 Interpretive Guidance further generally limited the use of designations under section 113 of the Dodd-Frank Act to cases where a potential risk or threat could not be adequately addressed by existing regulators. The Council received many comments favoring the prioritization of an activities-based approach over entity-specific designation, and many other comments advocating for the removal of the prioritization. The Final Guidance does not include the statement that the Council will first rely on existing regulators to address risks to financial stability before considering a nonbank financial company for potential designation.

The Council believes that rescinding the prioritization of an activities-based approach will better enable the Council to respond to threats to financial stability irrespective of their source. The Council agrees with the many commenters that stated that the Council should work closely with federal and state regulators. As discussed above and below, the Council engages extensively with federal and state financial regulatory agencies to identify, assess, and respond to risks to financial stability. The Council appreciates the expertise and experience, noted by many commenters, of primary financial regulators. The Council agrees with commenters that collaborating with existing regulators is critical. Under the Final Guidance, the Council will maintain its previous commitment to engaging extensively with existing regulators.

Some commenters noted that other bodies, including the Financial Stability Board, have focused in recent years on an activities-based approach, and encouraged the Council to do the same. Some commenters also stated that an activities-based approach is the most effective means of addressing risks to the financial system. The Council believes that the availability of its full range of authorities is important to enable it to address the full range of potential risks to financial stability. In many respects, the Council agrees with reasons identified by commenters for supporting efforts by existing regulators to address potential risks to financial stability. For example, as commenters noted, in appropriate circumstances such actions can enable the mitigation of risks that arise from the activities of numerous financial companies in a particular sector or from financial products that are offered on a widespread basis. Other commenters stated that addressing risks through generally applicable regulatory requirements may increase fairness and reduce competitive disadvantages by promoting consistent treatment across firms. Some commenters stated that action by existing regulators may also be quicker than a Council designation process followed by the adoption of prudential standards by the Federal Reserve. The Council appreciates these points.

Some commenters suggested that the prioritization of an activities-based approach is appropriate, in part, because the Council is not a primary financial regulator and should defer to the judgment of primary financial regulators. During any designation review, the Council will consider the “degree to which the company is already regulated by 1 or more primary financial regulatory agencies,”  56 but the statute does not prioritize this factor among the list of required considerations. While the Council engages routinely with primary financial regulators, as discussed above, Congress gave the Council itself the responsibility to reach judgments under the standard set forth in section 113 of the Dodd-Frank Act regarding potential threats to financial stability.

Other commenters highlighted the benefits of nonbank financial company designations compared to other ways to respond to a potential threat to financial stability. Many commenters pointed out that designation may be more appropriate when a threat to U.S. financial stability arises from the material financial distress or activities of a particular nonbank financial company, and that in the event of such a risk, a designation may be a more targeted solution that does not impact all firms in the same market. Designation may also be more suitable when a large, complex, interconnected nonbank financial company is subject to varying levels of regulation across financial markets and regulatory jurisdictions. As some commenters stated, the potential impact of a nonbank financial company's material financial distress or activities on financial stability is frequently related to the interconnections and combination of financial risks across multiple business lines within a single company and the company's existing regulation and risk-management practices.

One commenter also noted more holistic benefits of nonbank financial company designations. Designation may be a more effective deterrent against companies' actions that increase potential risks to financial stability because some companies may be able to avoid activities-based rules through regulatory arbitrage. Moreover, one commenter noted that designation, whose resulting regulatory regime includes resolution-planning requirements, supports the success of the Orderly Liquidation Authority under Title II of the Dodd-Frank Act, which is designed to limit the consequences of insolvencies when they do occur. Commenters also noted that the Council's nonbank financial company designation process enables firms to respond quickly, and that the Council can reconsider a previous designation if there are changes that reduce the potential threat to financial stability.

Some commenters asserted that the Proposed Guidance indicates that the Council intends to prioritize an entity-based approach. This is incorrect. The Council does not intend to favor any of its statutory authorities over others. The Proposed Guidance and the Final Guidance focus on the nonbank financial company designation authority simply because the sole purpose of the guidance is to establish the Council's process for designating nonbank financial companies. Other Council materials, including the Analytic Framework, describe how the Council may apply other authorities.

Although the Dodd-Frank Act does not require a cost-benefit analysis prior to the designation of a nonbank financial company, the 2019 Interpretive Guidance stated that the Council would perform a quantitative cost-benefit analysis, whenever possible, 57 as a prerequisite to designation. Under the Proposed Guidance, the Council would not conduct a cost-benefit analysis prior to a designation of a nonbank financial company. The Council received and considered numerous comments both favoring retention of cost-benefit analysis as a step in the designation process and advocating its removal. As described below, the Council does not believe that a cost-benefit analysis of individual designation determinations is legally required or reasonably estimable, useful, or appropriate in this context. Therefore, the Final Guidance does not contemplate the Council conducting a cost-benefit analysis prior to a nonbank financial company designation.

Section 113 of the Dodd-Frank Act sets forth the standard for designation, which directs the Council to determine whether “material financial distress at [a] nonbank financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of [a] nonbank financial company, could pose a threat to the financial stability of the United States.”  58 The Dodd-Frank Act also sets forth the list of considerations “the Council shall consider” “[i]n making a determination” to designate a nonbank financial company under section 113. 59 Subsection 113(a)(2) lists 10 explicit and mandatory considerations—including the company's leverage, transactions with other financial companies, assets under management, and existing regulation—as well as a permissive eleventh consideration: “any other risk-related factors that the Council deems appropriate.”  60

The designation standard and the statutory considerations are focused on the threat a nonbank financial company's material financial distress or activities could pose to U.S. financial stability. Section 113 establishes a structure for the Council's evaluation of a company and the risks it could pose to financial stability. This statutory structure does not contain, nor does it require the Council to perform, a cost-benefit analysis. The statute instructs the Council to focus on potential threats to financial stability, not the costs of designation to the company under review or to others. The potential costs and benefits of designation depend, among other things, on financial conditions, market behaviors, and the risk and magnitude of potential future financial crises that are inestimable with reasonable precision. Congress determined that when a nonbank financial company meets the statutory standard, designation is justified. The Council declines to second-guess that legislative judgment.

Some commenters noted that neither the costs nor the benefits of designation appear in the considerations listed in section 113 of the Dodd-Frank Act, and that they are not similar to any of the listed considerations. The absence of a cost-benefit analysis requirement in section 113 contrasts with other provisions of the Dodd-Frank Act that do require cost-benefit analysis. 61 As several commenters noted, this contrast demonstrates that Congress did not intend for the Council to perform a cost-benefit analysis when making determinations under section 113.

Further, some commenters noted that while Congress granted the Council discretion to consider other factors it “deems appropriate,” these too must be “risk-related.”  62 Thus, under the text of section 113 of the Dodd-Frank Act, whether cost-benefit analysis is a prerequisite to designation depends on two inquiries: (1) is cost-benefit analysis a “risk-related factor,” and (2) does “the Council deem[ ] appropriate” the consideration of costs and benefits in a designation? The answer to both is no.

Having considered the public comments on the Proposed Guidance, the Council does not believe that cost-benefit analysis, or its results or components, are “risk-related factors,” and does not expect to consider them. The Council believes the statutory reference to “any other risk-related factors” should be interpreted, consistent with the statutory standard for designation and the expressly enumerated considerations, as meaning a factor related to the risk to U.S. financial stability posed by a nonbank financial company's material financial distress or activities. 63 Cost-benefit analysis is unlike any of the 10 explicit considerations the Council must take into account prior to designating a nonbank financial company. Each of the mandatory considerations—for example, a company's leverage, off-balance-sheet exposures, and importance as a source of credit—all directly inform the threat a company's material financial distress or activities could pose to U.S. financial stability. Analysis of the costs and benefits of designation does not have that character. The Council acknowledges that there would be costs to a designated nonbank financial company associated with the Federal Reserve's prudential standards and supervision, but the Council does not believe that those costs would be “risk-related factors.”  64

Some commenters contended that the costs of designation could be so great as to increase the threat to financial stability that a company's material financial distress or activities could pose. Thus, these commenters stated, the costs of designation should also be considered a risk-related factor. However, the Council does not believe that commenters on the Proposed Guidance identified a credible scenario in which the costs of designation could be relevant to the assessment of the threat a company's material financial distress or activities could pose to financial stability. 65 That is, while commenters noted that costs of designation hypothetically could affect a company's financial position, they did not convincingly demonstrate that such costs could affect the threat to financial stability posed by the company's material financial distress, were it to occur, or activities. Moreover, the purpose of the prudential standards and Federal Reserve supervision applicable to a designated nonbank financial company is to mitigate the threat to financial stability that the company's material financial distress or activities could pose. For example, even if they were costly to implement, risk-based capital requirements, leverage limits, or liquidity requirements reduce risks posed by companies to the financial system. Notwithstanding the potential costs of a Council designation, Congress set out a process by which companies should be evaluated and, if they meet the statutory standard, subject to prudential standards and Federal Reserve supervision.

Other commenters contended that costs accruing to the market more generally ( e.g., potential competitive harms) or the results of a cost-benefit analysis assessing the effect of designation on the broader economy could be “risk-related factors.” However, the standard Congress chose for nonbank financial company designations indicates that such costs and cost-benefit analysis are not “risk-related factors.” The Council does not believe that cost-benefit analysis indicates whether a company's material financial distress or activities “could pose a threat to the financial stability of the United States,” the standard for designation under section 113. As noted above, in adopting this statutory standard, Congress determined that if a company meets the standard, based on the considerations Congress identified, the designation is justified. 66

Even if the cost of designation or the results of cost-benefit analysis were “risk-related factors,” the Council does not deem appropriate their consideration as a prerequisite to designation. A cost-benefit analysis aimed at assessing the incremental costs resulting from a designation and the potential benefits from mitigating the threat a company's material financial distress or activities could pose to financial stability would be impossible to perform with reasonable precision. This is in part because, as some commenters noted, it is not feasible to estimate with any certainty the likelihood, magnitude, or timing of a future financial crisis. The costs to financial stability arising from the material financial distress or activities of a nonbank financial company will depend on the state of the economy, the financial system, and innumerable other factors at the time. The costs of any particular future financial crisis, and thus the benefits of its prevention or mitigation through designation or other measures, cannot be predicted. Even estimates of the costs of past crises (which approximate the benefits of their avoidance), in terms of reductions in gross domestic product (GDP), greater government expenses, increases in unemployment, or other factors, vary widely on the order of trillions of dollars. 67

The costs of designation to the designated company, the market, or others are also likely to evade useful estimation. These costs will depend critically on the applicable regulatory regime, which the Dodd-Frank Act directs the Federal Reserve, not the Council, to adopt. 68 Generally, specific regulatory requirements for previously designated nonbank financial companies have been determined after the designation, in order to enable the requirements to be appropriately tailored to risks posed by the company. Moreover, those requirements, along with the company's behavior in response to them and relevant market conditions, may vary over time. As such, evaluating the potential costs and benefits of a designation with reasonable specificity is not possible before a designation, and it is unlikely that performing a cost-benefit analysis for a nonbank financial company designation would yield a useful assessment. As noted by commenters, the infrequency and heterogeneity of past financial crises, combined with the unpredictable nature of financial markets and uncertain future evolution of financial firms and activities, do not provide a reliable basis for conducting an informative cost-benefit analysis. A cost-benefit analysis in this context is likely to produce results that are highly sensitive to discretionary assumptions and thus not helpful to decision-making. Accordingly, it is not surprising that Congress declined to prescribe a cost-benefit analysis as a prerequisite to designation.

Some commenters also asserted that a cost-benefit analysis before a designation is legally required by the district court's decision in MetLife, Inc. v. Financial Stability Oversight Council (MetLife), 69 the Supreme Court's decision in Michigan v. EPA, 70 or the APA. 71 The Council disagrees.

The district court in MetLife rescinded one of the Council's previous designations under section 113 of the Dodd-Frank Act because, among other reasons, the Council did not consider the costs of the designation. However, as the MetLife court noted: “This Court is one of 94 United States District Courts, comprising several hundred judges, and its Opinion is not binding on others; the Opinion stands on its own persuasive value, to the extent it has any.”  72 Furthermore, the MetLife court's holding appears to rely, in part, on its assessment that a company's likelihood of material financial distress was a required consideration under the Council's guidance in effect at that time. 73 As discussed below, the Final Guidance makes clear that the Council does not expect to consider the likelihood of a nonbank financial company's material financial distress; as a result, to the extent MetLife' s reasoning relied on that requirement, it would not apply. In addition, while the court in MetLife viewed costs as a risk-related factor, it failed to take into account that the Council did not “deem” the cost of designation an appropriate risk-related factor to consider. Consistent with section 113(a)(2)(K) of the Dodd-Frank Act, because the Council did not deem cost appropriate to consider, its consideration was not required for the statutory reasons described above.

Other commenters stated that Michigan v. EPA requires the Council to perform cost-benefit analyses of its designations. In Michigan, the Supreme Court considered whether cost-benefit analysis was required by a provision of the Clean Air Act directing the EPA to regulate certain hazardous emissions only if EPA found that “such regulation is appropriate and necessary.”  74 The Court held that the requirement to determine that the regulation was “`appropriate and necessary' requires at least some attention to cost.” Notably, the Court stated that it was not concluding the statute required EPA “to conduct a formal cost-benefit analysis.”  75

While section 113 of the Dodd-Frank Act also uses the word “appropriate,” the context is entirely different. First, the phrase “any other risk-related factors that the Council deems appropriate” is permissive, not mandatory. 76 Unlike the EPA, which was directed to act only when it found that regulation was “appropriate and necessary,”  77 under the Dodd-Frank Act, the Council has clear statutory authority to choose which “other risk-related factors” to consider by deeming them appropriate, or not. Second, section 113's permissive reference to “appropriate” is limited to “risk-related factors,” rather than other considerations that could conceivably influence agency decision-making, such as cost-benefit analysis. This interpretation of section 113 is consistent with the Supreme Court's decision in Michigan v. EPA, in which it noted that “[t]here are undoubtedly settings in which the phrase `appropriate and necessary' does not encompass cost.”  78 Similarly, and more recently, the Court of Appeals for the D.C. Circuit has rejected the claim that the word “appropriate” necessarily requires consideration of economic costs, in part, because the Supreme Court in Michigan v. EPA “was careful to emphasize that its reading of `appropriate' was dependent on the statutory context . . . .”  79

Several commenters argued that the APA's general prohibition on arbitrary and capricious agency action could require the Council to perform cost-benefit analysis, regardless of the standard and requirements set forth in the Dodd-Frank Act. However, the APA contains no such mandate, and the Supreme Court has long held that the APA's text sets forth the “maximum procedural requirements” courts may impose. 80 Reading additional requirements into the APA “would violate the very basic tenet of administrative law that agencies should be free to fashion their own rules of procedure.”  81

A number of commenters stated that cost-benefit analysis is generally a helpful agency practice because it disciplines agency decision-making and leads to better policy outcomes. The Council takes no view on these propositions in general, but as discussed above, does not believe cost-benefit analysis would generally be appropriate in the context of nonbank financial company designations such that it should be a prerequisite to designation. Under the Analytic Framework, the Council anticipates that its analyses, including in the context of a designation under section 113 of the Dodd-Frank Act, will be rigorous, data-driven, and transparent. Other commenters contended that cost-benefit analysis is necessary to ensure that designation will promote U.S. financial stability or generally do more good than harm. The Council disagrees. Under the statutory standard in section 113, the Council has authority to designate a nonbank financial company only if the company's material financial distress or activities could pose a threat to U.S. financial stability. Thus, the promotion of U.S. financial stability is already embedded in the designation standard.

In addition, these commenters did not acknowledge the fact that the prudential standards will be developed by the Federal Reserve, and some presume it would regulate nonbank financial companies in a way that actually increases risks to financial stability. However, under its statutory mandate, the Federal Reserve would seek to establish prudential standards that would “prevent or mitigate risks to the financial stability of the United States.”  82 The Federal Reserve will also take into consideration companies' “capital structure, riskiness, complexity, financial activities (including the financial activities of their subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate.”  83

As part of the evaluation of a company being considered for designation, the 2019 Interpretive Guidance provided that “the Council will assess the likelihood of the company's material financial distress.”  84 The Final Guidance removes this “likelihood assessment” from the Council's designation procedures. 85

The Entity List (supplement no. 4 to part 744 of the EAR (15 CFR parts 730-774)) identifies entities for which there is reasonable cause to believe, based on specific and articulable facts, that the entities have been involved, are involved, or pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States, pursuant to § 744.11(b). The EAR impose additional license requirements on, and limit the availability of, most license exceptions for exports, reexports, and transfers (in-country) when a listed entity is a party to the transaction. The license review policy for each listed entity is identified in the “License Review Policy” column on the Entity List, and the impact on the availability of license exceptions is described in the relevant Federal Register document that added the entity to the Entity List. The Bureau of Industry and Security (BIS) places entities on the Entity List pursuant to parts 744 (Control Policy: End-User and End-Use Based) and 746 (Embargoes and Other Special Controls) of the EAR.

The End-User Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and makes all decisions to remove or modify an entry by unanimous vote.

The ERC determined to remove the Ministry of Public Security's Institute of Forensic Science of China from the Entity List pursuant to a removal proposal and review that the ERC conducted in accordance with procedures described in supplement no. 5 to part 744 of the EAR. Prior to removal from the Entity List by this rule, the Ministry of Public Security's Institute of Forensic Science of China was listed under the destination of China.

On August 13, 2018, the President signed into law the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included the Export Control Reform Act of 2018 (ECRA) (50 U.S.C. 4801-4852). ECRA provides the legal basis for BIS's principal authorities and serves as the authority under which BIS issues this rule.

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

2. Notwithstanding any other provision of law, no person is required to respond to or be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This regulation involves an information collection approved by OMB under control number 0694-0088, Simplified Network Application Processing System. BIS does not anticipate a change to the burden hours associated with this collection as a result of this rule. Information regarding the collection, including all supporting materials, can be accessed at https://www.reginfo.gov/public/do/PRAMain.

3. This rule does not contain policies with federalism implications as that term is defined in Executive Order 13132.

4. Pursuant to section 1762 of the Export Control Reform Act of 2018, this action is exempt from the Administrative Procedure Act (5 U.S.C. 553) requirements for notice of proposed rulemaking, opportunity for public participation, and delay in effective date.

5. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., are not applicable. Accordingly, no regulatory flexibility analysis is required, and none has been prepared.

Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

North Carolina has the potential to be affected by hurricanes and tropical storms on a yearly basis, especially between the months of June and November. The Sector North Carolina Captain of the Port (COTP) proposed establishing a safety zone to provide for the safety of life and for the protection of port infrastructure and of the environment during such storms. In response, on July 14, 2023, the Coast Guard published a notice of proposed rulemaking (NPRM) titled “Safety Zone; Hurricanes and Tropical Storms in Captain of the Port Zone North Carolina” (88 FR 45123). There we stated why we issued the NPRM and invited comments on our proposed regulatory action related to this safety zone. During the comment period that ended August 14, 2023, we received no comments.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The COTP of Sector North Carolina has determined that the establishment of a safety zone to be enforced in case of hurricanes and heavy weather in North Carolina is necessary to ensure the safety of the waters of the COTP Zone Sector North Carolina. This safety zone establishes actions to be completed by local industry and vessels in the COTP zone prior to landfall of hurricanes and heavy weather threatening the State of North Carolina. The safety zone consists of all navigable waters of the United States in the Sector North Carolina COTP Zone, as defined in 33 CFR 3.25-20. Portions of the safety zone may be activated at different times, as conditions dictate.

As noted above, we received no comments on our NPRM published July 14, 2023. While there were no comments to the proposed rule, the following change was made to this rule. The name of the rule was changed to “Safety Zone; Hurricanes and Heavy Weather in Captain of the Port Zone Sector North Carolina” in order to harmonize this to similar rules within U.S. Coast Guard District 5. There are no changes in the regulatory text of this rule from the proposed rule in the NPRM.

This action is necessary to ensure the safety of the waters of the COTP Zone Sector North Carolina as it establishes actions to be completed by local industry and vessels in the COTP zone prior to landfall of hurricanes and tropical storms threatening the State of North Carolina. This safety zone consists of all navigable waters of the United States in the Sector North Carolina COTP Zone, as defined in 33 CFR 3.25-20. Portions of the safety zone may be activated at different times, as conditions dictate.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the necessity to protect life and port infrastructure during hurricanes and tropical storms. The scope of the regulation is narrow and will only apply when a hurricane or tropical storm impacts the navigable waters of the Sector North Carolina Captain of the Port Zone. These events are infrequent and of relatively short duration. Regulatory restrictions will be lifted as soon as practicable following the passage of a named storm.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard received no comments from the Small Business Administration on this rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has 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. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect 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 Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves a safety zone that prohibits entry in certain waters of the Sector North Carolina COTP Zone for the duration needed to ensure safe transit of vessels and industry post-hurricane, post-storm, and post-emergency. It is categorically excluded from further review under paragraph L60(a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

On March 15, 2023, the Coast Guard received notification from WSP USA Inc. requesting to close a portion of the Shrewsbury River for the replacement of the S-32 Bridge on County Route 520 (Rumson Road) over the Shrewsbury River in the Boroughs of Rumson and Sea Bright, NJ; Federal Project No. STBGP-0520(300); NJDOT Job No. 6700352. In response, on May 23, 2023, the Coast Guard published a notice of proposed rulemaking (NPRM) titled “Safety Zone; Shrewsbury River, S-32 Bridge, Boroughs of Rumson and Sea Bright, NJ” (88 FR 33054). There we stated why we issued the NPRM and invited comments on our proposed regulatory action related to this safety zone. During the comment period that ended June 22, 2023, we received one comment, that is discussed in section IV below.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be impracticable because immediate action is needed to respond to the potential safety hazards associated with replacement of the S-32 Bridge that will impact navigation along the Shrewsbury River.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port New York (COTP) has determined that potential hazards associated with the bridge construction would be a safety concern for anyone within a 100-yard radius of the center point of the bridge. The purpose of this rulemaking is to protect personnel, vessels, and the marine environment from potential hazards created by the S-32 Bridge construction activities within a 100-yard radius.

As noted above, we received one comment on our NPRM published May 23, 2023. The comment is in favor of the rule, however identified a variety of concerns including channel reduction and impact on velocity of current, on scene management of vessel traffic, project background, and the time of year for a portion of the waterway closures. Additionally, as you will notice as we address the comments below, we have made a change to the effective dates of the rule to account for a delay in the start date.

The commenter expressed concerns with the reduced horizontal clearance of 37 feet and increasing the velocity of the current and vessels losing steerage and causing collisions and distress calls. The commenter stated that they lost steerage transiting the present draw bridge with an oncoming vessel, spun a full 180-degrees and hit the bridge fender system to avoid a collision. They also recommended a safety watch during the height of the summer season.

Coast Guard is working closely with affected stake holders to ensure the full and partial channel closures will occur outside the peak recreational boating season. We will notify USCG Station Sandy Hook and New Jersey State Marine Police Carteret Station for their awareness during patrols. Also, the Coast Guard will ensure adequate notice and of this safety zone to mariners through dissemination of information through the Local Notice to Mariners. NOAA has also included the “Bridge under construction” label on Chart 12325 at < https://charts.noaa.gov/PDFs/12325.pdf > to increase awareness among mariners.

The commenter stated there should be a safety presence directing marine traffic and not just a bridge tender who is worried about the bridge operation. The Coast Guard does not have the physical assets to provide a daily on scene presence during the enforcement periods. We will notify USCG Station Sandy Hook and New Jersey State Marine Police Carteret Station for their awareness during patrols.

The commenter stated this rulemaking proposal did not start on March 15, 2023, with the request for waterway restrictions, nor in the past 75 days.

The commenter also stated it is not a good idea for even a partial channel closure for a majority of the boating season and should occur after November 30 and before April 1.

The Coast Guard proceeded with the rulemaking request once sufficient information was provided, as required by 33 CFR 165.5 establishment procedures.

The commenter stated “there is multiple 180-foot by 64-foot crane barge spudded down in the channel while conducting heavy lift operations each week at the new bridge. We are not building the Tappan Zee Bridge here.” The Coast Guard is receiving regular updates regarding the project's construction timelines. The current project schedule calls for one, 180-foot by 64-foot crane barge to spud down in the channel for five days. The Coast Guard does not determine the type of machinery used on construction projects.

There are two updates to the information shared in the NPRM about the project. First, The Coast Guard is receiving regular updates regarding the project's scheduled timelines. The Coast Guard will publish any changes to the full channel closure dates in the Local Notice to Mariners. The public is urged to visit https://www.rumsonseabrightbridge.com/ for the most up to date information on timelines. Second, the half-channel closure horizontal clearance will be 37 feet 6 inches instead of the originally published 37 feet.

As noted above there is one change to the regulatory text of this rule from the proposed rule in the NPRM. The Coast Guard is publishing this rulemaking to now be effective and enforceable from December 1, 2023, to account for delays, through December 31, 2024, as originally stated. This rule now establishes a safety zone from December 1, 2023, through December 31, 2024, but will only be enforced during periods when heavy lift operations are in progress. The first full channel closure is anticipated to take place sometime between January 2024 and March 2024. The Federal navigation channel closure is due to a 180-foot by 64-foot crane barge spudded down in the channel while conducting heavy lift operations.

The remainder of the bridge construction activities will partially close the channel allowing marine traffic to pass on either the east half or the west half of the channel. During these partial closures, the channel will be reduced to a width of 37 feet, 6 inches. The Coast Guard is working closely with stakeholders to ensure full and partial closures will occur outside of the peak recreational boating season. The safety zone covers all navigable waters of the Shrewsbury River within 100 yards of the center point of the S-32 Bridge. The duration of the zone is intended to ensure the safety of personnel, vessels, and these navigable waters during the bridge construction. During periods of heavy lift operations, no vessel or person would be permitted to enter the safety zone without obtaining permission from the COTP or a designated representative.

We developed this rule after considering numerous statutes and Executive orders related to rulemaking. Below we summarize our analyses based on a number of these statutes and Executive orders, and we discuss First Amendment rights of protestors.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits. This rule has not been designated a “significant regulatory action,” under section 3(f) of Executive Order 12866, as amended by Executive Order 14094 (Modernizing Regulatory Review). Accordingly, this rule has not been reviewed by the Office of Management and Budget (OMB).

This regulatory action determination is based on the size, location, duration and time-of-day of the safety zone. This rule may affect owners or operators of vessels intending to transit the Shrewsbury River within a 100-yard radius of the center point of the S-32 Bridge, some of which might be small entities. However, this safety zone will not have a significant economic impact on a substantial number of these entities because it is temporarily enforced, allows for deviation requests, and does not impact vessel transit significantly. Regarding the enforcement period, although this safety zone will be in effect from December 1, 2023, through December 31, 2024, vessels will only be prohibited from the regulated zone during periods of heavy lift operations in correspondence to the period of enforcement. Vessels will also be able to request deviation from this rule to transit through the safety zone during enforcement periods. Such requests would be considered on a case by-case basis and may be authorized by the COTP or a designated representative. For these reasons, the Coast Guard expects any impact of this rulemaking establishing a temporary safety zone on Shrewsbury River within a 100-yard radius of the center point of the S-32 Bridge to be minimal and have no significant economic impact on small entities. The Coast Guard will notify the public of the enforcement periods of this rule through appropriate means, which may include, but are not limited to, publication in the Local Notice to Mariners and Broadcast Notice to Mariners via VHF-FM marine channel 16.

The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, as amended, requires Federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. The Coast Guard received no comments from the Small Business Administration on this rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

While some owners or operators of vessels intending to transit the safety zone may be small entities, for the reasons stated in section V.A. above, this rule will not have a significant economic impact on any vessel owner or operator.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call or email the person listed in the FOR FURTHER INFORMATION CONTACT section.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has 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. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132.

Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect 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 Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

We have analyzed this rule under Department of Homeland Security Directive 023-01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishing a safety zone on all navigable waters of the Shrewsbury River, within a 100-yard radius of the center point of the S-32 Bridge, on County Route 520 (Rumson Road) in the Boroughs of Rumson and Sea Bright, New Jersey. It is categorically excluded from further review under paragraph L60 (a) of Appendix A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to call or email the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

The EPA is publishing this rule without a prior proposed rule because we view this as a noncontroversial action and anticipate no adverse comment. However, in the “Proposed Rules” section of this issue of the Federal Register , we are publishing a separate document that will serve as the proposed rule to exempt a new system of records, EPA-83, the Personnel Security System (PSS) 2.0, from certain requirements of the Privacy Act if adverse comments are received on this direct final rule. We will not institute a second comment period on this action. Any parties interested in commenting must do so at this time. For further information about commenting on this rule, see the ADDRESSES section of this document.

If EPA receives adverse comment, we will publish a timely withdrawal in the Federal Register informing the public that this direct final rule will not take effect. We would address all public comments in any subsequent final rule based on the proposed rule.

The EPA published a Privacy Act system of records notice for PSS 2.0 (85 FR 32380, May 29, 2020) to replace PSS 1.0, which was a module of the Office of Administrative Services Information System (OASIS, EPA-41), and create a stand-alone system. The Personnel Security Branch (PSB) plans to update PSS with a new module focused on providing the agency with insider threat inquiry management and coordination capabilities. The PSS 2.0 supports the PSB with tracking the documentation associated with background investigations for Federal and non-Federal personnel working for EPA. This includes reporting requirements that meet the Security Executive Agent Directive (SEAD) 3, which establishes reporting requirements for all “covered individuals” who have access to classified information or who hold a sensitive position. Access to the system is restricted to authorized users and PSS is maintained in a secure, password protected computer system, in secure areas and buildings with physical access controls and environmental controls. In the performance of their official duties, EPA federal personnel must input and manage Sensitive Personally Identifiable Information (such as social security number) and Personally Identifiable Information (such as home address and email address). All personnel are required to take annual Information Technology Security and Privacy Training to ensure the proper handling and management of Sensitive Personally Identifiable Information (SPII) and Personally Identifiable Information (PII). The data is required in the system to start the onboarding process and to manage personnel through lifecycle activity at EPA (such as background investigations). PSS 2.0 displays a reminder about the appropriate PII and SPII handling procedures every time a user begins to enter data for a new background investigation. Additionally, PSS will include a module dedicated specifically for insider threat inquiry management and coordination. This module will contain details of insider threat inquiries, including the names and identifiers of personnel involved in such inquiries.

Pursuant to 5 U.S.C. 552a(k)(2) and (k)(5), an individual's request for access to his or her record may be exempt from specific access and accounting provisions of the Privacy Act where the “investigatory material [was] compiled for law enforcement purposes”. See 40 CFR 16.12. Note that the (k)(5) exemption applies only to access requests for background investigation records that would identify a confidential source. Under 5 U.S.C. 552a(k)(1), (k)(2), and (k)(5), EPA is proposing to exempt the PSS 2.0 from the following provisions of the Privacy Act of 1974 as amended; 5 U.S.C. 552a; (d); (e)(1); (e)(4) (G), (H), and (I); and (f)(2) through (5) for the following reasons:

(1) From subsection 552a(c)(3), because making available to a named individual an accounting of disclosures of records concerning him/her/them could reveal investigative interest on the part of EPA and/or the Department of Justice. This could allow record subjects to impede the investigation, e.g., destroy evidence, intimidate potential witnesses, or flee the area to avoid inquiries or apprehension by law enforcement personnel. Further, such a disclosure could reveal the identity of a confidential source and hamper the Agency's investigation.

(2) From subsection 552a(c)(4), which concerns providing notice to others regarding corrections or disputed information in accordance with subsection (d) of the Privacy Act, because no access to these records is available under subsection (d) of the Act.

(3) From subsection 552a(d), which requires an agency to permit an individual to access, contest or request amendment of records pertaining to him/her/them, because the records contained in this system relate to official Federal investigations. Individual access to these records could compromise ongoing investigations, reveal confidential informants and/or sensitive investigative techniques used in particular investigations, or constitute unwarranted invasions of the personal privacy of third parties who are involved in a certain investigation.

(4) From subsections 552a(e)(1) and (e)(5), which require an agency to collect/maintain only accurate and relevant information about an individual, because the accuracy or relevance of information obtained in the course of a law enforcement investigation is not always known when collected. Material that may seem unrelated, irrelevant, or incomplete when collected may take on added meaning or significance as the investigation progresses. Also, in the interest of effective law enforcement, it is appropriate to retain all information that may aid in establishing patterns of criminal activity. Therefore, it would impede the investigative process if it were necessary to assure the relevance, accuracy, timeliness and completeness of all information obtained.

(5) From subsections 552a(e)(4)(G) and (H), which require an agency to publish—in the Federal Register —procedures concerning access to records, because no access to these records is available under subsection (d) of the Privacy Act, for the reasons explained above in the discussion of subsection (d).

(6) From subsections 552a(f)(2), (f)(3), (f)(4), and (f)(5), concerning agency rules for obtaining access to records under subsection (d), because this system is exempt from the access and amendment provisions of subsection (d). Since EPA is claiming that this system of records is exempt from subsection (d) of the Act, concerning access to records, the requirements of subsections (f)(2) through (5) of the Act, concerning agency rules for obtaining access to such records, are inapplicable and are exempted to the extent that this system of records is exempted from subsection (d) of the Act.

(7) From subsection 552a(I), concerning agency rules for use of records from another agency under a matching program. Such documents are owned by and the responsibility of the source agency, and only that source agency can share or release the information.

Note that the (k)(5) exemption applies only to access requests for background investigation records that would identify a confidential source.

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

This action was submitted to the Office of Management and Budget (OMB) for review and reviewed without comment.

This action does not impose an information collection burden under the PRA. This action contains no provisions constituting a collection of information under the PRA.

I certify that this action will not have a significant economic impact on a substantial number of small entities under the RFA. This action will not impose any requirements on small entities.

This action does not contain any unfunded mandate as described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or uniquely affect small governments.

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the National Government and the states, or on the distribution of power and responsibilities among the various levels of government.

This action does not have tribal implications as specified in Executive Order 13175. Thus, Executive Order 13175 does not apply to this action.

The EPA interprets Executive Order 13045 as applying only to those regulatory actions that concern environmental health or safety risks that the EPA has reason to believe may disproportionately affect children, per the definition of “covered regulatory action” in section 2-202 of the Executive order. This action is not subject to Executive Order 13045 because it does not concern an environmental health risk or safety risk.

This action is not subject to Executive Order 13211, because it is not a significant regulatory action under Executive Order 12866.

This rulemaking does not involve technical standards.

The EPA believes that this action does not have disproportionately high and adverse human health or environmental effects on minority populations, low-income populations and/or indigenous peoples, as specified in Executive Order 12898 (59 FR 7629, February 16, 1994).

This rule is exempt from the Congressional Review Act (CRA) because it is a rule of agency organization, procedure or practice that does not substantially affect the rights or obligations of non-agency parties.

For the reasons stated in the preamble, title 40, chapter I, part 16 of the Code of Federal Regulations is amended as follows:

Section 6101(a) of the Affordable Care Act (Pub. L. 111-148) added a new section 1124(c) to the Social Security Act (the Act). This provision established requirements for the disclosure of information about the owners and operators of Medicare SNFs and Medicaid nursing facilities. (Except as otherwise indicated, these Medicare and Medicaid providers will be collectively and occasionally referenced as “nursing facilities,” “nursing homes,” or simply “facilities” or “providers”.).

In a proposed rule published in the Federal Register on February 15, 2023 titled “Medicare and Medicaid Programs; Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities and Nursing Facilities” (88 FR 9820), we proposed to implement portions of section 1124(c) of the Act. As we explained in detail in the February 15, 2023 proposed rule, we are engaging in rulemaking that is required under section 1124(c) of the Act. Furthermore, we have recently received information regarding particular categories of nursing facility owners (including, but not limited to, private equity companies (PECs) and real estate investment trusts (REITs)) that has generated concerns about the quality of care that nursing facility residents receive. We stated that having sufficient data on these owners could help CMS better monitor and hold accountable their nursing facilities. We accordingly believed that implementing the data collection requirements in section 1124(c) of the Act (albeit with isolated exceptions) would assist us in achieving this aim.

We also proposed in the February 15, 2023 proposed rule to establish definitions of PEC and REIT in 42 CFR 424.502. The purpose was to assist SNFs in identifying on their Form CMS-855A enrollment applications (Medicare Enrollment Application—Institutional Providers; OMB Control No.: 0938-0685) which entities listed in Section 5 of said application are PECs or REITs. 1 In addition, in the Fiscal Year 2024 Inpatient Prospective Payment System Long-Term Care Hospital Prospective Payment System proposed rule that appeared in the May 1, 2023 Federal Register (88 FR 26658) (hereinafter referred to as the FY 2024 IPPS/LTCH PPS proposed rule), we proposed to apply the aforementioned PEC and REIT definitions to all providers and suppliers that complete the Form CMS-855A, not merely SNFs. 2

There are three principal categories of provisions that we are finalizing in this rule.

We are finalizing our proposals that nursing homes must disclose the following information to CMS or, for Medicaid nursing facilities, the applicable state Medicaid agency (hereafter occasionally referenced as “state” or “state agency”):

• Each member of the facility's governing body, including the name, title, and period of service of each member.

• Each person or entity who is an officer, director, member, partner, trustee, or managing employee of the facility, including the name, title, and period of service of each such person or entity.

• Each person or entity who is an additional disclosable party of the facility.

• The organizational structure of each additional disclosable party of the facility and a description of the relationship of each such additional disclosable party to the facility and to one another.

To the extent that a Medicare SNF must already report some of this data via the Form CMS-855A, we are finalizing our proposal that the SNF need not report the same data required under section 1124(c) of the Act more than once on the same application submission. (States will have the option of adopting a similar policy with respect to the required Medicaid nursing facility data.) In general, this rule should be construed towards disclosure and, if in doubt about whether additional information should be released, SNFs should disclose it.

We will also make the information provided per section 1124(c) of the Act publicly available within 1 year as required under section 6101(b) of the Affordable Care Act.

We are finalizing our proposal that the nursing facility must report the foregoing information upon initially enrolling in Medicare or Medicaid (which, for purposes of this requirement, includes changes of ownership under 42 CFR 489.18) and when revalidating their Medicare or Medicaid enrollment. Moreover, a Medicare SNF, once enrolled, must disclose any changes to this information within the current timeframes specified in § 424.516(e) for reporting changes in enrollment data.

Consistent with 42 CFR 424.515, SNFs must revalidate their Medicare enrollment every 5 years. However, CMS under § 424.515(d) can perform off-cycle revalidations; that is, we can revalidate a provider or supplier at any time and need not wait until the arrival of the provider's or supplier's 5-year revalidation cycle. As finalized, CMS will accordingly reserve the right and indeed plans to conduct off-cycle revalidations of SNFs to collect the data required under section 1124(c) of the Act beginning when the revisions to the Form CMS-855A are finalized. .

To explain some of the terminology associated with these reporting requirements, we proposed several new definitions. These included, but were not limited to, private equity company, real estate investment trust, additional disclosable party, and organizational structure.

Concerning the PEC and REIT definitions we proposed in the February 15, 2023 and FY 2024 IPPS/LTCH PPS proposed rules, we are finalizing the PEC definition with one minor clarification, as discussed in section III. of this final rule. Due to concerns raised by commenters, we are not finalizing our proposed REIT definition. However, we are finalizing a definition of REIT that commenters recommended that: (1) we believe is more consistent with current federal law and industry practice; and (2) will still enable us to collect the information we need regarding REIT ownership of nursing homes.

We are also finalizing without modification: (1) all other definitions we proposed in the February 15, 2023 proposed rule; and (2) our proposal in the FY 2024 IPPS/LTCH PPS proposed rule to apply the PEC and REIT definitions (though as modified in this final rule) to all providers and suppliers that complete the Form CMS-855A.

This final rule will become effective 60 days after the date it is published in the Federal Register . Yet Medicare SNFs will not have to disclose the data required under section 1124(c) of the Act until the Form CMS-855A is: (1) revised to collect this data; and (2) publicly available for use. For Medicaid nursing facilities, the required data will not need to be reported until the applicable state Medicaid agency has established means to collect it. CMS expects state Medicaid agencies to promptly: (1) establish such data collection mechanisms; and (2) begin requiring Medicaid nursing facilities to provide this data once these collection means are established.

Sections IV. and V. of this final rule outline the impacts that our proposals will have on affected entities and beneficiaries. The principal impact will involve the disclosure of the required data by nursing facilities. As explained in section IV. of this final rule, we project a total annual information collection burden on Medicare and Medicaid nursing facilities in reporting this data of 26,974 hours at a cost of $2,216,128.

We have determined that this final rule is not 3(f)(1) significant. See section IV. of this final rule for a detailed discussion.

There are three principal categories of legal authorities for our provisions:

• Section 1124(c) of the Act requires Medicare and Medicaid nursing facilities to disclose certain information about their ownership and management.

• Section 1866(j) of the Act furnishes specific authority regarding the enrollment process for providers and suppliers.

• Sections 1102 and 1871 of the Act provide general authority for the Secretary to prescribe regulations for the efficient administration of the Medicare program.

Section 1866(j)(1)(A) of the Act requires the Secretary to establish a process for the enrollment of providers and suppliers into the Medicare program. The overarching purpose of the enrollment process is to confirm that providers and suppliers seeking to bill Medicare for services and items furnished to Medicare beneficiaries meet all applicable Federal and State requirements to do so. The process is, to an extent, a “gatekeeper” that prevents unqualified and potentially fraudulent individuals and entities from entering and inappropriately billing Medicare. Since 2006, we have undertaken rulemaking efforts to outline our enrollment procedures. These regulations are generally codified in 42 CFR part 424, subpart P (hereafter occasionally referenced as simply “subpart P”). They address, among other things, requirements that providers and suppliers must meet to obtain and maintain Medicare billing privileges.

As outlined in § 424.510, one such requirement is that the provider or supplier complete, sign, and submit to its assigned Medicare Administrative Contractor (MAC) the appropriate enrollment form, typically the Form CMS-855 (OMB Control No. 0938-0685). The Form CMS-855 collects important information about the provider or supplier. Such data includes, but is not limited to, general identifying information (for example, legal business name), licensure and/or certification data, and practice locations. The application is used for a variety of provider enrollment transactions, including the following:

• Initial enrollment—The provider or supplier is—(1) enrolling in Medicare for the first time; (2) enrolling in another Medicare contractor's jurisdiction; or (3) seeking to enroll in Medicare after having previously been enrolled.

• Change of ownership—The provider or supplier is reporting a change in its ownership.

• Revalidation—The provider or supplier is revalidating its Medicare enrollment information in accordance with § 424.515.

• Reactivation—The provider or supplier is seeking to reactivate its Medicare billing privileges after it was deactivated in accordance with § 424.540.

• Change of information—The provider or supplier is reporting a change in its existing enrollment information in accordance with § 424.516.

After receiving the provider's or supplier's initial enrollment application, CMS or the MAC reviews and confirms the information thereon and determines whether the provider or supplier meets all applicable Medicare requirements. We believe this screening process has greatly assisted CMS in executing its responsibility to prevent Medicare fraud, waste, and abuse.

As previously mentioned, over the years we have issued various final rules pertaining to provider enrollment. These rules were intended not only to clarify or strengthen certain components of the enrollment process but also to enable us to take further action against providers and suppliers: (1) engaging (or potentially engaging) in fraudulent or abusive behavior; (2) presenting a risk of harm to Medicare beneficiaries or the Medicare Trust Funds; or (3) that are otherwise unqualified to furnish Medicare services or items.

States have considerable flexibility in how they administer their Medicaid programs within a broad federal framework, and programs vary from state to state. In operating Medicaid, states historically have permitted the enrollment of providers who meet the state requirements for program enrollment as well as any applicable federal requirements. State enrollment requirements must be consistent with section 1902(a)(23) of the Act and implementing regulations at § 431.51.

Part 455 of title 42 includes federal Medicaid provider enrollment requirements to which states must adhere. These include, but are not limited to, the following:

• Requiring providers to disclose information regarding ownership, business transactions, certain criminal convictions, and affiliations (§§ 455.104 through 455.107).

• Screening providers consistent with the procedures in part 455, subpart E (§ 455.410).

• Revalidating a provider's enrollment at least every 5 years (§ 455.414).

• Performing site visits and criminal background checks in certain circumstances (§§ 455.432 and 455.434).

Although required to comply with the foregoing federal requirements, states have the discretion to, for instance: (1) undertake stricter screening of providers; and (2) require providers to submit data beyond that identified in §§ 455.104 through 455.107. Except as otherwise noted therein, the provisions in 42 CFR part 455 are thus the minimum requirements for states, not the maximum.

We received approximately 75 timely pieces of correspondence in response to the February 15, 2023 proposed rule. We received approximately 10 timely pieces of correspondence in response to our PEC and REIT proposals in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 27190). This final rule will summarize and respond to all of these comments and address our finalized provisions stemming from both the February 15, 2023 proposed rule and our PEC and REIT proposals from the FY 2024 IPPS/LTCH PPS proposed rule.

Section 6101(a) of the Affordable Care Act added a new section 1124(c) to the Act. It established requirements for the disclosure of information about nursing facility ownership and oversight. Under section 1124(c)(2)(A)(ii) of the Act, a nursing facility enrolling or enrolled in Medicare or Medicaid must disclose—

• The name, title, and period of service of each member of the facility's governing body;

• The name, title, and period of service of each person or entity who is an officer, director, member, partner, trustee, or managing employee of the facility; and

• Each person or entity who is an additional disclosable party of the facility.

Section 1124(c)(5)(A) of the Act defines “additional disclosable party” as a person or entity that—

• Exercises operational, financial, or managerial control over the facility or a part thereof, or provides policies or procedures for any of the facility's operations, or provides financial or cash management services to the facility;

• Leases or subleases real property to the facility, or owns a whole or part interest equal to or exceeding 5 percent of the total value of such real property; or

• Provides management or administrative services, management or clinical consulting services, or accounting or financial services to the facility.

In addition, section 1124(c)(2)(A)(iii) of the Act requires the nursing facility to disclose: (1) the organizational structure of each additional disclosable party of the facility; and (2) a description of the relationship of each such additional disclosable party to the facility and to one another. Section 1124(c)(5)(D) of the Act defines “organizational structure” as meaning, in the case of—

• A corporation—The officers, directors, and shareholders of the corporation who have an ownership interest in the corporation which is equal to or exceeds 5 percent;

• A limited liability company—The members and managers of the limited liability company (including, as applicable, what percentage each member and manager has of the ownership interest in the limited liability company);

• A general partnership—The partners of the general partnership;

• A limited partnership—The general partners and any limited partners of the limited partnership who have an ownership interest in the limited partnership which is equal to or exceeds 10 percent;

• A trust—The trustees of the trust;

• An individual—Contact information for the individual; and

• Any other person or entity, such information as the Secretary determines appropriate.

We initially included provisions to implement section 1124(c) of the Act as part of the May 6, 2011 proposed rule titled “Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information” (76 FR 26364). We did not finalize those proposed disclosure provisions in the subsequent final rule, published on August 8, 2011, 3 however, due to the need for more time to consider the comments received, though we stated that we would address our provisions in a separate final rule in early 2012. After reviewing the comments, we did not publish a final rule or finalize our proposals. Yet CMS's concerns about the quality of care and operations of nursing facilities, including (though by no means exclusively) those owned by private equity and other types of investment firms, have increased since 2011 and we thus released a new proposed rule in February 2023. We addressed these concerns in detail in the proposed rule and restate them here.

As of 2021, roughly 70 percent of nursing homes were for-profit facilities; this includes those owned by PECs, which comprised approximately 11 percent of all nursing homes (although estimates vary). 4 Reports have circulated that nursing facility quality has declined under private equity and similar owners. For example, in February 2021 the National Bureau of Economic Research (NBER) published an analysis titled “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes.” The report stated: “Our estimates show that private equity (PE) ownership increases the short-term mortality of Medicare patients by 10%, implying 20,150 lives lost due to PE ownership over our twelve-year sample period. This is accompanied by declines in other measures of patient well-being, such as lower mobility, while taxpayer spending per patient episode increases by 11%.”  5 A November 2021 analysis published in the Journal of the American Medical Association contained similar findings concerning PEC-owned nursing facilities. Titled “Association of Private Equity Investment in US Nursing Homes with the Quality and Cost of Care for Long-Stay Residents,” the report stated that PECs seek annual returns of 20% or more; with this pressure to generate high short-term profits, private-equity-owned nursing homes might reduce staffing, services, supplies, or equipment, which could adversely affect quality of care. 6 The analysis concluded that: (1) private equity acquisition of nursing facilities was associated with higher costs and increases in emergency department visits and hospitalizations for ambulatory sensitive conditions; and (2) per the study's findings, more stringent oversight and reporting on private equity ownership of nursing homes may be warranted. 7 The previously mentioned concerns about nursing home ownership are not limited to PECs. Other types of private ownership, such as REITs, have generated similar concerns. 8

I. Legal Basis for the Rulemaking

Congress delegated certain powers to regulate interstate commerce to DOT in numerous pieces of legislation, most notably in section 6 of the Department of Transportation Act (DOT Act) (Pub. L. 89-670, 80 Stat. 931, 937, Oct. 15, 1966). Section 6 of the DOT Act transferred to DOT the authority of the former Interstate Commerce Commission (ICC) to regulate the qualifications and maximum hours of service of employees, the safety of operations, and the equipment, of motor carriers in interstate commerce (80 Stat. 939). This authority, first granted to the ICC in the Motor Carrier Act of 1935 (Pub. L. 74-255, 49 Stat. 543, Aug. 9, 1935), now appears in 49 U.S.C. chapter 315. The regulations issued under this authority, as well as subsequently enacted laws, became known as the FMCSRs, codified at 49 Code of Federal Regulations (CFR) parts 350 through 399. The administrative powers to enforce chapter 315 (codified in 49 U.S.C. chapter 5) were also transferred from the ICC to DOT in 1966, assigned first to the Federal Highway Administration (FHWA), and then to FMCSA. The FMCSA Administrator, whose powers and duties are set forth in 49 U.S.C. 113, has been delegated authority by the Secretary of Transportation (the Secretary) under 49 CFR 1.81 to prescribe regulations and to exercise authority over and with respect to any personnel within the organization, and under 49 CFR 1.87 to carry out the motor carrier functions vested in the Secretary.

Between 1984 and 1999, enforcement of the FMCSRs, the Hazardous Materials Regulations, and the Commercial Regulations was added to FHWA's authority. The statutes granting these authorities include the Motor Carrier Safety Act of 1984 (Pub. L. 98-554, Title II, 98 Stat. 2832, Oct. 30, 1984), codified at 49 U.S.C. chapter 311, subchapter III; the Commercial Motor Vehicle Safety Act of 1986 (Pub. L. 99-570, Title XII, 100 Stat. 3207-170, Oct. 27, 1986), codified at 49 U.S.C. chapter 313; the Hazardous Materials Transportation Uniform Safety Act of 1990, as amended (Pub. L. 101-615, 104 Stat. 3244, Nov. 16, 1990), codified at 49 U.S.C. chapter 51; the Omnibus Transportation Employee Testing Act of 1991 (Pub. L. 102-143, Title V, 105 Stat. 917, 952, Oct. 28, 1991), codified at 49 U.S.C. 31306; the ICC Termination Act of 1995 (Pub. L. 104-88, 109 Stat. 803, Dec. 29, 1995), codified at 49 U.S.C. chapters 131-149; and the Transportation Equity Act for the 21st Century (Pub. L. 105-178, 112 Stat. 107, June 9, 1998).

The Motor Carrier Safety Improvement Act of 1999 (Pub. L. 106-159, 113 Stat. 1748, Dec. 9, 1999) established FMCSA as a new operating administration within DOT, effective January 1, 2000. Accordingly, since that time the motor carrier safety, and certain commercial, responsibilities previously assigned to both the ICC and FHWA have been the jurisdiction of FMCSA. These responsibilities also include regulations relating to section 18 of the Noise Control Act of 1972, codified at 42 U.S.C. 4917, which were originally assigned to the Secretary of Transportation (Pub. L. 92-574, 86 Stat. 1249, Oct. 27, 1972) and delegated to FHWA (39 FR 7791, Feb. 28, 1974), and are now the jurisdiction of FMCSA, as codified at 49 U.S.C. 113(f)(1). 1

Congress subsequently expanded, modified, and amended FMCSA's authority in the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Pub. L. 107-56, 115 Stat. 272, Oct. 26, 2001); the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) (Pub. L. 109-59, 119 Stat. 1144, Aug. 10, 2005); the SAFETEA-LU Technical Corrections Act of 2008 (Pub. L. 110-244, 122 Stat. 1572, June 6, 2008); the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Pub. L. 112-141, 126 Stat. 405, July 6, 2012); Fixing America's Surface Transportation Act (Pub. L. 114-94, 129 Stat. 1312, Dec. 4, 2015); and the Infrastructure Investment and Jobs Act (Pub. L. 117-58, 135 Stat. 429, Nov. 15, 2021).

The specific regulations amended by this rule are based on the statutes detailed above. Generally, the legal authority for each of those provisions was explained when the requirement was originally adopted and is noted at the beginning of each part in 49 CFR.

The Administrative Procedure Act (APA) specifically provides exceptions to its notice and comment rulemaking procedures when an agency finds there is good cause to dispense with them, and incorporates the finding, and a brief statement of reasons therefore, in the rules issued (5 U.S.C. 553(b)(B)). Good cause exists when an agency determines that notice and public comment procedures are impractical, unnecessary, or contrary to the public interest. The amendments made in this final rule primarily correct inadvertent errors and omissions, remove or update obsolete references, and make minor language changes to improve clarity and consistency. The technical amendments do not impose any new material requirements or increase compliance obligations. For these reasons, FMCSA finds good cause that notice and public comment on this final rule are unnecessary.

In addition to amendments that fall within the APA good cause exception, this rule also contains amendments that fall within the APA exception for rules of agency organization, procedure, or practice. The Agency amends part 386, titled “Rules of Practice for FMCSA Proceedings,” so that administrative proceedings under that part are brought before the appointed or duly authorized Agency Decisionmaker rather than the Assistant Administrator. These amendments fall within the exception to the APA's notice and comment rulemaking procedures for “rules of agency organization, procedure, or practice,” (5 U.S.C. 553(b)(A)), and are therefore excepted from the notice and public comment requirements. Further, the APA does not apply to matters “relating to agency management or personnel” (5 U.S.C. 553(a)(2)); therefore, the notice and comment rulemaking procedures do not apply to the Agency Decisionmaker amendments in part 386.

The APA also allows agencies to make rules effective immediately with good cause (5 U.S.C. 553(d)(3)), instead of requiring publication 30 days prior to the effective date. For the reasons already stated, FMCSA finds there is good cause for this rule to be effective immediately, except as noted in amendatory instruction 84 concerning the revised Medical Examination Report Form, MCSA-5875, in § 391.43(f) and Medical Examiner's Certificate, Form MCSA-5876, in § 391.43(h).

The purpose of this rule is to make technical amendments throughout FMCSA's regulations. These amendments include minor changes to correct inadvertent errors and omissions, remove or update obsolete references, and improve the clarity and consistency of certain regulatory provisions. These technical amendments, which apply to many different parts of FMCSA's regulations, are collected into this single rule for rulemaking efficiency. This rule is bound together by the common character of the changes as technical amendments, rather than a common subject matter. As a result, FMCSA finds that the provisions in this final rule can operate independently and are therefore severable. In the event a court were to invalidate one or more of this rulemaking's unique provisions, the remaining provisions should stand.

This section-by-section analysis first describes changes to the regulatory text that affect multiple parts within the FMCSRs, and then the remaining changes to the regulatory text in numerical order.

The following amendments affect chapter III, subchapter B, as a whole, or multiple parts within the subchapter.

FMCSA makes several amendments to the appendices of chapter III, subchapter B, to complete a reorganization of that subchapter. The object of the reorganization is to move each appendix at the end of subchapter B to the specific part to which the appendix most directly pertains, for the purpose of making the appendices more helpful and accessible to the reader. All but one of the appendices have already been moved via redesignation, though appendices A and C through E remain reserved at the end of the subchapter to maintain the appendix ordering. 2 The last non-reserved appendix, appendix B, is now moved and the reserved appendices are deleted.

Subchapter B formerly had an appendix A entitled “Interpretations.” This appendix contained a collection of interpretations of the FMCSRs. FMCSA's predecessor agency, FHWA, deemed this appendix obsolete, and removed and reserved it (59 FR 60319, 60322, Nov. 23, 1994). With the relocation of appendix B, appendix A no longer needs to be reserved to maintain the appendix ordering, and so FMCSA deletes reserved appendix A to subchapter B.

FMCSA redesignates appendix B to subchapter B, entitled “Special Agents,” as appendix B to part 390. This appendix describes the authority of persons appointed as special agents of FMCSA, and the obligations of motor carriers and other regulated entities to comply with examination and inspection by special agents. Of the parts within the FMCSRs, this appendix most directly pertains to part 390, “Federal Motor Carrier Safety Regulations; General,” therefore FMCSA redesignates the appendix as appendix B to that part. Note that the appendix is cross-referenced in several sections of the FMCSRs, and conforming amendments are made to update these cross-references, as described later in the section-by-section analysis.

Subchapter B formerly had an appendix C entitled “Written Examination for Drivers.” This appendix related to a written examination covering the FMCSRs, then required by part 391. FHWA determined this requirement was unnecessary and removed and reserved the appendix (59 FR 60319, 60320, Nov. 23, 1994). FMCSA now deletes the reserved appendix.

Subchapter B formerly had an appendix D entitled “Table of Disqualifying Drugs and Other Substances, Schedule I,” and an appendix E entitled “Tables of Disqualifying Drugs and Other Substances, Schedules II Through V.” Earlier versions of the FMCSRs cross-referenced these tables in regulations related to controlled substances use and testing. When the controlled substances use and testing regulations were updated, these cross-references to appendices were replaced with cross-references to drug schedules located elsewhere in the CFR (see, e.g., 62 CFR 37150, 37151, July 11, 1997 (amendment to the definition of controlled substance in § 383.5)). The change in cross-references made appendices D and E unnecessary, and FHWA removed and reserved them (62 CFR 37150, 37153, July 11, 1997). FMCSA now deletes these reserved appendices.

FMCSA amends the FMCSRs throughout to change the terms “Web site” and “web site” to “website.” This change adds consistency throughout the FMCSRs by adopting the updated form of the term, which is already used in several regulations (see, e.g., 49 CFR 375.213(a)(1)). FMCSA also changes the term “http” to “https” to ensure the website addresses in the CFR are accurate. This amendment affects §§ 365.105, 365.106T, 365.503, 368.3, 368.3-1T, 368.3T, 369.1, 371.107, 371.111, 371.117, 375.103, 375.213, 385.305, 385.305T, 385.603T, 389.5, 390.19, 390.19T, 390.200T, 390.201, 391.43, 395.22, and appendix A to subpart B of part 395.

FMCSA amends the FMCSRs by adding a hyphen to the term “third party” where it is used as an adjective. In these instances, hyphen usage is recommended by the U.S. Government Publishing Office Style Manual. This amendment increases clarity by updating the term to use the correct grammar to avoid confusion. This amendment does not affect instances where “third party” is used as a noun (see, e.g., 49 CFR 350.207(b)). This amendment affects §§ 382.107, 382.401, 382.403, 382.409, 382.711, 383.5, 383.75, 384.228, 384.229, and 390.15.

FMCSA replaces “appendix B to subchapter B” with “appendix B to part 390” in paragraph (a). This change reflects the redesignation of appendix B to subchapter B of chapter III—Special Agents, as discussed above in section III.A. The redesignation appends the Special Agents material to part 390, the part to which it most directly pertains.

FMCSA replaces “§ 1312.3(a)” with “§ 1310.3(a)” in the definition of tariff to correct a cross-reference. The definition currently references 49 CFR 1312.3(a) when referring to Surface Transportation Board tariff requirements. However, the Surface Transportation Board tariff requirements for shipments of household goods referenced in the definition of tariff are found at 49 CFR 1310.3(a). Accordingly, FMCSA is updating the cross-reference to reflect the correct section of the regulations.

FMCSA amends § 375.403(a)(6)(ii) to clarify the requirements for binding estimates provided by household goods motor carriers. Section 375.403(a) describes the requirements for a binding estimate, and § 375.403(a)(6) relates to situations where a shipper of household goods tenders additional household goods or requires additional services not identified in the binding estimate. This section was amended last year to incorporate recommendations from the Household Goods Consumer Protection Working Group (the Working Group) (87 FR 24431, Apr. 26, 2022). Prior to this amendment, § 375.403(a)(6)(ii) referred to a revised binding estimate that accurately listed, in detail, additional household goods or services. As amended, § 375.403(a)(6)(ii) refers to a new, rather than a revised, binding estimate and does not expressly refer to a list of additional goods or services.

FMCSA's purpose in amending this section was merely to change the requirement from a revised binding estimate to a new binding estimate (87 FR 24431, 24435, Apr. 26, 2022). 3 The Working Group had found that, in some cases, revised estimates obscured whether the shipper and mover had agreed to the items to be moved, services to be provided, and price to be paid. The lack of clear terms made it difficult for investigators to address shipper complaints, and the Working Group recommended requiring a new estimate, rather than a revised estimate, to close this loophole.

In making the change from “revised binding estimate” to “new binding estimate” in 2022, however, there was no intent to remove the requirement that the estimate contain an accurate and detailed list of the household goods or services to which the estimate applied, and no such change was discussed in the rulemaking. Rather, FMCSA intended that the new estimate would justify the increased costs for additional goods and services by clearly describing all goods and services included in the shipment, as is required for original estimates in § 375.403(a)(5), including any additional goods tendered or services requested. It has come to FMCSA's attention that deleting this language may have inadvertently caused confusion about what a new binding estimate must contain. The Agency is therefore amending § 375.403(a)(6)(ii) to restore the language indicating that a list of additional household goods and services is required when a new estimate is prepared.

FMCSA also replaces “§ 375.401(a)” with “§ 375.401(b)(1)” in paragraph (b) to correct a cross reference. The requirements for a binding estimate referenced in paragraph (b) are in § 375.401(b)(1), whereas § 375.401(a) discusses physical surveys and does not mention binding estimates. Accordingly, FMCSA is updating the cross-reference to reflect the correct section of the regulations.

FMCSA amends § 375.405(b)(7)(ii) to make a clarification similar to the above amendment in § 375.403(a)(6)(ii). Section 375.405(b) describes the requirements for a non-binding estimate, and § 375.403(b)(7) relates to situations where a shipper of household goods tenders additional household goods or requires additional services not identified in the non-binding estimate, similar to the situation described in § 375.403(a)(6) but in the case of a non-binding estimate instead of a binding estimate. FMCSA amended § 375.405(b)(7)(ii) last year to require a new non-binding estimate, rather than a revised non-binding estimate (87 FR 24431, 24435, Apr. 26, 2022). As with the 2022 amendment to § 375.403(a)(6)(ii), FMCSA's amendment to streamline the regulatory language inadvertently caused confusion for movers when preparing new estimates. FMCSA now amends § 375.405(b)(7)(ii) to restore the original language, clarifying that the non-binding estimate must provide a detailed and accurate list of the additional household goods or services to which the estimate applies.

FMCSA amends § 375.505 by replacing the term “order for service” with the term “bill of lading” in paragraph (b)(4). This revision is consistent with the changes made in the 2022 final rule incorporating recommendations from the Working Group (87 FR 24431, Apr. 26, 2022). As noted in the preamble of that rule, in agreement with Recommendation 9 of the Working Group, FMCSA removed the requirements in part 375 for an order for service as duplicative and updated the requirements for a bill of lading to also include information that was previously contained in an order for service (87 FR 2441). While all references to an order for service in part 375 should have been replaced with references to a bill of lading, the final rule inadvertently left the original language in place in § 375.505(b)(4). FMCSA updates the reference to reflect that the bill of lading has replaced the order for service, consistent with the prior revisions.

FMCSA revises the definition of overcollection in § 378.2(d) so that the Surface Transportation Board is no longer described as a component of DOT. The Surface Transportation Board Reauthorization Act made the Surface Transportation Board completely independent from DOT (Pub. L. 114-110, 129 Stat. 2228, at 2228-29, Dec. 18, 2015). This amendment removes the characterization of the Surface Transportation Board as a DOT component to conform with the board's current status as an independent agency.

FMCSA replaces “Office of Bus and Truck Standards and Operations (MC-PS)” with “Office of Carrier, Driver & Vehicle Safety Standards (MC-PS)” to update the name of the office. The office name has changed to “Office of Carrier, Driver & Vehicle Safety Standards” since this section was last amended. FMCSA removes the word “the” preceding the term “FMCSA” in the section heading as an update to the language for consistency. FMCSA also removes the period after the term “SE” in the address provided in the section.

FMCSA removes the word “the” where it precedes the term “FMCSA” in the section heading for consistency. FMCSA removes the word “to” preceding the word “either” in paragraph (b) and adds the word “to” before the word “deny” to correct a typographical error. In paragraph (d)(1), FMCSA replaces “the Department of Transportation, Docket Management Facility, 1200 New Jersey Ave. SE, Washington, DC 20590-0001” with “Dockets Operations, U.S. Department of Transportation, 1200 New Jersey Avenue SE, West Building, Ground Floor, Washington, DC 20590-0001” to update the office name and location. In paragraph (d)(2), FMCSA replaces “the Department of Transportation, Docket Management Facility” with “Dockets Operations, U.S. Department of Transportation” to update the office name.

FMCSA revises § 382.213(b) to replace “pursuant to the instructions of a licensed medical practitioner” with “prescribed by a licensed medical practitioner.” This amendment conforms to FMCSA's intent as described in its final rule “Harmonizing Schedule I Drug Requirements,” published at 77 FR 4479 (Jan. 30, 2012). The Agency had proposed to amend § 382.213(b) by replacing “prescribed by” with “pursuant to the instructions of” a licensed medical practitioner but declined to adopt that change. When declining to adopt the language change in the final rule, FMCSA explained that the proposed change was inconsistent with language used elsewhere in the Agency's regulations and would be confusing to public. The Agency further stated in the final rule that it was removing the language “pursuant to the instructions of” and replacing it with the original language in this section, “prescribed by” (77 FR 4481). However, that change was inadvertently omitted from the 2012 final rule regulatory text. This amendment conforms the language of § 382.213(b) with FMCSA's expressed intent.

Section 382.213(c) currently states that employers who have actual knowledge of controlled substance use by drivers must not permit the driver to perform, or continue to perform, safety-sensitive functions. The term controlled substances, currently defined in § 382.107, refers to those substances tested for in accordance with 49 CFR 40.82. FMCSA amends § 382.213(c) by adding “as defined in § 382.107” after “controlled substances” and by adding “except when the use is prescribed by a licensed medical practitioner, as defined in § 382.107, who is familiar with the driver's medical history and has advised the driver that the substance will not adversely affect the driver's ability to safely operate a commercial motor vehicle.” The Agency makes this change to conform § 382.213(c) with the language of § 382.213(b), as revised.

Section 382.217 states that no employer may allow, require, permit, or authorize a driver to operate a commercial motor vehicle (CMV) during any period in which an employer determines that a driver is not in compliance with the return-to-duty requirements in 49 CFR part 40, subpart O, after the occurrence of prohibited drug or alcohol use, as specified in paragraphs (a) through (d) or has actual knowledge that a driver has used alcohol while performing safety sensitive functions, used alcohol within 4 hours of performing safety-sensitive functions, or used a controlled substance, as set forth in paragraphs (e)(1) through (3). The term controlled substance, currently defined in § 382.107, refers to those substances tested for in accordance with 49 CFR 40.82.

FMCSA amends paragraph (e)(3) by adding after “controlled substance” the phrase “except when the use is prescribed by a licensed medical practitioner who is familiar with the driver's medical history and has advised the driver that the substance will not adversely affect the driver's ability to safely operate a commercial motor vehicle.” Under current regulations, a driver who uses a controlled substance, as defined in § 382.107, pursuant to a valid prescription as described above, is not required to comply with return-to-duty requirements. The Agency makes this change to conform with existing practice in FMCSA's controlled substance use and testing program and to conform paragraph (e)(3) with the language of § 382.213(c), as revised.

FMCSA amends § 383.25(a)(1) by adding the words “and is otherwise authorized to operate the CMV for that trip” following “necessary to operate the CMV” in the first sentence. Section 383.25 permits a CLP holder to operate a CMV on public roads for purposes of behind-the-wheel (BTW) training, as long as several minimum conditions are met. One of these conditions, set forth in § 383.25(a)(1), requires that the CLP holder be accompanied by the holder of a valid commercial driver's license (CDL) who has the proper CDL group and endorsement(s) necessary to operate the CMV and is physically present in the front seat of the CMV next to the CLP holder, or in the case of a passenger vehicle, directly behind or in the first row behind the driver. The CDL holder must have the CLP holder under observation and direct supervision. The amendment clarifies that the CDL holder must also be legally authorized to operate the CMV for the trip. FMCSA makes this revision in response to a petition for rulemaking submitted in April 2023 by the Commercial Vehicle Safety Alliance asking the Agency to clarify this issue in the interest of promoting safety.

The requirement that the CLP holder be accompanied by the holder of a valid CDL who has the proper CDL group and endorsement(s) serves two purposes: (1) the CDL holder, having passed the CDL skills test(s), is knowledgeable in the operation of the CMV for BTW training purposes; and (2) the CDL holder is ready to assume control of the CMV in the event the CLP holder is not capable of performing a BTW training maneuver, or becomes otherwise incapacitated. As discussed below, FMCSA is aware, however, that situations may occur when the person accompanying the CLP holder has a valid CDL but is nevertheless not legally authorized to operate the CMV due to other existing regulatory requirements.

For example, someone holding a valid CDL may be prohibited from operating a CMV due to a drug or alcohol use or testing violation, in accordance with § 382.501(a). The Agency notes that even after the CDL downgrade provision set forth in § 383.73(q) takes effect on November 18, 2024, thereby removing the CDL privilege from the holder's license, the downgrade may not be recorded on the CDL holder's CDLIS record for up to 60 days. Another example involves a CDL holder who is not qualified to operate a CMV because they do not comply with the physical qualification requirements in 49 CFR part 391, subpart E, as required by § 391.11(a). The holder's CDL is subject to downgrade in accordance with § 383.73(o)(4), due to not a having a current medical certificate or medical variance, but again, the downgrade may not be effective for 60 days. Another scenario would be when a CDL holder has self-certified as “excepted interstate commerce” and is thus exempt from medical requirements, but the CDL holder is accompanying the CLP holder in a non-excepted interstate movement. Under these circumstances, operating without a current medical certificate is prohibited. In each of these examples, the individual continues to hold a CDL that is facially valid while they are otherwise prohibited from operating the CMV due to existing regulatory requirements. FMCSA acknowledges that these examples are not intended to be exclusive and that there may be other instances where an individual holding a valid CDL is not authorized to operate the CMV under the FMCSRs.

FMCSA replaces the words “he or she” with the words “the employer” in the introductory text of § 383.37 to clarify that the knowledge requirement referred to in the regulation applies to the employer. In paragraph (d), FMCSA replaces the words “he/she is driving” with “the driver is operating” to update the language.

Section 383.5 defines commercial driver's license (CDL) as a license issued to an individual by a State or other jurisdiction of domicile, in accordance with the standards contained in this part, which authorizes the individual to operate a class of a CMV. In accordance with § 383.23(b)(1), CDLs issued by Canadian Provinces and Territories in conformity with the Canadian National Safety Code and the Licencias Federales de Conductor issued by the United Mexican States are in accordance with the standards of 49 CFR part 383. In § 384.208(a), FMCSA adds the phrase “or other jurisdiction of domicile” after “by another State” and adds the words “or jurisdiction” after “notify the State.” The purpose of these amendments, which reflect current practice, is to conform to the current definition of CDL set forth in § 383.5 and to clarify that the commercial licensing entities in Canada and Mexico are included within the scope of this section.

In paragraphs (a)(1) and (b)(1) of § 384.209, FMCSA adds the phrase “or other jurisdiction of domicile” after “another State” and adds the words “or jurisdiction” between “the licensing entity in the State” and “where the driver is licensed.” The purpose of these amendments, which reflect current practice, is to conform to the current definition of CDL set forth in § 383.5 and to clarify that the commercial licensing entities in Canada and Mexico are included within the scope of this section, similar to the amendments to § 384.208 above.

FMCSA amends part 386 by replacing “Assistant Administrator” with “Agency Decisionmaker” throughout the part, excluding §§ 386.1 and 386.2. FMCSA amends §§ 386.1 and 386.2 to make similar, section-specific replacements. These amendments specify that administrative proceedings under applicable provisions of the Federal Motor Carrier Safety Regulations (49 CFR parts 350 through 399), including the commercial regulations (49 CFR parts 360 through 379), and the Hazardous Materials Regulations (49 CFR parts 171 through 180) are not necessarily brought before the Assistant Administrator. The statute requiring FMCSA to have an Assistant Administrator, 49 U.S.C. 113(e), does not require that this person act as the Agency Decisionmaker. Replacing the current language is consistent with the Agency's ability to allow another properly appointed official to assume the duties of Agency Decisionmaker when the Assistant Administrator position is vacant or when the Agency determines that this function is better served by a different official. Consequently, this part will be updated to state that such proceedings are before the Agency Decisionmaker, rather than before the Assistant Administrator. FMCSA also amends part 386 to conform the capitalization of the term “Agency Decisionmaker” throughout the part.

FMCSA amends part 386 to correct certain instances where the term “Final Agency Order” is used instead of the term “Final Order.” These terms, while similar, are distinguishable in that a Final Order may be reviewed by the Agency Decisionmaker, while a Final Agency Order is typically issued by the Agency Decisionmaker and constitutes FMCSA's final action in a proceeding. The amendment applies to sections where the regulations are intended to refer to an administratively reviewable Final Order rather than a Final Agency Order as defined in § 386.2. The affected sections are §§ 386.14, 386.16, 386.31, 386.36, 386.61, and 386.64. Taking § 386.14 as an example, the document currently described as a “Notice of Default and Final Agency Order” in § 386.14(c)(1) is appealable to the Agency Decisionmaker for review and is therefore not a Final Agency Order when initially issued, thus the terminology must be corrected to read, “Notice of Default and Final Order.” In addition to replacing the term “Final Agency Order” with “Final Order” where necessary to correct this oversight, the Agency also makes minor conforming amendments to §§ 386.14(c)(3) and 386.16(a)(5). The term “Final Agency Order” is retained in sections describing orders that are Final Agency Orders as defined in § 386.2 (see, e.g., § 386.18).

FMCSA amends § 386.1(a) and (b) to replace “Assistant Administrator” with “Agency Decisionmaker,” consistent with the replacement amendment applied throughout part 386, described above. The amendment to § 386.1 includes the removal of the description of the Assistant Administrator as FMCSA's Chief Safety Officer, appearing in § 386.1(a), because the section will no longer refer to the Assistant Administrator.

FMCSA amends the definition of “Agency Decisionmaker” in § 386.2. Currently, the Agency Decisionmaker is the Assistant Administrator or any person to whom this decisionmaking authority has been delegated. The amended definition will make clear that other Agency officials may serve as the Agency Decisionmaker, provided they are appointed by the President or otherwise duly authorized. As discussed above, the Assistant Administrator is not statutorily required to serve in this role and FMCSA has the discretion to delegate these functions to another authorized official.

FMCSA deletes the definition of “Assistant Administrator,” as this term will no longer be used interchangeably with the term “Agency Decisionmaker.”

FMCSA amends the definition of “Final Agency Order” to reflect that such orders are issued by the Agency Decisionmaker or another authorized official, in conformance with the amendments discussed above.

FMCSA amends § 386.3 to conform the capitalization of the terms “Agency Decisionmaker” and “Agency Decisionmakers” with the capitalization used throughout the rest of part 386.

FMCSA amends § 386.12 by correcting the telephone number provided for information on filing a written complaint, in each place that the number appears. The telephone number included in this section was inaccurately published as beginning with “1-800,” but in fact begins with “1-888.” The remainder of the telephone number is unchanged.

FMCSA amends § 387.9 by adding the words “in bulk” to one of the commodities listed in table 1, to conform the description of that commodity to other commodity descriptions on the list. Section 387.9 specifies minimum levels of financial responsibility that motor carriers must maintain to comply with other sections within part 387 (see 49 CFR 387.7). The level of financial responsibility required depends on the type of carriage and the commodity transported, as shown in table 1 of § 387.9. The second row of the table specifies a combination of carriage type and commodity subject to a $5,000,000 level of financial responsibility.

FMCSA, and FHWA before it, have amended table 1 several times to clarify that the list generally refers to commodities carried in bulk (see 59 FR 63921, 63924 (Dec. 12, 1994), 73 FR 76496 (Dec. 16, 2008), and 86 FR 57060, 57064 (Oct. 14, 2021)). The table previously used various terms to describe the quantities of these commodities and stated that the $5,000,000 level of financial responsibility applied to, among other commodities, in bulk Division 1.1, 1.2, 1.3 materials, Division 2.3, Hazard Zone A, or Division 6.1, Packing Group I, Hazard Zone A material. As part of a later amendment, this list of commodities was broken into multiple clauses and the word “or” omitted. The term “in bulk” was also inadvertently omitted from the new clause containing Division 2.3, Hazard Zone A materials. This commodity should be described as in bulk, the same as the preceding and succeeding items on this list. FMCSA corrects this oversight by prepending the words “in bulk” to Division 2.3, Hazard Zone A material.

FMCSA revises the definition of act in § 389.3 by adding “or commercial activity” to the end of the definition. This revision clarifies that the rulemaking procedures in part 389 apply to the issuance, amendment, and revocation of rules under FMCSA's statutory authority for both motor carrier safety and commercial activities. 4 The definition of act currently references statutes only covering motor carrier safety. FMCSA's intent and practice, however, is and has been that part 389 applies to rulemaking procedures in all areas of FMCSA's authority, including the Agency's commercial authorities. The lack of reference to commercial authorities is an oversight in § 389.3 that has carried over from predecessor agency regulations.

When responsibility for administering these commercial authorities was transferred from the ICC to FHWA, 5 the definition of act should have been updated to include the new authorities under which FHWA was promulgating regulations. However, the new commercial authorities were not formally updated into the definition of act, although nothing in the regulatory history of this section suggests this omission was intended. When the FHWA regulations were transferred to FMCSA, it was an inadvertent oversight for the Agency to not update the definition to include the commercial statutes. In practice, the Agency has treated these regulatory actions the same. Thus, the Agency remedies this ongoing oversight by revising the definition of act to include a reference to FMCSA's commercial statutory authorities to clarify that the provisions in part 389 apply to the issuance, amendment, and revocation of rules under both safety and commercial authorities.

FMCSA amends § 389.31 by correcting a typographical error in the Agency's website address. The published address, “ www.FMCSA.gov, ” is incorrect and FMCSA replaces it with the correct address, which is “ www.FMCSA.dot.gov. ”

FMCSA revises the definition of employer in §§ 390.5 (suspended) and 390.5T by replacing the word “terms” with “term” to correct a typographical error. The word “term” is meant to refer to the term “employer” in the singular.

FMCSA revises the definition of medical variance in §§ 390.5 (suspended) and 390.5T by removing the words “or § 391.64 of this chapter” in paragraph (1) of the definition. Section 391.64 provided a basis for an exemption from the Agency's vision standard for certain drivers who participated in FMCSA's Vision Waiver Study Program conducted in the 1990s. On January 21, 2022, FMCSA published a final rule adopting an alternative vision standard for individuals to be medically certified to operate CMVs in interstate commerce (87 FR 3390). The rule also eliminated physical qualification under § 391.64 as of March 22, 2023 (87 FR 7756, Feb. 10, 2022). Because this date has passed, FMCSA removes the obsolete reference to medical certification under § 391.64 from the definition. In addition, FMCSA adds the word “or” to the end of paragraph (1) of the definition to make the list grammatically correct and reflect that either of the documents listed is included in the definition, as indicated in the introductory paragraph of the term.

FMCSA revises the definition of special agent in §§ 390.5 (suspended) and 390.5T by replacing “appendix B to subchapter B—Special agents” and “appendix B to this subchapter—Special agents,” respectively, with “appendix B to this part.” This change reflects the redesignation of appendix B to subchapter B of chapter III discussed above in section III.A. The redesignation appends the Special Agents material to part 390, the part to which it most directly pertains.

FMCSA revises § 390.25 by replacing the words “he or she” with the word “it” in the last sentence of the section. This amendment also corrects an error from a previous technical amendment. In FMCSA's technical amendments rule published October 14, 2021, the Agency replaced the term “the FMCSA Field Administrator” with the term “FMCSA,” and a corresponding edit should have been made to replace “he or she” with “it” in the same sentence (see 86 FR 57060, 57064-65, Oct. 14, 2021). This amendment corrects that oversight.

FMCSA revises § 390.27 to change the address of the Southern Service Center from 1800 Century Boulevard, Suite 1700, Atlanta, Georgia 30345-3220, to 61 Forsyth Street SW, Suite 3M40, Atlanta, GA 30303. The Southern Service Center moved in May 2021, requiring this update to remove the obsolete address.

FMCSA revises § 391.23 to clarify that the initial motor vehicle record (MVR) required by § 391.23(a) is to cover the prior 3 years. This revision addresses an inadvertent error in a previous rulemaking titled, “Medical Certification Requirements as Part of the CDL,” published at 73 FR 73095 (Dec. 1, 2008). FMCSA's intention in that rulemaking was to revise paragraph (a)(1) to use the terms “State driver license agency” and “motor vehicle record” (73 FR 73113). Prior to the rule, paragraph (a)(1) read, “An inquiry into the driver's driving record during the preceding 3 years to the appropriate agency of every State in which the driver held a motor vehicle operator's license or permit during those 3 years; and.” The rule revised the paragraph to read “An inquiry to each State where the driver held or holds a motor vehicle operator's license or permit during the preceding 3 years to obtain that driver's motor vehicle record.” The rulemaking provided no mention of, nor rationale for, the removal of the language requiring the initial MVR to cover the prior 3 years.

FMCSA now fixes this unintentional deletion by adding “covering that driver's prior 3-year driving history” to the end of paragraph (a)(1). The accidental removal of the language in the 2008 rule has not changed how the 3-year requirement has been applied since 2008, but FMCSA believes adding that language back to paragraph (a)(1) increases clarity for regulated entities.

FMCSA amends three paragraphs in § 391.43 to remove obsolete references to medical certification under § 391.64. As noted above, § 391.64 provided a basis for an exemption from the Agency's vision standard for certain drivers who participated in FMCSA's Vision Waiver Study Program conducted in the 1990s. On January 21, 2022, FMCSA published a final rule adopting an alternative vision standard for individuals to be medically certified to operate CMVs in interstate commerce (87 FR 3390). The rule also eliminated physical qualification under § 391.64 as of March 22, 2023 (87 FR 7756, Feb. 10, 2022).

FMCSA revises § 391.43 by removing and reserving paragraph (e). Paragraph (e) relates only to drivers medically certified under § 391.64.

In paragraph (f), FMCSA changes the Medical Examination Report Form, MCSA-5875, by removing the option for medical certification under § 391.64 in the “Medical Examiner Determination (Federal)” section. Use of the revised form will become effective 60 days after this rule is published to provide sufficient time for the public to make any necessary information technology changes.

In paragraph (h), FMCSA changes the Medical Examiner's Certificate, Form MCSA-5876, by removing the option for medical certification under § 391.64 in the first section on the form. Use of the revised form will become effective 60 days after this rule is published to provide sufficient time for the public to make any necessary information technology changes.

FMCSA revises § 391.45 by removing and reserving paragraph (d). Paragraph (d) relates only to drivers medically certified under § 391.64. As previously noted, § 391.64 provided a basis for an exemption from the Agency's vision standard for certain drivers who participated in FMCSA's Vision Waiver Study Program conducted in the 1990s. On January 21, 2022, FMCSA published a final rule adopting an alternative vision standard for individuals to be medically certified to operate CMVs in interstate commerce (87 FR 3390). The rule also eliminated physical qualification under § 391.64 as of March 22, 2023 (87 FR 7756, Feb. 10, 2022). Because this date has passed, FMCSA removes the obsolete reference to medical certification under § 391.64.

FMCSA amends § 391.47 to reflect current Agency terminology and eligibility to conduct a driver physical qualification examination. Section 391.47 provides a process to resolve conflicting medical certification determinations between the medical examiner for the driver and the medical examiner for the motor carrier. When § 391.47 was adopted in 1970, the term “medical examiner” was used in § 391.47 to describe the individuals who conducted the physical qualification examination (35 FR 6458, Apr. 22, 1970). At that time, § 391.43(a) provided that only a physician, i.e., a licensed doctor of medicine or osteopathy, was allowed to conduct such examinations. In 1977, § 391.47 was completely rewritten and an opinion by an impartial medical specialist in the field in which the medical conflict arose was added to the process (42 FR 18076, Apr. 5, 1977). The term “physician” was used throughout the revised section to replace medical examiner and to include the impartial medical specialist. The intent was to ensure that the medical specialist was well qualified. The relevant provisions of § 391.47 have not been revised since 1977.

Over time, the categories of medical professionals eligible to conduct physical qualification examinations have expanded and the term used to describe them has changed. In 1992, a new definition of health care professional was added to § 390.5 (57 FR 33276, July 28, 1992). The term was defined as a person who is licensed, certified, and/or registered, in accordance with applicable State laws and regulations, to perform physical examinations. It included, but was not limited to, doctors of medicine, doctors of osteopathy, physician assistants, advanced practice nurses, and doctors of chiropractic. Section 391.43(a)(1) was amended to provide that the physical qualification examination must be performed by a licensed health care professional as defined in § 390.5.

In 1993, §§ 390.5 and 391.43 were amended with a technical amendment that changed the term “health care professional” wherever it appeared back to the previous usage of “medical examiner” without a change to the definition (58 FR 59194, Nov. 8, 1993). In 2012, the definition of medical examiner in § 390.5 was amended with respect to physical qualification examinations conducted on and after May 21, 2014, to mean an individual certified by FMCSA and listed on the National Registry of Certified Medical Examiners in accordance with 49 CFR part 390 (77 FR 24104, Apr. 20, 2012). New § 390.103(a)(1) provides the professional licensure requirements for medical examiner eligibility, which are essentially the same as those in the prior definition of medical examiner.

Section 391.47 was inadvertently overlooked when these changes occurred; therefore, FMCSA amends § 391.47 to conform to current Agency terminology and medical examiner eligibility. In paragraphs (b)(1) and (7), FMCSA changes “physicians” to “medical examiners and medical specialists.” In paragraph (b)(2), FMCSA changes “physician” to “medical examiner” each place that it appears.

In addition, FMCSA revises § 391.47 by removing the mail stop “MC-PS” in each place that it appears. This amendment corrects an inadvertent error from a previous technical amendment. In FMCSA's technical amendments rule published October 14, 2021, the Agency simplified many sections across various parts of the CFR to remove or otherwise update references to specific titles or offices to provide greater flexibility in delegations (86 FR 57060). The Agency replaced references to the Office of Carrier, Driver and Vehicle Safety Standards and its Director with the term “FMCSA,” but failed to remove the corresponding mail stop (86 FR 57074). This amendment corrects that oversight in § 391.47(c), (d)(1) and (2), and (f) by removing the reference to “MC-PS.”

FMCSA amends the definition of utility service vehicle provided in § 395.2 by adding broadband-internet and cellular telephone operations as examples of public utilities in paragraph (1) of the definition. The definition of utility service vehicle in § 395.2 is used in part 391 as part of the hours of service regulations. The definition provides a non-exhaustive list of public utilities in paragraph (1) as an illustration of which CMVs should be considered utility service vehicles. Broadband-internet and cellular telephone operations are public utilities, as evidenced by the Federal Communication Commission's classification of these services as public utilities. Many CMVs are used to repair, maintain, and operate facilities necessary for the delivery of broadband-internet and cellular telephone operations. Given the prevalence of these operations and associated vehicles, FMCSA amends the list of public utilities in § 395.2 by adding broadband-internet and cellular telephone operations.

FMCSA replaces “appendix B to this subchapter” with “appendix B to part 390” in paragraph (a). This change reflects the redesignation of appendix B to subchapter B of chapter III discussed above in section III.A. The redesignation appends the Special Agents material to part 390, the part to which it most directly pertains.

FMCSA replaces “appendix B to this subchapter” with “appendix B to part 390” in paragraph (a). This change reflects the redesignation of appendix B to subchapter B of chapter III discussed above in section III.A. The redesignation appends the Special Agents material to part 390, the part to which it most directly pertains.

FMCSA replaces “Appendix B of chapter III of this title” with “appendix B to part 390” in paragraph (a). This paragraph references the Special Agents appendix, although it incorrectly describes the appendix as appended to chapter III rather than subchapter B. FMCSA amends this section to reflect the redesignation of appendix B to subchapter B of chapter III discussed above in section III.A. The redesignation appends the Special Agents material to part 390, the part to which it most directly pertains.

FMCSA has considered the impact of this final rule under E.O. 12866 (58 FR 51735, Oct. 4, 1993), Regulatory Planning and Review, E.O. 13563 (76 FR 3821, Jan. 21, 2011), Improving Regulation and Regulatory Review, and by E.O. 14094 (88 FR 21879, Apr. 11, 2023), Modernizing Regulatory Review. The Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB) determined that this final rule is not a significant regulatory action under section 3(f) of E.O. 12866, as supplemented by E.O. 13563 and E.O. 14094, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that order. Accordingly, OMB has not reviewed it under that E.O. In addition, this rule is not significant within the meaning of DOT regulations (49 CFR 5.13(a)). The amendments made in this final rule primarily correct inadvertent errors and omissions, remove or update obsolete references, and make minor language changes to improve clarity and consistency. Some changes are statutorily mandated or relate to previous changes that were statutorily mandated. In accommodating those changes, the Agency is performing nondiscretionary, ministerial acts. Other changes merely align regulatory requirements with the underlying statutory authority. None of the changes in this final rule impose new material requirements or increase compliance obligations; therefore, this final rule imposes no new costs and a full regulatory evaluation is unnecessary.

This rule is not a major rule as defined under the Congressional Review Act (5 U.S.C. 801-808). 7

Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612), FMCSA is not required to complete a regulatory flexibility analysis because, as discussed earlier in the Legal Basis for the Rulemaking section, this action is not subject to notice and public comment under section 553(b) of the APA.

In accordance with section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, 110 Stat. 857, Mar. 29, 1996), FMCSA wants to assist small entities in understanding this final rule so they can better evaluate its effects on themselves and participate in the rulemaking initiative. If the final rule will affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance; please consult the person listed under the FOR FURTHER INFORMATION CONTACT section of this final rule.

Small businesses may send comments on the actions of Federal employees who enforce or otherwise determine compliance with Federal regulations to the Small Business Administration's Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of FMCSA, call 1-888-REG-FAIR (1-888-734-3247). DOT has a policy regarding the rights of small entities to regulatory enforcement fairness and an explicit policy against retaliation for exercising these rights.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or Tribal government, in the aggregate, or by the private sector of $192 million (which is the value equivalent of $100 million in 1995, adjusted for inflation to 2022 levels) or more in any 1 year. This final rule will not result in such an expenditure.

This final rule contains no new information collection requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under section 1(a) of E.O. 13132 if it has “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” FMCSA has determined that this rule will not have substantial direct costs on or for States, nor will it limit the policymaking discretion of States. Nothing in this document preempts any State law or regulation. Therefore, this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Impact Statement.

Section 522 of title I of division H of the Consolidated Appropriations Act, 2005 (Pub. L. 108-447, 118 Stat. 2809, 3268, Dec. 8, 2004 (5 U.S.C. 552a note)), requires the Agency to conduct a privacy impact assessment of a regulation that will affect the privacy of individuals. Because this rule does not require the collection of personally identifiable information, the Agency is not required to conduct a privacy impact assessment.

The Privacy Act (5 U.S.C. 552a) applies only to Federal agencies and any non-Federal agency that receives records contained in a system of records from a Federal agency for use in a matching program.

The E-Government Act of 2002 (Pub. L. 107-347, sec. 208, 116 Stat. 2899, 2921, Dec. 17, 2002), requires Federal agencies to conduct a privacy impact assessment for new or substantially changed technology that collects, maintains, or disseminates information in an identifiable form. No new or substantially changed technology will collect, maintain, or disseminate information as a result of this rule. Accordingly, FMCSA has not conducted a privacy impact assessment.

This rule does not have Tribal implications under E.O. 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect 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.

FMCSA analyzed this rule pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq. ) and determined this action is categorically excluded from further analysis and documentation in an environmental assessment or environmental impact statement under FMCSA Order 5610.1 (69 FR 9680 (Mar. 1, 2004)), Appendix 2, paragraph 6.b and c. These Categorical Exclusions address technical amendments and other minor amendments such as those found in this rulemaking, as well as regulations concerning internal agency functions, organization or personnel administration. Therefore, preparation of an environmental assessment or environmental impact statement is not necessary.

In consideration of the foregoing, FMCSA amends 49 CFR chapter III as set forth below:

On August 15, 2016, NMFS published a final rule (81 FR 54390) implementing the MMPA Import Provisions (Section 101(a)(2)). Section 101(a)(2) of the MMPA prohibits “the importation of commercial fish or products from fish which have been caught with commercial fishing technology which results in the incidental kill or incidental serious injury of ocean mammals in excess of United States standards.” 16 U.S.C. 1371(a)(2). In the 2016 final rule, NMFS explained that “a fish or fish product caught with commercial fishing technology which results in the incidental mortality or incidental serious injury of marine mammals in excess of U.S. standards is any fish or fish product harvested in an exempt or export fishery for which a valid comparability finding is not in effect.” 50 CFR 216.24(h)(1)(i). A “comparability finding” is “a finding by the Assistant Administrator [for Fisheries] that the harvesting nation for an export or exempt fishery has met the applicable conditions specified in [50 CFR 216.24(h)(6)(iii)] subject to the additional considerations for comparability determinations set out in [50 CFR 216.24(h)(7)].” Id. § 216.3. The 2016 final rule set forth those conditions in detail, which measure the effectiveness of the harvesting nation's regulatory program as compared to the U.S. regulatory program, as well as the procedure for issuing a comparability finding. The rule established that fish and fish products from fisheries identified in the List of Foreign Fisheries (LOFF) can be imported into the United States only if the harvesting nation has applied for and received such a comparability finding from NMFS.

The 2016 final rule provided, however, that this import prohibition “shall not apply during the exemption period” (50 CFR 216.24(h)(2)(ii)), which the rule initially defined as a five-year period. NMFS explained that this exemption period was necessary to provide harvesting nations with adequate time to assess marine mammal stocks, estimate bycatch, and develop regulatory programs that mitigate that bycatch. The 2016 final rule stated that NMFS “shall determine whether to issue” comparability findings “[n]o later than November 30th of the year when the exemption period . . . is to expire.” Id. § 216.24(h)(6)(ii); see also 50 CFR 216.24(h)(8)(i) (“No later than November 30th of the year when the exemption period . . . is to expire, the Assistant Administrator shall publish in the Federal Register , by harvesting nation, a notice of the harvesting nations and fisheries for which it has issued or denied a comparability finding and the specific fish and fish products that as a result are subject to import prohibitions under paragraphs (h)(1) and (9) of this section.”).

On November 3, 2020, NMFS issued an interim final rule (IFR) (85 FR 69515), which extended the exemption period for one year and requested public comment. The 2020 interim final rule sought to provide additional time for harvesting nations to apply for comparability findings and to comply with the requirements for such findings set forth in the 2016 final rule in light of the disruptions caused by the coronavirus pandemic. On October 21, 2022, NMFS issued a final rule (87 FR 63955), which responded to the comments received in response to the 2020 IFR and revised that rule to extend the exemption period by an additional year, until December 31, 2023, to give NMFS additional time to complete its assessment of the applications for comparability findings.

Under the current exemption period, therefore, NMFS must “determine whether to issue” comparability findings by “[n]o later than November 30th of” 2023 (50 CFR 216.24(h)(6)(ii)).

NMFS received 134 applications for comparability findings from nations involving almost 2,500 foreign fisheries. Nations apply for comparability findings for each of their fisheries on the LOFF; however, comparability determinations are made on a fishery-by-fishery basis, not by country. Thus, individual determinations need to be made for each fishery. To review applications for comparability findings, NMFS evaluates each nation's regulatory programs to address incidental and intentional mortality and serious injury of marine mammals in each fishery that exports fish and fish products to the United States. The evaluation includes assessing information provided in the applicants' submissions and readily available scientific information. The process also includes, when necessary, consulting with applicant nations to clarify ambiguous statutory or regulatory text, address data gaps, or request elaboration on their marine mammal bycatch mitigation regulatory program. Ultimately, the Nation's regulatory program, as described in its application, must be evaluated for consistency with the MMPA import provisions and the MMPA domestic statutory and regulatory provisions governing marine mammal bycatch in U.S. fisheries.

After careful deliberation, the Department of Commerce and NMFS have determined that additional time is necessary to complete the evaluation process, given the large number of foreign fisheries, the evolving nature of fisheries data, and the practical challenges of assessing the comparability of the regulatory programs in foreign countries. This extension would allow time to ensure that comparability determinations are fairly and consistently applied across harvesting nations and their fisheries. In the event NMFS identifies a need to further extend the exemption period or otherwise amend the 2016 final rule to ensure the effectiveness of the regulatory measures of foreign fisheries, NMFS intends to provide prior notice, solicit public comment, and finalize any such amendments within the extended exemption period provided under this rule.

Therefore, NMFS is extending the exemption period by two years to December 31, 2025.

This rule is published under the authority of the Marine Mammal Protection Act, 16 U.S.C. 1371. The NMFS Assistant Administrator has determined that this final rule is consistent with the Marine Mammal Protection Act and other applicable laws. Under NOAA Administrative Order (NAO 216-6), the promulgation of regulations that are procedural and administrative in nature are categorically excluded from the requirement to prepare an Environmental Assessment.

This final rule is exempt from the provisions of the Administrative Procedure Act (APA) that require advance notice and prior opportunity for public comment, as well as a 30-day delay in effectiveness, because it involves a “foreign affairs function of the United States” under 5 U.S.C. 553(a)(1). Courts have held that this foreign affairs exception covers certain rules involving restrictions on importation of foreign goods. See Am. Ass'n of Exporters & Importers-Textile & Apparel Grp. v. United States, 751 F.2d 1239, 1249 (Fed. Cir. 1985) (applying the foreign affairs exemption because “[p]rior disclosure of the Government's intention . . . to impose stricter import restrictions would `provoke definitely undesirable international consequences' ”); Mast Industries, Inc. v. Regan, 596 F. Supp. 1567, 1583 (Ct. Int'l Trade 1984) (“to the extent that the interim regulations define or alter quantitative limitations in bilateral trade agreements or unilaterally imposed restrictions on textile imports, they `clearly and directly' involve a `foreign affairs function' and are exempt from the prior notice and comment provisions of the APA”).

This rule falls under that exception. Under the 2016 final rule, as subsequently amended, the current exemption period is set to expire on December 31, 2023. And as explained above, NMFS is not able to finalize comparability findings by November 30, 2023 (as currently required under the 2016 final rule). Thus, if an extension of that exemption period is not in effect by December 31, 2023, importation of fish and fish products from all fisheries in the 134 countries that have applied for a comparability finding would be banned, thereby impairing U.S. trade interests and prompting “definitely undesirable international consequences.” H.R. Rep. No. 79-1980, at 257 (1946) (explaining that the foreign affairs exception applies to “ `affairs' which so affect the relations of the United States with other governments that, for example, public rulemaking would provoke definitely undesirable international consequences”).

Pursuant to 5 U.S.C. 553(b)(B) and (d)(3), NMFS also finds good cause to issue this final rule without advance notice or prior opportunity for public comment, as well as a 30-day delay in effectiveness, because such notice and public procedure would be contrary to the public interest. Were NMFS to seek public comment, the inherent delay attendant to such procedure would make it practically infeasible to issue a final rule before the expiration of the current exemption period on December 31, 2023. And because NMFS is not able to issue comparability findings by November 30, 2023, without an extension, it would be unlawful as of January 1, 2024, for all 134 applicant nations to export fish or fish products from any of the approximately 2,500 fisheries to the United States. Such consequences would undermine U.S. trade and adversely affect U.S. consumers.

Finally, this final rule is not subject to the 30-day delay in effectiveness for the additional reason pursuant to 5 U.S.C. 553(d)(1) that it “relieves a restriction.” This final rule does so by extending the current exemption period and thereby avoiding the impending ban on importation of fish and fish products from fisheries on the LOFF.

This final rule has been determined to be not significant for purposes of Executive Order 12866, as amended by Executive Order 14094.

This final rule contains no new or revised collection-of-information requirements subject to the Paperwork Reduction Act.

For the reasons set out in the preamble, 50 CFR part 216 is amended as follows: