Table of Contents I. Introduction A. Objectives of the Final Rule B. Background 1. Farm Credit System 2. Post-Financial Crisis Capital Rulemakings 3. ADC Lending Risk and HVCRE Risk Weight II. Summary of the Proposed Rule, Comments Received, and Final Rule A. Summary of the Proposed Rule B. Comments Received C. Discussion of Final Rule and Responses to Comments 1. Scope of HVCRE Exposure Definition 2. Exclusions From HVCRE Exposure Definition a. One- to Four-Family Residential Properties b. Agricultural Land c. Loans on Existing Income Producing Properties That Qualify as Permanent Financings d. Certain Commercial Real Property Projects i. Loan-to-Value Limits ii. Contributed Capital iii. Value Appraisal iv. Project e. Loans Originated for Less Than $500,000 f. Consideration of Additional Exclusions i. Project Financing of Public and Private Facilities ii. Agricultural Production or Processing Facilities With Contractual Purchase Agreements in Place iii. Minor Improvements or Alterations to Real Property iv. Credit Facilities Where Repayment Would Be From the Ongoing Business of the Borrower v. De Minimis Financings 3. Reclassification as a Non-HVCRE Exposure 4. Applicability Only to Loans Made After January 1, 2025 5. Impact on Prior FCA Board Actions III. Regulatory Analysis A. Regulatory Flexibility Act B. Congressional Review Act I. Introduction A. Objectives of the Final Rule

FCA's objectives in adopting this rule are to:

• Update capital requirements to reflect the increased risk characteristics exposures to certain acquisition, development or construction (ADC) loans pose to System institutions; and

• Ensure the System's capital requirements are comparable to the Basel Framework issued by the Basel Committee on Banking Supervision (BCBS or Basel Committee) and the standardized approach the Federal banking regulatory agencies (FBRAs) have adopted, 1 with deviations as appropriate to accommodate the different regulatory, operational, and credit considerations of the System.

In 1916, Congress created the System to provide permanent, affordable, and reliable sources of credit and related services to American agricultural and aquatic producers. As of January 1, 2024, the System consists of three Farm Credit Banks, one agricultural credit bank, 55 agricultural credit associations, one Federal land credit association, several service corporations, and the Federal Farm Credit Banks Funding Corporation (Funding Corporation). 2 System banks (including both the Farm Credit Banks and the agricultural credit bank) issue Systemwide consolidated debt obligations in the capital markets through the Funding Corporation, 3 which enables the System to extend short-, intermediate-, and long-term credit and related services to eligible borrowers. Eligible borrowers include farmers, ranchers, aquatic producers and harvesters and their cooperatives, rural utilities, exporters of agricultural commodities products, farm-related businesses, and certain rural homeowners. The System's enabling statute is the Farm Credit Act of 1971, as amended (Act). 4

In October 2013 and April 2014, the FBRAs published in the Federal Register capital rules governing the banking organizations they regulate (the U.S. rule). 5 When it was adopted, the U.S. rule reflected, in part, the BCBS's document entitled “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” (Basel III). 6 Although the U.S. rule has been updated since then, the risk weights generally have not changed.

The BCBS was established in 1974 by central banks with bank supervisory authorities in major industrial countries. The BCBS develops banking guidelines and recommends them for adoption by member countries and others. 7 Basel III was an internationally agreed upon set of measures developed in response to the 2007-2009 worldwide financial crisis with the goal of strengthening the regulation, supervision, and risk management of banks. Since that time, the BCBS has revised, updated, and integrated the Basel III reforms into a consolidated Basel Framework (Basel Framework), which comprises of all of the current and forthcoming BCBS standards. 8 U.S. banking regulators are not required by law to adopt the Basel Framework but, as discussed above, the U.S. rule, which the FBRAs continue to update, 9 is Basel-based. 10

FCA has had tier 1/tier 2 capital rules that are comparable to the Basel guidelines and the U.S. rule since 2016. 11 Beginning in 2010, System institutions requested FCA adopt a capital framework that was as similar as possible to the capital guidelines of the FBRAs. In particular, System institutions had asserted that consistency of FCA capital requirements with those of the FBRAs would allow investors, shareholders, and others to better understand the financial strength and risk-bearing capacity of the System. 12

Included in the provisions of FCA's 2014 proposed rulemaking to revise its regulatory capital requirements was a 150 percent risk weight for HVCRE exposures due to their higher risk characteristics. 13 As discussed below, HVCRE exposures are defined as acquisition, development, or construction exposures that meet certain criteria, and do not qualify for any of the exclusions, in the definition.

HVCRE exposures have increased risk characteristics supporting a 150 percent risk weight. Key risks to projects during the development and construction phase include, among others, financial risks, contract risks, and environmental risks. Financial risks include, but are not limited to, project delays and cost overruns, sponsor risk, project feasibility risk, and contractor risks. While these risks can be a threat to any type of lending, they are of particular risk to construction loans, because they can hinder project completion, and repayment of construction loans usually cannot begin until the project is finished. 14

Project delays and cost overruns are two key financial risks to construction loans. Supply chain constraints, permit delays, and labor shortages are some examples of factors that can contribute to the delay of projects or their costs exceeding budget. Other financial risks include sponsor, project feasibility, and contractor risks. Sponsors without adequate and relevant industry and project planning experience and expertise increase the risk of a construction project incurring additional costs and delays, including permitting delays. Inadequate sponsor financial strength can impact the availability of sponsor capital when needed for budget overruns. Project feasibility considerations include changes in either supply or demand factors, technology considerations, and competitive forces, which could detrimentally impact the underlying economics of a construction project. Contractor risk can threaten the financial viability of a construction project if the contractor does not have the requisite experience and expertise to complete the project successfully. Contractor inefficiencies or errors can derail a project's timeline or budget. The financial capacity of the contractor is also critical, especially in cases where the contractor is responsible for any cost overruns.

Contract risk is another key category of risk in construction lending. One of the most important contractual agreements in a construction project is the construction contract. While some types of construction contracts shift the responsibility of managing key aspects of the project to a contractor, other contracts can leave the borrower exposed to such risks as fluctuations in input costs and potential contract disputes with sub-contractors.

Another key risk to construction projects is environmental risk. Such risk can arise when site assessments are not properly conducted prior to construction and unidentified environmental issues such as contamination later derail project timelines or budgets, or even threaten the viability of the project. Contamination can also occur after construction has already begun and potentially involve expensive cleanup costs. Beyond contamination, borrowers also face other potential environmental impacts of the project, including the effects on native habitats for flora and fauna where legal or regulatory protections are in place.

FCA has recently seen certain System institution-funded construction projects particularly challenged due to some of the risks discussed above. Specifically, supply chain disruptions and labor shortages have led to project delays and cost overruns following the COVID-19 pandemic, recent geopolitical events, and increased inflation. Inflationary pressures continue to persist and have impacted the costs of some rural infrastructure projects.

Supply chain constraints and disruptions in project financings across different industries, including the leasing sector, have in some cases resulted in material increases in project costs and construction delays. The impact to costs and schedules has stemmed partly from the inadequate supply of key components but also from increased input costs. Such supply chain issues could pose a credit risk to System institutions if construction timelines are materially impacted and construction costs increase significantly during the construction phase.

As discussed above, various risks have continued to underscore construction lending, some of which have been more evident in recent years. These risks threaten the ability for such projects to be completed in a manner that ensures adequate repayment to lenders. As such, construction exposures warrant the higher risk weight proposed in this rule.

The FBRAs first recognized the higher risk in construction lending in the higher risk weights they adopted in their capital regulations in 2013-2014. FCA's 2014 proposed HVCRE provisions were very similar to those the FBRAs had adopted. System commenters expressed concern about parts of the proposed HVCRE definition and asked FCA not to adopt the definition. FCA did not adopt the HVCRE provisions in its capital rule in 2016, because it wanted to further consider and analyze HVCRE and the issues related to these exposures. In the preamble to the final capital rule in 2016, FCA said the Agency expected to engage in additional HVCRE rulemaking in the future. 15

Beginning in 2017, the FBRAs issued several proposed rules on HVCRE exposures to address concerns with the original definition. 16 On May 24, 2018, the President signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), 17 adding a new statutory definition that would have to be satisfied for an exposure to be risk-weighted as an HVCRE exposure. On December 13, 2019, the FBRAs published a final rule, which became effective on April 1, 2020, implementing the EGRRCPA requirements. 18

Recognizing the need to update capital requirements to reflect the increased risk characteristics that exposures to HVCRE loans pose to System institutions, and in accordance with this rule's objective to ensure continued comparability to the Basel guidelines and the FBRAs' rules, on August 26, 2021, FCA published in the Federal Register a notice of proposed rulemaking (proposed rule or proposal) seeking public comment on amendments to its capital rules to define and establish a risk weight for HVCRE exposures. 19

FCA's proposed rule was similar to the FBRAs' rule in most respects, with deviations as appropriate to accommodate the different regulatory, operational, and credit considerations of the System. Notably, the proposed rule contained provisions from the FBRAs' final rule that addressed certain concerns commenters raised in response to the FCA's 2014 proposed rule.

As discussed further below, FCA is adopting a final definition of HVCRE exposure with one modification from the proposal based on comments received. The Agency is also clarifying in this preamble certain provisions of the HVCRE rule.

FCA reminds System institutions that this is a risk-weighting regulation only. System scope and eligibility authorities are contained in other provisions of FCA's regulations and in the Act. 20

Because of the increased risk characteristics in HVCRE exposures, FCA proposed, consistent with the FBRAs, to assign a 150 percent risk weight to those exposures, rather than the 100 percent risk weight generally assigned to commercial real estate and other corporate exposures. 21

In response to the HVCRE proposal, FCA received 11 comment letters: One letter from the Farm Credit Council (FCC), with input from a System workgroup, consisting of several System institutions, that was established to review the HVCRE proposal and other related documents (System Comment Letter);  22 one letter each from CoBank, ACB (CoBank Letter), 23 Farm Credit Bank of Texas (FCBT Letter), 24 and AgriBank, FCB (AgriBank Letter), 25 all of which are System banks; and letters from seven System associations: Farm Credit Mid-America, ACA, 26 Farm Credit of the Virginias, ACA, 27 Northwest Farm Credit Services, ACA (Northwest Letter), 28 Capital Farm Credit, ACA, 29 Farm Credit West, 30 ACA, Compeer Financial, ACA, 31 and Farm Credit of Florida, ACA. 32 All System bank and association commenters supported the System Comment Letter, and several included identical language seeking clarification on several provisions and requesting further exclusions to the HVCRE exposure definition. Furthermore, no commenters supported any specific provisions of the proposed rule, and they all stated the burden of identifying HVCRE loans on an ongoing basis greatly exceeds the benefit of identifying the minimal potential adverse impact that such loans could have on the safety and soundness of a System institution. However, System commenters generally supported FCA's attempt to ensure FCA's capital rules are similar to those adopted by the FBRAs with the guiding principle that the same loan to the same borrower—whether it is made by a commercial bank or a System institution—carries the same risk and should be assigned the same risk weight.

FCA proposed to define an HVCRE exposure as “a credit facility secured by land or improved real property” that met the three criteria discussed below (and that did not meet any of the definition's exclusions, which are discussed in Section II.C.2 of this preamble—Exclusions From HVCRE Exposure Definition). 33 If a credit facility secured by land or improved real property did not meet all three criteria, it would not be an HVCRE exposure.

The determination of whether a credit facility is an HVCRE exposure is made on new exposures only. New exposures determined not to be HVCRE after initial evaluation do not need to be evaluated again as HVCRE exposures. New exposures include loan originations, modifications, and project alterations that materially change the underwriting of the credit facility (such as increases to the loan amount, changes to the size and scope of the project, or removing all or part of the 15 percent minimum capital contribution in a project).

Credit facilities that meet the definition of HVCRE exposure after initial evaluation may be reclassified as non-HVCRE if they meet the criteria discussed in Section II.C.3 of this preamble—Reclassification as a Non-HVCRE Exposure.

Under the proposed definition, a credit facility is secured by land or improved real property if the estimated value of the real estate collateral at origination (after deducting all senior liens held by others) is greater than 50 percent of the principal amount of the loan at origination. 34 For example, if an institution made a loan to construct and equip a building, and the loan was secured by both the real estate and the equipment, the institution would have to estimate the value of the building, upon completion, and of the equipment. If the value of the building was greater than 50 percent of the principal amount of the loan at origination, the loan would be a “credit facility secured by land or improved real property.”  35 If the value of the building, upon completion, was less than 50 percent of the principal amount of the loan at origination, it would not be a “credit facility secured by land or improved real property.” Accordingly, it would not be an HVCRE exposure.

As discussed above, a credit facility that is secured by land or improved real property would not be classified as an HVCRE exposure under the proposed rule unless it met three criteria. If such a facility did not meet all three criteria, it would not be an HVCRE exposure. These criteria are discussed below.

First, under paragraph (1)(i) of the proposed HVCRE definition, the credit facility must primarily finance, have financed, or refinance the acquisition, development, or construction of real property. This criterion would be satisfied if more than 50 percent of the proposed use of the loan funds was for the acquisition, development, or construction of real property. The criterion would not be satisfied if 50 percent or less of the proposed use of the loan funds was for the acquisition, development, or construction of real property. In the case of revolver loans that are secured by land or real property, if more than 50 percent of the proposed use of the revolver funds is for acquisition, development, or construction of real property, the entire loan would satisfy this criterion and potentially be subject to HVCRE classification if it meets the other two criteria and is not subject to an exclusion.

Second, under paragraph (1)(ii) of the proposed HVCRE definition, the purpose of the credit facility must be to provide financing to acquire, develop, or improve such real property into income-producing property.

Finally, under paragraph (1)(iii) of the proposed HVCRE definition, the repayment of the credit facility must depend upon the future income or sales proceeds from, or refinancing of, such real property. The preamble to the proposed rule explained that under this criterion, credit facilities that would be repaid from the borrower's ongoing business, as opposed to being repaid from future income or sales proceeds from the property, would not be classified as an HVCRE exposure.

FCA received various comments on the proposed definition of HVCRE exposures, including the three criteria. On a broad level the Farm Credit Council, supported by all System bank and association commenters, commented that the rulemaking was not needed due to limited opportunity for System institutions to make HVCRE loans. They commented that the burden in identifying these loans exceeds the benefit of identifying the risk to safety and soundness. 36

These comments are premised on a misunderstanding of the definition of HVCRE. Specifically, these comments assert that the HVCRE risk weight “was designed by the FBRAs to identify commercial real estate loans of a speculative nature (such as office buildings and strip malls without signed lessees).”  37

Contrary to the commenters' assertion, the FBRAs' definition includes more than just speculative commercial real estate loans. The plain language of their definition includes all credit facilities that are secured by land or improved real property and that satisfy the three criteria and are not subject to an exclusion. None of the criteria and exclusions limit the HVCRE definition only to speculative commercial real estate loans. The HVCRE definition, including the three criteria and considering the exclusions, includes, for example, project finance construction and construction of facilities dependent on third-party integrator agreements. System institutions make loans of this nature, and such loans satisfy this definition.

The System Comment Letter also stated that there are better ways to accomplish the Agency's objectives. 38 Two commenters referenced System practices currently in place at System institutions to control risk concentrations in construction exposures including risk-based borrower ratings, concentration and hold limits, and underwriting standards. 39 While the Agency recognizes that System institutions can mitigate their HVCRE risk exposures through risk management practices, regulatory risk weights ensure that a minimum amount of capital is reserved by all institutions. In the same way that corporate exposures are generally risk-weighted at 100 percent  40 and certain past due and nonaccrual exposures are risk-weighted at 150 percent  41 despite variations in institutions' credit administration practices, HVCRE exposures should all be subject to the same risk weight, regardless of an individual institution's risk management practices.

The System Comment Letter, supported by all System bank and association commenters, included various questions and comments regarding the proposed third criterion. 42 The Letter requested clarification of the terms “future income” and “income from ongoing business”; asked whether “income from ongoing business” includes any assets built and operated by the business that developed the property; asked the percentage of future and ongoing income relied upon when determining whether a property is income-producing; and requested consideration of the fact that repayment can come from multiple sources. Moreover, the letter requested an explicit exclusion in the regulation for credit facilities for which repayment would be from the ongoing business of the borrower as well as removal of “third-party rent or lease payments” from the proposed definition. Finally, the letter included a request for FCA to consider the impact of “third-party rent or lease payments” on young, beginning, or small (YBS) farmers who may rely on third-party integrator agreements to start themselves in agriculture. 43

In response to these comments, FCA reiterates that the proposed third criterion was that the credit facility is “dependent on future income or sales proceeds from, or refinancing of,” the property for repayment. The proposed regulation did not refer to “income from ongoing business.” The preamble to the proposed rule discussed loan repayment from ongoing business as an example of a form of repayment that does not satisfy the proposed third criterion because it is not repayment from future income or sales proceeds from the real property. 44 FCA confirms that if a credit facility was dependent on any form of repayment other than future income or sales proceeds from, or the refinancing of, the real property, including repayment from income generated by any assets within a borrower's portfolio, it would not satisfy this proposed criterion and would therefore not be an HVCRE exposure.

The System Comment Letter specifically referenced assets built and operated by the business that developed the property. FCA clarifies that for the purpose of HVCRE classification, the cash flow of the borrower must be analyzed, not that of the property developer or some other entity other than the borrower. Because this preamble clarifies the plain language of the third criterion, that credit facilities for which repayment would be from the ongoing business of the borrower are not covered by that criterion and are not HVCRE exposures, explicit regulatory language to that effect is not needed.

In response to the question about the percentage of future and ongoing income relied upon when determining whether a property is income-producing and for consideration of the fact that repayment can come from multiple sources (both ongoing and future income or sales proceeds), FCA retains the proposed requirement that if any part of the repayment on a credit facility depends on future income or sales proceeds, the credit facility satisfies the proposed third criterion. FCA believes specifying a percentage threshold for future income other than zero to determine HVCRE status would be overly complicated and burdensome. The Agency recognizes that repayment of credit facilities may come from multiple sources but, for the purpose of HVCRE classification, if any repayment depends on future income or sales proceeds, the exposure would meet the proposed third criterion of the definition of HVCRE.

Regarding the System Comment Letter's request to remove “third-party rent or lease payments” from the proposed definition of HVCRE exposure, FCA notes that terminology is not actually included in the definition. Rather, it is found in the preamble to the proposed rule, in a discussion of “certain commercial real property projects” that would qualify for exclusion from HVCRE. 45 As such, there is no need to remove that term from the definition of HVCRE. However, in Section II.C.2.d of this preamble—Certain Commercial Real Property Projects—the reference to “third-party rent or lease payments” that was in the preamble to the proposed rule has been replaced with a reference to “revenues from future income.”

As discussed above, credit facilities where repayment would be from any type of future income, including third-party rents or lease payments, were included in the proposed definition of HVCRE to reflect the risk of such facilities. Excluding third-party rents or lease payments, including third-party integrator agreements, from the definition of future income is not warranted by the risk in those exposures. There is further discussion around exclusions for integrator contracts in Section II.C.2.f.ii of this preamble—Agricultural Production or Processing Facilities with Contractual Purchase Agreements in Place—including the Agency's consideration of YBS farmers.

For the reasons stated above, FCA is adopting as final, without change from the proposal, the definition of HVCRE as a credit facility secured by land or improved real property. In addition, the Agency is adopting, as proposed, the three criteria outlined above. The exclusions from the HVCRE definition, as well as related comments and FCA's responses, will be discussed in the next section of the preamble.

FCA's final rule is similar to the FBRAs' rule in most respects, but it differs in two general areas. The FBRAs' rule clarified the interpretation of certain terms generally to be consistent with their usage in other FBRA regulations or Call Report instructions. The FCA did not propose different interpretations of these terms, nor did the Agency propose to refer to these FBRA references. In addition, FCA proposed some differences where appropriate to accommodate the different regulatory, operational, and credit considerations of the System, while continuing to maintain appropriate safety and soundness. FCA's proposed definition of HVCRE exposure was intended to capture only those exposures that have increased risk characteristics in the acquisition, development, or construction of real property.

Under FCA's HVCRE proposal, like the FBRA rule, four broad types of exposures were excluded from the definition of HVCRE exposure. These types of exposures are discussed in the following sections.

Under paragraph (2)(i)(A) of FCA's proposed HVCRE definition, as in a similar provision of the FBRA rule, an HVCRE exposure did not include a credit facility financing the acquisition, development, or construction of properties that are one- to four-family residential properties, provided that the dwelling (including attached components such as garages, porches, and decks) represented at least 50 percent of the total appraised value of the collateral secured by the first or subsequent lien.

Manufactured homes permanently affixed to the underlying property, when deemed to be real property under state law, would qualify for this proposed exclusion, as would construction loans secured by single family dwelling units, duplex units, and townhouses. Condominium and cooperative construction loans would qualify for this proposed exclusion, even if the loan was financing the construction of a building with five or more dwelling units, if the repayment of the loan came from the sale of individual condominium dwelling units or individual cooperative housing units.

This proposed exclusion would apply to all credit facilities that fall within its scope, whether rural home financing under § 613.3030 or one- to four-family residential property financing under § 613.3000(b). Similar to the reduced risk weight assigned to residential mortgage exposures under § 628.32(g)(1), a credit facility would qualify for this proposed exclusion only if the property securing the credit facility exhibited characteristics of residential property rather than agricultural property including, but not limited to, the requirement that the dwelling (including attached components such as garages, porches, and decks) represents at least 50 percent of the total appraised value of the collateral secured by the first or subsequent lien. If examiners determined that the property was not residential in nature, the credit facility would not qualify for this proposed exclusion.

Loans for multifamily residential property construction (such as apartment buildings where loan repayment is dependent upon apartment rental income) would not qualify for this proposed exclusion. 46

Loans used solely to acquire undeveloped land for the purpose of constructing one- to four-family residential structures would not qualify for this proposed exclusion; the credit facility would also have to include financing for the construction of one- to four-family residential structures. Moreover, credit facilities that do not finance the construction of one- to four-family residential structures (as defined above), but instead solely finance improvements such as the laying of sewers, water pipes, and similar improvements to land, would not qualify for this proposed exclusion. A credit facility that combines the financing of land development and the construction of one- to four-family structures would qualify for this proposed exclusion.

FCA did not receive any comments on this proposed exclusion and is adopting the exclusion as proposed.

Under paragraph (2)(i)(C) of its proposed HVCRE definition, FCA proposed to exclude credit facilities financing “agricultural land,” as defined in FCA regulation § 619.9025, or real estate used as an integral part of an aquatic operation. FCA regulation § 619.9025 defines “agricultural land” as “land improved or unimproved which is devoted to or available for the production of crops and other products such as but not limited to fruits and timber or for the raising of livestock.”

The proposed exclusion applied only to financing for the agricultural and aquatic needs of bona fide farmers, ranchers, and producers and harvesters of aquatic products under § 613.3000 of FCA regulations. It did not apply to loans for farm property construction or land development purposes.

FCA intended its proposed agricultural land exclusion to have the same scope as the agricultural land exclusion of the FBRAs. The FBRAs' definition of agricultural land has the same meaning as “farmland” in their Call Report forms and instructions. 47 They define farmland as “all land known to be used or usable for agricultural purposes, such as crop and livestock production. Farmland includes grazing or pastureland, whether tillable or not and whether wooded or not.” Loans for farm property construction and land development purposes are not “farmland” loans, and therefore such loans do not fall within the FBRAs' agricultural land exclusion. Unlike the FBRAs, FCA proposed to expressly include within the agricultural land exclusion real estate that is an integral part of an aquatic operation.

As in the FBRAs' final rule, loans for land development purposes and farm property construction would not have been eligible in FCA's proposed rule for the agricultural land exclusion. Loans made for land development purposes would include loans made to finance property improvements, such as laying sewers or water pipes preparatory to erecting new structures. Loans made for farm property construction would include loans made to finance the on-site construction of industrial, commercial, residential, or farm buildings. For the purposes of this exclusion, “construction” includes not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way for new structures.

Exposures to land in transition—agricultural land in the path of development—were not automatically excluded from the definition of HVCRE through the proposed agricultural land exclusion. These exposures would need to be evaluated against the three criteria of the HVCRE definition discussed in Section II.C.1 of this preamble—Scope of HVCRE Exposure Definition—as well as all exclusions discussed in this preamble, to determine whether they are HVCRE exposures.

FCA received several comments related to the proposed agricultural land exclusion. The System Comment Letter, and several other comment letters, 48 highlighted the section of the proposed rule preamble that explained the exclusion would not apply to loans for farm property construction, including farm buildings. They stated that not applying the exclusion to the construction of farm buildings was contradictory to the underlying premise of the agricultural land exclusion and did not recognize the lower risk of these types of “on-farm facilities.”  49 The letter requested that FCA add “not related to on-going farming operations” after the term “farm buildings,” indicating that the interdependent nature of System loan packages and the fact that farm construction projects are often related to ongoing farming operations reduces the risk of such projects. 50

As discussed above, the scope of FCA's proposed agricultural land exclusion was similar to that of the FBRAs' (except that FCA's proposed exclusion added exposures to real estate that is an integral part of an aquatic operation). The FBRAs' exclusion includes exposures to “farmland” only and does not include loans for farm property construction. Therefore, the commenters' statement that not applying the exclusion to the construction of farm buildings is contradictory to the underlying premise of the agricultural land exclusion is not correct.

In response to the commenters' request that FCA expand the scope of the proposed exclusion to include the construction of farm buildings related to ongoing farming operations, FCA notes, as discussed in Section II.C.1 of this preamble—Scope of HVCRE Exposure Definition, that farm building construction projects where repayment of the credit facility will be from ongoing farming operations do not meet the third criterion of the proposed HVCRE definition and would not be subject to the increased risk weight. The third criterion is that repayment of the credit facility is dependent on the future income or sales proceeds, or refinancing of, the real property. 50 This risk-weighting treatment reflects the lower relative risk characteristics of these exposures.

On the other hand, farm construction projects where repayment will depend on future income or the sales proceeds from the real property would meet the third criterion of the proposed HVCRE definition. Such projects have increased risk characteristics, justifying a higher risk weight compared to projects with repayment from ongoing operations. They would be assigned a higher risk weight under the FBRAs' rules and would be assigned a higher risk weight under FCA's proposed rule as well.

In discussing the proposed Agricultural Land exclusion, the System Comment Letter, as well as two other letters, 51 requested that FCA consider potential obstacles for YBS borrower entry into agriculture. These commenters stated that farm construction projects by YBS borrowers are often not part of ongoing farming operations and would potentially have higher costs of credit if subject to the 150 percent HVCRE risk weight. FCA believes excluding all YBS borrowers from the HVCRE risk weight would present safety and soundness concerns and detract from the objectives of this rule. However, as discussed in Section II.C.2.e of this preamble—Loans Originated for Less Than $500,000—the final rule includes an HVCRE exclusion for loans originated under $500,000, which will benefit some YBS borrowers. 52

For the reasons stated above, FCA is adopting as final, without change from the proposal, the agricultural land exclusion.

As in the FBRA rule, FCA proposed, in paragraph (2)(ii) of its definition of HVCRE exposure, to exclude credit facilities that finance the acquisition or refinance of existing income-producing real property secured by a mortgage on such property, so long as the cash flow generated by the real property covers the debt service and expenses of the property in accordance with the System institution's underwriting criteria for permanent loans. FCA also proposed, in part (2)(iii) of its definition of HVCRE, to exclude credit facilities financing improvements to existing income-producing real property secured by a mortgage on such property. The preamble to the proposed rule noted that examiners may review the reasonableness of a System institution's underwriting standards for permanent loans through the regular examination process to ensure the real estate lending policies are consistent with safe and sound banking practices.

Under the proposal, loans such as agribusiness or rural project financing transactions, among other types of loans, could qualify for the income-producing property exclusion if the cash flow being generated by the real property is sufficient to support the debt service and expenses of the real property in accordance with the System institution's underwriting criteria for permanent loans.

Loans that are not secured by existing income-producing real property, however, would not fall under this proposed exclusion. Such loans often pose a greater credit risk than permanent loans. FCA believes it is appropriate to classify these loans as HVCRE exposures and impose a 150 percent risk weight given their increased risk characteristics compared to other commercial real estate exposures (unless the loan satisfies one of the other exclusions). However, as discussed in Section II.C.3 of this preamble—Reclassification as a Non-HVCRE Exposure, the proposal would allow a System institution to reclassify these HVCRE exposures as non-HVCRE exposures if they satisfied the two conditions in paragraph (6) of the proposed rule.

FCA received one comment on the proposed exclusion for existing income producing properties that qualify as permanent financings. The System Comment Letter referenced a “cash flow `test' ” to determine the sufficiency of the cash flow generated by real property to support the debt service and expenses. 53 The Letter requested the test be conducted only once at loan origination and not be required again assuming the loan continues to pay as agreed. While neither the preamble to the proposed rule nor the rule text itself explicitly referenced a cash flow “test”, FCA interprets the comment as reference to the underwriting analysis performed in determining whether a loan qualifies for this exclusion. The Agency is clarifying that once a loan has undergone this analysis at origination or purchase for the purpose of HVCRE classification, the institution does not need to reassess the loan again for that purpose. However, as with any permanent financing, the institution must have procedures in place for monitoring the ongoing quality of the loan. These procedures could include ongoing loan analysis. 54

For the reasons stated above, FCA is adopting as final, without change from the proposal, the exclusion for loans on existing income producing properties that qualify as permanent financings.

As in the FBRA rule, FCA proposed, in paragraph (2)(iv) of its HVCRE definition, to exclude from the definition of HVCRE exposure credit facilities for certain commercial real property projects that are underwritten in a safe and sound manner in accordance with proposed loan-to-value (LTV) limits and where the borrower has contributed a specified amount of capital to the project. A commercial real property project loan generally is used to acquire, develop, construct, improve, or refinance real property, and the primary source of repayment is dependent on the sale of the real property or the revenues from future income. Commercial real property project loans do not include ordinary business loans and lines of credit in which real property is taken as collateral. As it relates to the System, FCA believes this proposed exclusion is most relevant to agribusiness (processing and marketing entities and farm-related businesses) and rural project financing.

To qualify for this proposed exclusion, a credit facility that finances a commercial real property project would be required to meet four distinct criteria. First, the LTV ratio would have to be less than or equal to the applicable maximum set forth in proposed Appendix A. Second, the borrower would have to contribute capital of at least 15 percent of the real property's value to the project. Third, the 15 percent amount of contributed capital would have to be contributed prior to the institution's advance of funds (other than a nominal sum to secure the institution's lien on the real property). Fourth, the 15 percent amount of contributed capital would have to be contractually required to remain in the project until the loan could be reclassified as a non-HVCRE exposure. The proposed interpretations of terms relevant to the four criteria for this exclusion are discussed below.

To qualify for this exclusion from the HVCRE exposure definition, the FBRAs' rule requires that a credit facility be underwritten in a safe and sound manner in accordance with the Supervisory Loan-to-Value Limits contained in the Interagency Guidelines for Real Estate Lending Policies. 55 These Interagency Guidelines require banking institutions, for real estate loans, to establish internal LTV limits that do not exceed specified supervisory limits ranging from 65 percent for raw land to 85 percent for 1- to 4-family residential and improved property.

The FCA has not adopted these supervisory LTV limits. 56 Nevertheless, FCA examination guidance from 2009 makes clear that FCA expectations are consistent with the Interagency Guidelines, including the supervisory LTV limits. 57 FCA believes exposures should satisfy these LTV limits to qualify for this proposed exclusion to the HVCRE definition. In paragraph (2)(iv)(A) of the final rule, the Agency proposed to adopt these LTV limits, for the purpose of the HVCRE definition only, in a new Appendix A to part 628.

The System Comment Letter requested that FCA consider the potential impact of these proposed LTV limits on YBS lending. For the reasons discussed above, FCA is not providing an exclusion for all YBS borrowers. However, the final rule includes an HVCRE exclusion for loans originated under $500,000, which will benefit some YBS borrowers.

For the reasons stated above, FCA is adopting as final this provision of the proposed rule.

Under paragraph (2)(iv)(B) and (C) of FCA's proposed definition of HVCRE exposures, borrowers must contribute capital of at least 15 percent of the real property's value to the project to qualify for the commercial real property projects exclusion. Cash, unencumbered readily marketable assets, paid development expenses out-of-pocket, and contributed real property or improvements would count as forms of capital for purposes of the 15 percent capital contribution criterion. A System institution could consider costs incurred by the project and paid by the borrower prior to the advance of funds by the System institution as out-of-pocket development expenses paid by the borrower.

FCA's proposed rule required the value of contributed property to be determined in accordance with FCA regulations at Part 614, Subpart F, which are generally similar to the FIRREA standards adopted in the FBRA rule. 58 Under the proposed rule, the value of the real property that could count toward the 15 percent contributed capital requirement would be reduced by the aggregate amount of any liens on the real property securing the HVCRE exposure. In addition, the preamble to the proposed rule explained that contributed property or improvements would have to be “directly related” to the project to be eligible to count towards the capital contribution. As explained in that preamble, under the proposed rule real estate not developed as part of the project would not be counted toward the capital contribution. FCA received various comments on the contributed capital requirement of the proposed rulemaking which are addressed below.

The System Comment Letter included a request for FCA to permit cross-collateralized real property or improvements to qualify as part of the capital contribution to an HVCRE project. 59 The Letter referenced the common practice of System institutions cross-collateralizing real estate collateral, and particularly the practice of a related party contributing collateral to support a loan to a YBS farmer so the farmer can obtain financing. The Letter explained that while the collateral might not be “directly related” to the project being financed, the collateral is pledged agricultural land integral to a borrower's overall operation and does not have the same risk profile as “unrelated commercial development real estate projects.”  60

In response to this comment, the Agency is confirming that cross-collateralized property is permitted to count as a capital contribution to an HVCRE project. As explained in the preamble to the proposed rule, the value of the contributed real property must be reduced by the aggregate amount of any outstanding liens on the property for the purpose of calculating the 15 percent capital contribution.

In addition, the Agency has reconsidered its regulatory interpretation in the preamble to the proposed rule that contributed real property or improvements must be “directly related” to the project. Under the final rule, other real property contributed to a project does not have to be “directly related” to the project to count as capital contributions for the purpose of the commercial real property projects exclusion.

In not requiring real property to be “directly related” to a project to count towards the 15 percent capital contribution for the purposes of excluding a project from the HVCRE definition, FCA is deviating from the FBRAs' interpretation of their final rule. After careful consideration, FCA does not believe that the relation of real property to a project materially impacts the risk associated with accessing System collateral. Requiring real property to be “directly related” to the project is therefore not a necessary safety and soundness criterion.

In line with the Interagency Guidelines for Real Estate Lending Policies, 61 FCA, in its proposed rule, interpreted the term “unencumbered readily marketable assets” to mean insured deposits, financial instruments, and bullion in which the System institution has a perfected interest. For assets to be considered “readily marketable” by a System institution, the institution's expectation would be that the financial instrument and bullion would be salable under ordinary circumstances with reasonable promptness at a fair market value determined by quotations based on actual transactions, an auction or similarly available daily bid and ask price market. 62

The System Comment Letter asked FCA to clarify how often and to what extent institutions need to document that assets are readily marketable. 63 For the purpose of qualifying as contributed capital for an HVCRE project, the assets must be deemed readily marketable at the time of loan origination only. The assessment to determine whether an asset is readily marketable should address the depth, breadth, and liquidity of the respective markets as well as other liquidity risk indicators.

The System Comment letter also requested that FCA “make a distinction on real estate collateral taken as abundance of caution for purposes of the 15% capital contribution requirement”. 64 FCA regulation § 614.4240(a) defines abundance of caution, when used to describe decisions to require collateral, as circumstances in which collateral is taken when (1) it is not required by statute, regulation, or institution policy, and (2) the extension of credit could have been made without taking the collateral.

Borrowers must make a 15 percent capital contribution that meets the criteria outlined in paragraph (2)(iv)(B) of this final rule, among other requirements, for their loan to qualify for this exclusion from the HVCRE definition. As discussed above, such collateral can be cross-collateralized and does not have to be “directly related” to the project. Any collateral used to meet this requirement must satisfy the specified criteria, including collateral taken from the borrower in an abundance of caution.

The Agency considered the impact of the contributed capital requirements on YBS borrowers and, for the reasons discussed above, is not providing an exclusion for all YBS borrowers. However, the final rule includes an HVCRE exclusion for loans originated under $500,000, which will benefit some YBS borrowers.

For the reasons stated above, FCA is adopting, as final, this provision of the proposed rule.

Under paragraph (2)(iv)(B) of FCA's proposed definition of HVCRE exposures, the 15 percent capital contribution would be required to be calculated using the real property's value. An appraised “as completed” value is preferred; however, when an “as completed” value appraisal is not available FCA proposed to permit the use of an “as is” appraisal. 65 In addition, in its proposed rule FCA proposed to allow the use of a collateral evaluation of the real property in situations when the Agency's appraisal regulations  66 permit collateral evaluations to be used in lieu of appraisals. As explained in the proposed rule preamble, FCA's approach to real property valuation deviates from the FBRAs' regulatory language but is consistent with their interpretation of the regulation.

FCA did not receive any comments on this provision of the proposed rule and, as such, is adopting it as proposed.

Under paragraph (2)(iv)(B) of FCA's proposed definition of HVCRE exposures, the 15 percent capital contribution and the appraisal or collateral evaluation would be measured in relation to a “project.” As discussed in the proposed rule preamble, FCA expects that each project phase being financed by a credit facility have a proper appraisal or evaluation with an associated “as completed” or “as is” value. Where appropriate and in accordance with the System institution's applicable underwriting standards, a System institution may look at a multiphase project as a complete project rather than as individual phases.

FCA did not receive any comments on this provision of the proposed rule and, as such, is adopting it as proposed.

FCA is adding an HVCRE exclusion to paragraph (2)(v) of the final rule for loans originated for less than $500,000. FCA recognizes the potential administrative burden of tracking loans of this size. As reported in the System's Annual Information Statement as of December 30, 2022, 85 percent of System borrowers had at least one loan under $500,000, 67 for the purpose of HVCRE classification. This exclusion maintains a balance between providing regulatory relief to System institutions and limiting the potential risk from HVCRE exposures.

The System Comment Letter asked FCA for consideration of YBS borrowers in the final rule. The Letter asserted that the loans of YBS applicants may be defined as HVCRE due to their reliance on third-party agreements for repayment and the fact that they are often not part of ongoing farming operations, and it stated that this classification could be an obstacle for YBS borrowers obtaining financing. The Letter also asked FCA to consider the impact of the LTV limits and capital contribution requirements in the commercial real property projects exclusion on YBS borrowers.

FCA is committed to supporting the FCS's mission to serve YBS borrowers but the Agency must also ensure the safety and soundness of the System. The addition of an exclusion for loans under $500,000 will benefit some YBS borrowers. 68 In addition, many YBS borrowers and System borrowers in general will continue to have access to loan guarantees through programs such as the Farm Service Agency guarantee programs. The guaranteed portion of these loans will continue to receive a reduced risk weight in accordance with FCA's capital rules and will not be subject to the 150 percent risk weight for HVCRE exposures. 69

For the reasons discussed above, FCA is adding an exclusion for loans originated for less than $500,000 to the HVCRE definition.

As detailed below, the System Comment Letter, as well as several other comment letters, asked FCA to consider various additional exclusions from the HVCRE definition. 70 The requested exclusions included project financing of public and private facilities; agricultural production or processing facilities with contractual purchase agreements in place; minor improvements or alterations to real property; credit facilities where repayment would come from the borrower's ongoing business; and de minimis levels of financing. FCA considered each of these requested exclusions as discussed below.

The System Comment Letter (supported by the Northwest Letter), the CoBank Letter, and the FCBT Letter requested an exclusion from the HVCRE definition for project financing of public and private facilities, such as rural infrastructure projects, where contractual agreements to purchase the product produced are in place before a facility is constructed. Commenters expressed concern that the proposed HVCRE definition would include System project financing, and therefore impact the financing of crucial rural infrastructure projects.

The commenters stated that these projects may not have the necessary collateral support required by the proposed rule but highlighted mitigating factors against risk: the credit evaluation of a project independent of the sponsor, focus on the creditworthiness of counterparties to the contractual agreements, and the bankruptcy remoteness of the projects from their sponsors. 71 They differentiated System project financings from other forms of corporate financing in which lenders evaluate the financial condition of corporate entities, not individual projects. In addition, they stated that the FBRAs' intent with the HVCRE risk weight was to capture speculative commercial real estate loans.

As an initial matter, FCA notes that FCA Bookletter-070—Revised Capital Treatment for Certain Water and Wastewater Exposures—and Bookletter-053—Revised Regulatory Capital Treatment for Certain Electric Cooperatives—assign reduced risk weights to certain project financing exposures, including some exposures in the construction phase. 72 Specifically, Bookletter-070 assigns a reduced risk weight to certain rural water and wastewater (RWW) construction exposures. 73 Bookletter-053 assigns a reduced risk weight to certain electric cooperative construction loans for new baseload power plants. This rule will not affect the reduced risk weights for the project finance construction exposures that these bookletters assign, even for exposures that are HVCRE exposures.

In response to the comments regarding the standalone nature of System project financings, FCA agrees that this characteristic can be a risk mitigant to such projects in isolating them from any financial difficulties of their sponsors. However, the Agency also believes that the limited recourse to project sponsors could be to the detriment of such financings. If the project were to default, the lender could be limited to accessing the project's collateral, and any contributed capital, alone. They may not have any recourse to the project sponsor's assets. More importantly, project finance loans in the construction phase share many of the same risks as other construction loans regardless of recourse to project sponsors. These risks are discussed later in this section. FCA does not therefore believe that the independent nature of such financings is a sound enough reason alone to exclude these projects from the HVCRE definition. As discussed in Section II.C.3 of this preamble—Reclassification as a Non-HVCRE Exposure—the HVCRE risk weight no longer applies once the project is reclassified as non-HVCRE.

The System Comment Letter also referenced the focus on the creditworthiness of contractual agreement counterparties as another risk mitigant to project financings. FCA agrees the creditworthiness of counterparties to the contractual agreements entered into by public and private projects is key to mitigating the risks of these projects. However, if a project depends on a counterparty's contractual payments to repay its construction phase debt, the inability of the counterparty to meet its obligations increases the risk that the project's loan will default. Counterparty credit risk cannot be avoided and can translate to elevated risk for construction loan projects heavily reliant on counterparties for repayment.

FCA believes there are other risk factors to consider in relation to public and private facility project financing that justify inclusion of these credits in the HVCRE definition. In addition to the counterparty credit risk mentioned above, some additional risks include project delays, cost overruns, project obsolescence, contractor risk, and risks from shifting market dynamics.

As discussed in Section II.C.1 of this preamble—Scope of HVCRE Exposure Definition—project delays and cost overruns have been a particular challenge to System construction loans recently, including in the project financing sector, and the impact in some cases has been material. If construction timelines and costs continue to be adversely affected, such supply chain issues could pose a credit risk to System institutions. The comment letters did not address these risks.

Further, the reduced risk weights that Bookletter-070 and Bookletter-053 assign to RWW and electric cooperative construction exposures, as discussed above, do not support exempting all project finance construction exposures from HVCRE exposure risk weighting. The reduced risk weights for RWW and electric cooperative exposures, including exposures during the construction phase, are supported by unique characteristics of those exposures that may not exist with other project finance exposures.

As Bookletter-070 notes, RWW plays a critical role in agricultural and rural America, but its infrastructure is aging, and it can be difficult for rural communities to finance improvements. The services provided by RWW facilities are essential, which contributes to the overall strength and stability of the industry. Moreover, many RWW facilities are able to adjust rates as needed to support repayment, thus reducing the likelihood of default. FCA determined that a reduced risk weight for exposures that satisfied specified quantitative and qualitative safety and soundness criteria would provide more capacity for System institutions to provide RWW funding without taking on excessive risk. Similarly, the reduced risk weight for electric cooperatives that satisfy criteria specified in Bookletter-053 was supported by the unique characteristics and lower risk profile of the industry segment. The reduced risk weights assigned by bookletter to RWW and electric cooperative construction exposures do not support excluding project finance construction generally from the HVCRE risk weight.

For the reasons stated above, FCA is not including a general exclusion for project financing in the final HVCRE rule. However, as discussed in Section II.5 of this preamble—Impact on Prior FCA Board Actions—certain project financing loans will not be subject to the HVCRE risk-weight under the provisions of Bookletter-053 and a revised Bookletter-070.

The System Comment Letter (supported by the Northwest Letter) asked for an explicit exclusion from the HVCRE definition for agricultural or processing facilities where contractual agreements are in place, prior to construction of the facility, to purchase the output from these facilities. The System Comment Letter specifically referenced “loans to finance construction of poultry or other livestock barns that are originated with an integrator contract to support the lending structure.”  74 Poultry and other livestock facility construction projects are subject to the same risks as any construction project, namely project cost overruns and time delays. These risks are discussed in Section I.B.3 of this preamble—ADC Lending Risk and HVCRE Risk Weight. The commenters did not provide a risk-based justification, or any other justification, for excluding these types of loans from the HVCRE definition, and FCA does not believe such a justification exists.

The System Comment Letter did ask FCA to consider the potential impact on YBS borrowers by not providing an exclusion for loans with third-party integrator agreements. As explained in Section II.C.1 of this preamble—Scope of HVCRE Exposure Definition—a borrower dependent on payments from an integrator for repayment of debt would meet the criteria for classification as an HVCRE exposure unless the loan qualifies for an HVCRE exclusion. As a reminder, if repayment of the poultry or other livestock construction loan comes from the ongoing business of the borrower, the loan would not meet the HVCRE criteria. As discussed above, FCA is not providing an exclusion for all YBS borrowers. However, some YBS and other borrowers dependent on integrator agreements for loan repayment will benefit from the exclusion of loans under $500,000 from the definition of HVCRE in the final rule. In addition, YBS loans may have access to loan guarantees to reduce risk weights.

For the reasons stated above, FCA is not adopting an HVCRE exclusion for agricultural or processing facilities where contractual agreements are in place.

The System Comment Letter (supported by the Northwest Letter) stated that FCA's proposed HVCRE definition included construction loans for “additions or alterations” regardless of materiality and requested an exclusion for minor improvements or alterations to real property. 75 The letter indicated that unless a minor improvement request was a modification to an existing permanent financing it would be classified as HVCRE.

As an initial matter, the Letter's suggestion that if a minor improvement request is a modification to an existing permanent financing it would not be classified as an HVCRE exposure is not necessarily correct. As the preamble to the proposed rule explains, when a System institution modifies a loan or if a project is altered in a manner that materially  76 changes the underwriting of a credit facility, the institution must treat the loan as a new exposure and must evaluate it to determine whether or not it is an HVCRE exposure. 77

In response to the request for an exclusion for minor improvements or alterations to real property, the Agency's exclusion for loans under $500,000 will provide relief for these types of financings. In addition, the final rulemaking does have an exclusion for improvements to existing income producing improved real property if the cash flow generated by the property is sufficient to support the debt service and expenses of the real property in line with permanent financing criteria. Unless the loan to make minor improvements or alterations will be repaid from future income or sale of the project's real property, it would not fall under the definition of HVCRE.

For the reasons stated above, FCA is not adopting an HVCRE exclusion for minor improvements or alterations to real property.

The System Comment Letter (supported by the Northwest Letter) requested an explicit exclusion for credit facilities where repayment would come from the borrower's ongoing business. 78 An explicit exclusion for these credit facilities is not warranted, because such an exclusion is clear from the existing regulatory language.

The definition of HVCRE in the proposed rule includes a criterion that credit facilities where repayment is dependent on future income or the sale of the real estate would be considered HVCRE. Implicit in this criterion is that repayment from the ongoing business of the borrower would exclude a credit facility from being classified as HVCRE. In addition, in the preamble to the proposed rule, FCA explicitly stated that credit facilities that will be repaid from the borrower's ongoing business would not be classified as HVCRE. 79 FCA does not believe changing the final rule to incorporate an explicit exclusion is warranted. Instead, FCA reiterates that a credit facility for which ongoing income covers repayment would not meet the definition of HVCRE.

For the reasons stated above, FCA is not adopting an HVCRE exclusion for credit facilities where repayment would be from the ongoing business of the borrower.

The System Comment Letter (supported by the Northwest Letter) asked FCA to consider an exclusion for a de minimis level of financing determined by each institution as a percentage of risk funds. 80 The final rule includes an exclusion for loans under $500,000, which as discussed in Section II.C.2.e of this preamble—Loans Originated for Less Than $500,000—will provide administrative relief without introducing material risk exposure to the System. The Agency believes establishing a de minimis level as a percentage of capital or some other similar metric would allow for higher potential risk exposure than a dollar threshold would. Large institutions with considerable capital, for example, would be able to amass potentially material amounts of HVCRE volume if a capital-based threshold was set. The $500,000 exclusion would apply to all loans under $500,000 regardless of an institution's size or capital levels.

For the reasons stated above, FCA is not adopting an HVCRE exclusion for de minimis financings.

Under the proposal, a System institution would be allowed to reclassify an HVCRE exposure as a non-HVCRE exposure when the substantial completion of the development or construction on the real property has occurred and the cash flow generated by the property covered the debt service and expenses on the property in accordance with the institution's loan underwriting standards for permanent financings. Each System institution should have prudent, clear, and measurable underwriting standards, which we may review through the examination process.

The System Comment Letter requested FCA clarify its expectations for when an HVCRE project can be reclassified. The letter asked for clarification of “the period that follows project completion to determine whether a projected cash flow is acceptable for purposes of reclassification.”  81 In addition, the letter requested further guidance on how to calculate projected cash flows for a property “owned by the business” when these are not “separately provided by the borrower”. 82

As stated in the proposed rule, institutions should defer to their loan underwriting criteria for permanent financings when determining if an HVCRE exposure is generating sufficient cash flow to support the debt service and expenses of the real property. FCA does not have an expectation for a specific period following project completion to demonstrate adequate cash flows. Such a criterion should be clearly stated in an institution's loan underwriting standards. Similarly, the Agency is not specifying in the final rule how to calculate cash flows. Regardless of how cash flow information is presented by a borrower, the institution should have processes in place to adequately analyze and project cash flows.

FCA is adopting this part of the proposed rule without change.

In consideration of the changes this rule would require, only loans made after January 1, 2025, the planned effective date of this rule, would be subject to the HVCRE risk-weighting requirements. Loans made prior to January 1, 2025 could continue to be risk-weighted as they are under the pre-existing version of the rule.

After January 1, 2025, when a System institution modifies a loan or if a project is altered in a manner that materially changes the underwriting of the credit facility (such as increases to the loan amount, changes to the size and scope of the project, or removing all or part of the 15 percent minimum capital contribution in a project), the institution must treat the loan as a new exposure and reevaluate the exposure to determine whether or not it is an HVCRE exposure.

Existing FCA Bookletter BL-070 authorizes System institutions to assign a 50- or 75-percent risk weight for RWW facilities that satisfy certain criteria, but it does not permit these risk weights for exposures when a RWW facility is not fully operational due to initial construction or major renovation. RWW exposures subject to a 50- or 75-percent risk weight under BL-070 will continue to receive these risk weights after this HVCRE rule becomes effective.

Bookletter-070 currently provides that exposures not subject to the 50- or 75-percent risk weight are assigned risk weights in accordance with Part 628 of FCA's regulations. Because this HVCRE rule is not yet in effect, these exposures are currently risk weighted at 100-percent as corporate exposures under § 628.32(f)(1) when they are in the construction phase. However, as this bookletter is currently written, once the HVCRE risk weight becomes effective such construction exposures would be assigned the HVCRE risk weight if the HVCRE definition were met and no exclusions applied.

Before the rule's planned effective date of January 1, 2025 (which is before BL-070's existing sunset date of November 2025), FCA plans to revise BL-070 to provide that RWW construction exposures not subject to a 50-or 75-percent risk weight under the bookletter will continue to be risk-weighted as corporate exposures. FCA plans to revise the risk weight of these exposures because of the unique characteristics of RWW exposures discussed above.

Similarly, electric cooperative exposures assigned 20- or 50-percent risk weights under FCA Bookletter BL-053, including exposures to some power plants that are in the construction phase, will continue to receive these risk weights under the bookletter even after this rule becomes effective. Under the bookletter, electric cooperative exposures that are not assigned a 20- or 50-percent risk weight are subject to the “current” (as of the 2007 adoption of the bookletter) regulatory risk weight under former § 615.5211, 83 which was 100 percent. 84 Therefore, under the bookletter, electric cooperative construction exposures that are not assigned a 20- or 50-percent risk weight will be assigned a 100 percent risk weight and will not be subject to risk weights in Part 628 (including the new HVCRE risk weight).

The Convention on Cultural Property Implementation Act (Pub. L. 97-446, 19 U.S.C. 2601 et seq. ) (CPIA), which implements the 1970 United Nations Educational, Scientific and Cultural Organization (UNESCO) Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (823 U.N.T.S. 231 (1972)) (Convention), allows for the conclusion of an agreement between the United States and another party to the Convention to impose import restrictions on certain archaeological and ethnological material. Pursuant to the CPIA, the United States entered into a bilateral agreement with the Islamic Republic of Pakistan (Pakistan) to impose import restrictions on certain archaeological and ethnological material of Pakistan. This rule announces that the United States is now imposing import restrictions on certain archaeological and ethnological material of Pakistan through January 30, 2029. This period may be extended for additional periods, each extension not to exceed 5 years, if it is determined that the factors justifying the initial agreement still pertain and no cause for suspension of the agreement exists (19 U.S.C. 2602(e); § 12.104g(a) of title 19 of the Code of Federal Regulations (19 CFR 12.104g(a))).

Under 19 U.S.C. 2602(a)(1), the United States must make certain determinations before entering into an agreement to impose import restrictions under 19 U.S.C. 2602(a)(2). On August 29, 2022, the Assistant Secretary for Educational and Cultural Affairs, United States Department of State, after consultation with and recommendation by the Cultural Property Advisory Committee, made the determinations required under the statute with respect to certain archaeological and ethnological material originating in Pakistan that is described in the Designated List set forth below in this document.

These determinations include the following: (1) that the cultural patrimony of Pakistan is in jeopardy from the pillage of archaeological material representing Pakistan's cultural heritage dating from approximately 2,000,000 Years Before Present  1 to A.D. 1750, and ethnological material representing Pakistan's diverse history, ranging in date from approximately A.D. 800 to 1849 (19 U.S.C. 2602(a)(1)(A)); (2) that the Pakistani government has taken measures consistent with the Convention to protect its cultural patrimony (19 U.S.C. 2602(a)(1)(B)); (3) that import restrictions imposed by the United States would be of substantial benefit in deterring a serious situation of pillage and remedies less drastic are not available (19 U.S.C. 2602(a)(1)(C)); and (4) that the application of import restrictions as set forth in this final rule is consistent with the general interests of the international community in the interchange of cultural property among nations for scientific, cultural, and educational purposes (19 U.S.C. 2602(a)(1)(D)). The Assistant Secretary also found that the material described in the determinations meets the statutory definition of “archaeological or ethnological material of the State Party” (19 U.S.C. 2601(2)).

On January 30, 2024, the Governments of the United States and Pakistan signed a bilateral agreement, “Agreement Between the Government of the United States of America and the Government of the Islamic Republic of Pakistan Concerning the Imposition of Import Restrictions on Categories of Archaeological and Ethnological Materials of Pakistan” (“the Agreement”), pursuant to the provisions of 19 U.S.C. 2602(a)(2). The Agreement entered into force on January 30, 2024, following the exchange of diplomatic notes, and enables the promulgation of import restrictions on certain categories of archaeological material ranging in date from the Lower Paleolithic Period (approximately 2,000,000 Years Before Present) through A.D. 1750, as well as certain categories of ethnological material associated with Pakistan's diverse history from A.D. 800 through 1849. A list of the categories of archaeological and ethnological material subject to the import restrictions is set forth later in this document.

In accordance with the Agreement, importation of material designated below is subject to the restrictions of 19 U.S.C. 2606 and 19 CFR 12.104g(a) and will be restricted from entry into the United States unless the conditions set forth in 19 U.S.C. 2606 and 19 CFR 12.104c are met. CBP is amending 19 CFR 12.104g(a) to indicate that these import restrictions have been imposed.

Import restrictions listed at 19 CFR 12.104g(a) are effective for no more than 5 years beginning on the date on which an agreement enters into force with respect to the United States. This period may be extended for additional periods of not more than 5 years if it is determined that the factors which justified the agreement still pertain and no cause for suspension of the agreement exists. Therefore, the import restrictions will expire on January 30, 2029, unless extended.

The Agreement between the United States and Pakistan includes, but is not limited to, the categories of objects described in the Designated List set forth below. Importation of material on this list is restricted unless the material is accompanied by documentation certifying that the material left Pakistan legally and not in violation of the export laws of Pakistan.

The Designated List includes archaeological and ethnological material from Pakistan. The archaeological material in the Designated List includes, but is not limited to, objects made of stone, ceramic, faience, clay, metal, plaster, stucco, painting, ivory, bone, glass, leather, bark, vellum, parchment, paper, textiles, wood, shell, and/or other organic materials, as well as human remains ranging in date from the Lower Paleolithic Period through A.D. 1750. The ethnological material in the Designated List includes, but is not limited to, architectural materials and manuscripts ranging in date from A.D. 800 through 1849.

Approximate Simplified Chronology of Well-Known Periods:

(a) Paleolithic, Neolithic, and Chalcolithic: c. 2,000,000 Years Before Present-3500 B.C.

(b) Bronze Age (Pre-Indus, Indus, and Post-Indus Periods): c. 3500-1500 B.C.

(c) Iron Age: c. 1500-600 B.C.

(d) Early Historic Period (Achaemenid, Macedonian, and Mauryan Empires; Greco-Bactrian, Indo-Greek, Indo-Scythian, and Indo-Parthian Kingdoms; Gandharan Culture; Kushan Empire; Kushano-Sasanian Period; Gupta Empire; and Turk Shahi Dynasty): c. 600 B.C.-A.D. 712.

(e) Middle Historic Period (Umayyad Caliphate, Hindu Shahi, Habbari, Ghaznavid, and Ghurid Dynasties): c. A.D. 712-1206.

(f) Late Historic Period (Delhi Sultanate; Mughal Empire; Sikh Empire): c. A.D. 1206-1849

(A) Stone

(1) Architectural Elements—Primarily in limestone, marble, sandstone, and steatite schist, but includes other types of stone. Category includes, but is not limited to, arches, balustrades, benches, brackets, bricks and blocks from walls, ceilings, and floors; columns, including capitals and bases; dentils; domes; door frames; false gables; friezes; lintels; merlons; mihrabs; minarets; mosaics; niches; pilasters; pillars, including capitals and bases; plinths; railings; ring stones; vaults; window screens ( jalis ). Elements may be plain, carved in relief, incised, inlaid, or inscribed in various languages and scripts; may be painted and/or gilded. Architectural elements may include relief sculptures, mosaics, and inlays that were part of a building, such as friezes, panels, or figures in the round. Includes architectural elements of Hellenistic (Greek) influence, such as Ionic and Corinthian styles, and/or depicting geometric, floral, or vegetal motifs, or figures and scenes from Hellenistic (Greek), Buddhist, Hindu, and Jain religious traditions. For example, Early Historic Period Gandharan architectural reliefs may include images of the Buddha, Bodhisattvas, human devotees, and scenes from the life of the Buddha. Approximate Date: 2600 B.C.-A.D. 1750.

(2) Non-Architectural Monuments—Primarily in limestone, marble, steatite schist, but includes other types of stone. Types include, but are not limited to: altars; bases; basins; cenotaphs; funerary headstones and monuments; fountains; libation platforms; linga (m); monoliths; niches; plaques; portable shrines; roundels; sarcophagi; slabs; stands; stelae; stelae bases; and yoni. Monuments may be plain, carved in relief, incised, inlaid, or inscribed in various languages and scripts; may be painted and/or gilded. Decorative elements may include geometric, floral, and/or vegetal motifs, as well as animal, mythological, and/or human figures, such as images from Hellenistic (Greek), Buddhist, Hindu, and Jain religious traditions. Includes rock edicts and pillars with incised inscriptions. Approximate Date: 800 B.C.-A.D. 1750.

(3) Large Statuary—Primarily in steatite schist but includes other types of stone. Statuary includes seated or standing human and divine figures, such as statues of the Buddha, Bodhisattvas, and devotees, as well as figures from Hindu religious traditions. Large statuary is primarily associated with the Early Historic Period Gandharan tradition. Statues may bear inscriptions in various languages and scripts. Approximate Date: 800 B.C.-A.D. 1200.

(4) Small Statuary—Primarily in agate, alabaster, chlorite, garnet, jade, jasper, limestone, marble, sandstone, and steatite schist, but includes other types of stone. Animal and human forms may be stylized or naturalistic. Includes game pieces. Small statuary is found throughout many periods from the Bronze Age onward; well-known styles date to the Indus and Early to Middle Historic Periods. Approximate Date: 3500 B.C.-A.D. 1750.

(a) Bronze Age Indus Period statuary is often made in alabaster, limestone, sandstone, or steatite. It includes human figures, such as bearded, seated males that may be schematic or more detailed and may have inlaid eyes, and female dancers, as well as animal figures such as bulls, rams, or composite mythological creatures that may be either schematic or naturalistic. Approximate Date: 3500-1800 B.C.

(b) Early Historic through Middle Historic period statuary made in alabaster, garnet, steatite schist, and other stones. Includes figures from Hellenistic (Greek), Buddhist, and Hindu religious traditions. Approximate Date: 800 B.C.-A.D. 1000.

(5) Vessels and Containers—Primarily in alabaster, chlorite, jade, rock crystal, and steatite, but includes other types of stone. Vessel types may be conventional shapes such as bowls, boxes, canisters, cups, cylindrical vessels, goblets, flasks, jars, jugs, lamps, platters, stands, and trays, and may also include caskets, cosmetic containers or palettes, inkpots, pen boxes, spittoons, reliquaries (and their contents), and incense burners. Includes vessel lids. Some reliquaries may take the shape of a Buddhist stupa. Surfaces may be plain, polished, and/or incised or carved in relief with geometric, floral, or vegetal decoration, elaborate figural scenes, and/or inscriptions in various languages. Vessels may be inlaid with stones or gilded. Includes round trays or cosmetic palettes carved in relief, often with Hellenistic (Greek) mythological or banquet scenes. Approximate Date: 6000 B.C.-A.D. 1750.

(6) Tools, Instruments, and Weights—Includes ground stone and flaked stone tools.

(a) Ground stone tools, instruments, and weights are mainly made from chert, diorite, gneiss, granite, jade, marble, limestone, quartz, sandstone, or steatite, but other types of stone are included. Types include adzes, anvils, axes, balls, celts, grinding stones, hammerstones, maces, mills, molds, mortars, palettes, pestles, querns, rods, rubbers, scepters, whetstones, and others. Also included are counters, dice, finials, fly whisk handles, game pieces, hilts, mirror frames and handles, spindle whorls, trays, and weights. Stone weights are found in various shapes, such as cubes, rectangular prisms, rings, spheres, and truncated spheres, and may be decorated with incisions or relief carving and/or inscribed in various languages and scripts. Mirror handles of the Early Historic Period may be carved in human and animal forms, and dagger and sword hilts of the Mughal period may be carved in zoomorphic shapes and inlaid with precious or semi-precious stones, glass and/or precious metals. Approximate Date: 8000 B.C.-A.D. 1750.

(b) Flaked stone tools are primarily made of chalcedony, chert or other cryptocrystalline silicates, flint, jasper, obsidian, or quartzite, but other types of stone are included. Types include axes, bifaces, blades, burins, borers, choppers, cleavers, cores, hammers, microliths, points, projectiles, scrapers, sickles, unifaces, and others. Approximate Date: 2,000,000 Years Before Present—600 B.C.

(7) Beads and Jewelry—Primarily in alabaster, agate, amethyst, carnelian, chalcedony, coral, cryptocrystalline silicates, emerald, garnet, jade, jasper, lapis lazuli, onyx, quartz, rock crystal, ruby, steatite, and turquoise, but also includes other types of stone. Steatite beads may be fired and glazed. Carnelian beads bleached (etched) in white with geometric designs are particularly representative of the Bronze Age Indus period. Beads were made in animal, biconical, conical, cylindrical, disc, dumbbell, eye, faceted, scaraboid, spherical, teardrop, and other shapes. May bear geometric designs, images, and/or inscriptions in various languages and scripts. Jewelry includes amulets, bracelets, pendants, rings, and other types. Approximate Date: 7000 B.C.-A.D. 1750.

(8) Stamps, Seals, and Gems—Primarily in agate, amethyst, carnelian, chalcedony, hematite, jasper, rock crystal, steatite, but also includes other types of stone. Stamps, seals, and gems may have engravings that include animals, human figures, geometric, floral, or vegetal designs, and/or inscriptions in various languages and scripts. Includes cameos and intaglios. Well-known styles are from the Neolithic, Chalcolithic, Bronze Age, Iron Age, Early Historic Period, and Middle to Late Historic Periods. Approximate Date: 7000 B.C.-A.D. 1750.

(a) Chalcolithic and Bronze Age seals are usually square or rectangular stamp seals, but may also be circular, cylindrical, oval, or triangular, and may have a pierced knob handle. They may be made of steatite (usually fired and glazed) or other stones. Incised designs often feature inscriptions in the Indus script, either alone or together with animals such as bulls, elephants, and unicorns, as well as human, divine, and mythological figures, plants, and symbols. Designs may also be geometric. Approximate Date: 2800-1800 B.C.

(b) Stamps and intaglio seals of the Iron Age and Early Historic Period are usually made of stones such as agate, carnelian, chalcedony, garnet, hematite, jasper, lapis lazuli, onyx, quartz, and steatite. They are usually oval, rectangular, button-shaped or hemispherical. Stamps and seals may be incised, drilled, cut, or relief-carved with animals, human, divine, and/or mythological figures, and/or symbols of Hellenistic (Greek), Achaemenid/Persian, Buddhist, Zoroastrian, or Hindu traditions; may be carved with a portrait bust; may be perforated for suspension or set into a ring; may be inscribed in various languages and scripts. Approximate Date: 1500 B.C.-A.D. 712.

(c) Stamps and seals of the Middle and Late Historic Periods are usually made in carnelian, chalcedony, hematite, or other stones and are circular, oval, octagonal, teardrop-shaped, rectangular, or square. They are usually carved with inscriptions in Arabic or Persian script, sometimes with floral embellishments. Approximate Date: A.D. 712-1750.

(B) Ceramic, Faience, and Fired Clay

(1) Statuary—Includes small and large-scale statuary in ceramic, faience, and terracotta. May take the form of an animal, deity, human, hybrid animal/human or other mythological creature, cart frame or wheel, model mask, model boat, model house, or model stupa. May be associated with religious activity, games, or toys. May be painted or have traces of paint or pigment. Forms may be stylized or naturalized. Well-known styles date to the Chalcolithic, Bronze Age, Iron Age, Early Historic, and Middle Historic Periods. Approximate Date: 5500 B.C.-A.D. 1750.

(a) Chalcolithic and Bronze Age (Pre-Indus and Indus Period) male and female terracotta figurines are stylized with applied or incised eyes, hair, headdresses, or necklaces and tapered legs. Animal figurines in terracotta and faience may be stylized, with applied and incised details, or naturalistic and sometimes partly formed in a mold. Approximate Date: 5500-1800 B.C.

(b) Late Bronze Age (Post-Indus) and Iron Age terracotta human figurines may have pinched faces, incised details, and/or flat bases. Approximate Date: 1800-600 B.C.

(c) Early Historic Period terracotta figurines may be mold-made in Indo-Greek or local style or handmade with incised and applied details. They include female figurines (in the round and as plaques), horse-and-rider figurines, and animals. Approximate Date: 600 B.C.-A.D. 500.

(d) Early Historic Period large-scale terracotta statuary in the Gandharan tradition can be hand-formed or mold-made in the image of animals, humans, and mythological figures. May be painted, plastered, and/or inlaid with stones. Includes statues of the Buddha, Bodhisattvas, and devotees. Approximate Date: 1st-9th Centuries A.D.

(e) Middle Historic, Hindu Shahi Period terracotta figurines of male and female human figures and animals are handmade and schematic with pinched faces and applied and incised details. They can be slipped and painted. Approximate Date: 9th-10th Centuries A.D.

(2) Architectural Elements—Includes terracotta bricks, niches, panels, pipes, tiles, window screens ( jalis ), and other elements used as functional or decorative elements in buildings and mosaics. Bricks may be cut or molded to form decorative patterns on building exteriors. Mosaic designs include animals, humans, and geometric, floral, and/or vegetal motifs. Panels and tiles may be painted, plastered, or have traces of paint or plaster. Tiles may bear carved, incised, or impressed or molded decoration in the form of animals, humans, geometric, floral, and/or vegetal motifs. Glazed tiles and bricks are well-known from the Middle and Late Historic Periods, used to decorate civic and religious architecture. Tiles may be square or polygonal. They may have been molded, incised, and/or painted with animal, geometric, floral, and/or vegetal motifs, arabesque (intertwining) motifs, and or calligraphic writing in various scripts and languages before glazing. Glaze may be clear, monochrome, or polychrome. Polychrome glaze may be applied in the cuerda seca technique. Approximate Date: 3500 B.C.-A.D. 1750.

(3) Vessels—Includes utilitarian vessels, fine tableware, lamps, special-purpose vessels, and other ceramic objects of everyday use produced in many periods of Pakistan's history. Approximate Date: 6000 B.C.-A.D. 1750.

(a) Neolithic—Includes handmade earthenware vessels. Vessel types include bowls, jars, pots, and other forms. They may be made of coarse chaff- or sand-tempered clay, sometimes with red-slipped surface, often with basket or mat impressions. Approximate Date: 6000-5500 B.C.

(b) Chalcolithic—Includes handmade and wheel-made earthenware vessels. Vessel types include bowls, jars, flat dishes, pots, and other forms. Surface can be reddish-yellow, yellowish, buff, gray, brown, or red-brown, and burnished or red-slipped. Sometimes painted in black, brown, and/or red with simple geometric and animal motifs. Approximate Date: 5500-3500 B.C.

(c) Bronze Age (Pre-Indus, Indus, and Post-Indus Periods)—Includes handmade and wheel-made earthenware vessels. Vessel types include bowls, canisters, cooking pots, goblets, jars, lids, plates, pedestalled stands, perforated strainers, and other forms. Can also take the form of birdcages, feeder bottles, and mousetraps. Surface can be buff, greenish-gray, gray, red, red-buff, or white, sometimes with basket impressions or applied snake motifs. Sometimes slipped in black, gray, or red clay, occasionally combed to reveal the clay color beneath. Sometimes painted (monochrome, bichrome, or polychrome) in black, blue, brown, green, red, white, and yellow with simple or complex geometric motifs, animals such as birds, cattle, deer, dogs, gazelle, fish, and others, and/or vegetal motifs such as pipal leaves. Can be incised with characters in the Indus script. Approximate Date: 3500-1500 B.C.

(d) Iron Age—Includes handmade and wheel-made earthenware vessels. Vessel types include bottles, bowls, cooking pots, goblets, lids, jars, jugs, juglets, lids, plates, saucers, tubs, urns, and other forms. Vessel forms may have a pedestalled foot or stand, handles, and/or spouts. Surfaces can be red, gray, gray-black, brown, or brown-gray and may be slipped, grooved, and/or burnished. Painted decoration in monochrome or bichrome colors includes animal, human, plant, and/or geometric motifs. “Visage” jars or urns characteristic of this period depict a human face through modeling and incision or perforation. Approximate Date: 1500-600 B.C.

(e) Early Historic Period—Includes handmade, mold-made, or wheel-made earthenware vessels. Vessel types include conventional shapes such as basins, beakers, bottles, bowls, cooking pots, cups, dishes ( thalis ), jars, pitchers, plates, storage vessels, trays, and vases (kraters), as well as other forms such as incense burners, lamps, rhyta (drinking horns), and stands. Vessel forms may have pedestal bases, handles, and/or spouts. Some vessels may have been formed into elaborate shapes using molds. “Tulip bowls” with a rounded base, flaring rim, and carinated or kinked body are typical of the early part of this period. Includes round trays or cosmetic palettes decorated in relief with Hellenistic (Greek) mythological scenes or banquet scenes. Vessels may have a brown, buff, gray, red, dark purplish-red, yellow, or black surface. Surface treatments may include slip, burnishing, polishing, incising, impressing (including grooving, rouletting, and stamping), appliqué, painting, and/or glazing. Stamp impressions include simple geometric motifs; leaves, lotuses, and rosettes; and elaborate scenes combining animal, human, geometric, floral, and/or vegetal motifs. Molded animal heads, human figures, or rosettes in clay may be applied to the exterior surface of a vessel or attached as a handle. Painted designs include geometric, floral, and vegetal motifs, as well as friezes of humans, animals, and plants. Some vessels may be covered with green, blue-green, brown, or yellow glaze. Vessels may be incised or painted with inscriptions in various languages and scripts. Approximate Date: 6th Century B.C.-9th Century A.D.

(f) Middle and Late Historic Periods—Includes handmade, molded, and wheel-made earthenware vessels, as well as porcelain. Vessel types include conventional shapes such as bowls, cooking pots, cups, ewers, flasks, jars, jugs, lamps, lids, pans, platters, trays, water vessels (lota), and other types such as hookah pots, incense burners, vessels with a pedestalled foot, kneading troughs, model stupas, pipes, and vessels in the shape of animals. Clay is often red or buff. Surface treatments may include slip, polishing, burnishing, incising, impressing, appliqué, painting, and/or glazing. Stamps and impressions include motifs such as circles, bars and dots, rosettes, eyes, and human faces. Molded designs can include inscriptions and/or geometric, floral, and/or vegetal motifs on unglazed or glazed vessels. Spouts and handles may be formed in the shape of animals. Painted decoration includes animal, geometric, floral, and vegetal motifs, as well as inscriptions in various languages and scripts, variously applied on a slipped surface, under a colorless glaze, or over a colored glaze. Designs may be scratched ( sgraffiato ) through the slip to reveal the clay color beneath before glazing. Glazes may be colorless, monochrome, or polychrome. Common colors include green, yellow, blue, black, brown, turquoise, and white. Imported types include celadon (green ware) and blue-and-white porcelain from China. Approximate Date: 9th Century A.D.-A.D. 1750.

(4) Beads, Jewelry, and Ornaments—Includes bangles, beads, bracelets, buttons, ear spools, inlays, and rings made of faience and terracotta. Beads include barrel, biconical, cylindrical, segmented, and other shapes. Faience may be colored with blue, blue-green, red, and white glaze. Approximate Date: 5500 B.C.-A.D. 1750.

(5) Tools and Instruments—Includes terracotta balls, buttons, “cakes,” coin molds, statuary molds, vessel molds, cones, cubes, dabbers, dice, discs, flutes, loom weights, net-sinkers, stamps, rattles, rubbers, spindle whorls, scoops, spoons, stoppers, tri-armed kiln setters, whistles, and other objects. Bronze Age “cakes” may be circular, square, or triangular, and whistles may take the shape of animals such as birds. May be incised or stamped with characters in various scripts. Approximate Date: 6000 B.C.-A.D. 1750.

(6) Stamps and Seals—Terracotta faience stamp seals were produced in the Bronze Age, Early Historic Period, and Middle Historic Hindu Shahi Period. Bronze Age Indus Period stamp seals can be square or circular in shape and compartmented with geometric and animal motifs and/or inscribed with Indus script. Approximate Date: 3500 B.C.-A.D. 1000.

(7) Tablets and Sealings—Terracotta and faience tablets and sealings of the Bronze Age Indus period may be cylindrical, rectangular, or prismatic and molded in relief with images of animals, humans, and other motifs, and/or inscriptions in Indus script. Approximate Date: 2600-1800 B.C.

(C) Metal —Includes copper, gold, silver, iron, lead, tin, electrum, and alloys such as bronze, brass, pewter, and steel. Metal objects were produced in many periods of Pakistan's history, beginning in the Chalcolithic Period. Approximate Date: 5500 B.C.-A.D. 1750.

(1) Containers and Vessels—Vessel types include conventional shapes such as basins, bottles, bowls, boxes, canisters, cauldrons, chalices, cups, dishes, ewers, flasks, jars, jugs, lamps, pans, plates, platters, pots, stands, utensils, and vases, but also include forms such as caskets, hookah pots, incense burners, reliquaries (and their contents), and spittoons. Some reliquaries may take the form of a Buddhist stupa. One end of some drinking vessels ( rhyta ) may take the form of an animal or mythical creature. They may include lids, spouts, and handles of vessels. Metal containers may have been decorated by chasing (embossing), engraving, gilding, inlaying, punching, and/or repoussé (relief hammering). Designs include, but are not limited to, inscriptions in various languages and scripts, arabesque (intertwining) motifs, geometric, floral, and vegetal motifs, animal motifs, and portrait busts or scenes of human figures, such as ceremonial, banquet, or hunting scenes. Some containers and vessels, such as reliquaries, may be inlaid with precious or semi-precious stones, as well as precious metals such as gold and silver. Approximate Date: 5500 B.C.-A.D. 1750.

(2) Jewelry and Personal Adornments—Types include, but are not limited to, amulets, amulet holders, bangles, beads, bracelets, belts, bracteates, brooches, buckles, buttons, charms, clasps, crowns, earrings, ear spools, hair ornaments, hairpins, headdress or hat ornaments, lockets, necklaces, pectoral ornaments, pendants, pins, rings, rosettes, and staffs. Includes metal ornaments, appliqués, and clasps once attached to textiles or leather objects. Includes also metal scrolls inscribed in various languages and scripts. May have been decorated by chasing (embossing), cloisonné, enameling, engraving, filigree, gilding, granulation, inlaying, and/or repoussé (relief hammering). Decoration may include animal, human, geometric, floral, or vegetal motifs. May include inlays of ivory, bone, animal teeth, enamel, other metals, precious stones, and/or semi-precious stones. Approximate Date: 5500 B.C.-A.D. 1750.

(3) Tools and Instruments—Types include, but are not limited to, axes, backscratchers, bells, blades, chisels, drills, goads, hinges, hooks, keys, knives, measuring rods, mirrors, mirror handles, nails, pickaxes, pins, rakes, rods, saws, scale weights, shears, sickles, spades, spoons, staffs, trowels, weights, and tools of craftspeople such as carpenters, masons, and metalsmiths. Approximate Date: 5500 B.C.-A.D. 1750.

(4) Weapons and Armor—Includes body armor, such as chain mail, helmets, plate armor, scale armor, shin guards, shields, shield bosses, horse armor, and horse bits and bridle elements. Also includes launching weapons (arrowheads, spearheads, and javelin heads); hand-to-hand combat weapons (axes, swords, including sabers and scimitars, daggers, including khajars and katars, and maces); and sheaths. Some weapons may be highly decorative and incorporate inlays of other types of metal, precious stones, or semi-precious stones in the sheaths and hilts. Some weapons, hilts, and sheaths may be engraved or chased (embossed) with inscriptions in various languages and scripts, arabesque (intertwining), geometric, floral, and/or vegetal motifs, and/or human or animal scenes, such as hunting scenes. Approximate Date: 3500 B.C.-A.D. 1750.

(5) Coins—Ancient coins include gold, silver, copper, and copper alloy coins in a variety of denominations. Includes gold and silver ingots, which may be plain and/or inscribed. Some of the most well-known types are described below:

(a) Early coins in Pakistan include silver sigloi of the Achaemenid Empire. Gold staters and silver tetradrachms and drachms of Alexander the Great and Philip III Arrhidaeus are also found. Regionally minted Achaemenid-period coins include silver bent bars ( shatamana ) with punched symbols such as wheels or suns. Local Hellenistic (Greek)-period and Mauryan imperial punch-marked silver coins ( karshapana ) are covered with various symbols such as suns, crescents, six-arm designs, hills, peacocks, and others. Circular or square, die-struck cast copper alloy coins with relief symbols and/or animals on one or both sides also date to this period. Approximate Date: 6th-2nd Centuries B.C.

(b) Greco-Bactrian, Indo-Greek, Indo-Scythian, and Indo-Parthian coins include gold staters, silver tetradrachms, drachms, and obols, and copper alloy denominations. Copper alloy coins are often square. The bust of the king, the king on horseback, Greek and Hindu deities, the Buddha, elephants, bulls, and other animals are common designs. The name of the king is often written in Greek, Kharosthi or Brahmi script. Approximate Date: 2nd Century B.C.-1st Century A.D.

(c) Roman Imperial coins struck in silver and bronze are sometimes found in archaeological contexts in Pakistan. Approximate Date: 1st Century B.C.-4th Century A.D.

(d) Kushan coins include gold dinars, silver tetradrachms, and copper alloy denominations. Imagery includes the king as a portrait bust (“Augustus type”), standing figure with a fire altar, or equestrian figure; emblems ( tamgha ); and figures from Greek, Zoroastrian, Buddhist, and Hindu religious traditions. Inscriptions are written in Greek, Bactrian, and/or Brahmi scripts. Approximate Date: A.D. 30-350.

(e) Sasanian coins include gold dinars, silver drachms, obols ( dang ), and copper alloy denominations. Imagery includes the bust of the king wearing a large crown and Zoroastrian fire altars and deities. Inscriptions are usually written in Pahlavi, but gold dinars minted in Sindh with Brahmi inscriptions are included. Approximate Date: A.D. 240-651.

(f) Kushano-Sasanian or Kushanshah coins include gold dinars, silver tetradrachms, and copper alloy denominations. Some Kushano-Sasanian coins followed the Kushan style of imagery, while others resemble Sasanian coins. Inscriptions are written in Greek, Bactrian, Brahmi, or Pahlavi scripts. Approximate Date: A.D. 225-365.

(g) Gupta coins include gold dinars and silver and copper alloy denominations. Imagery includes the king in various postures and activities, the queen, Hindu deities, altars, and animals. Inscriptions are usually written in pseudo-Greek or Brahmi script. Approximate Date: A.D. 345-455.

(h) Coins of the Hephthalite, Kidarite, Alchon and Nezak Hun, Rai, Brahmin Chacha, and Turk Shahi Dynasties include silver and copper alloy denominations. Designs resemble Sasanian coins with a portrait bust of the ruler wearing a distinctive crown on the obverse and a fire altar or other Zoroastrian imagery on the reverse. Coins sometimes bear emblems ( tamgha s) and/or inscriptions in Bactrian, Pahlavi, Brahmi, or Nagari script. Designs are sometimes highly schematized. Approximate Date: 5th-9th Centuries A.D.

(i) Hindu Shahi silver coins often bear inscriptions in Nagari or Sharada script and depict a horseman and a bull, or an elephant and a lion. Approximate Date: A.D. 822-1026.

(j) The Umayyad and Abbasid Caliphates and the Ghaznavid and Ghurid Empires issued gold dinars, silver dirhams, and copper alloy fulus (singular fals ) bearing Arabic inscriptions on both faces. Inscriptions are often enclosed in circles, squares, rings of dots, or an inscription band. Silver and copper alloy denominations of local governors, the Habbari Dynasty of Sindh, and the Emirate of Multan are similar, but some coins of Multan carry inscriptions in Nagari or Sharada. Some Ghaznavid coins carry bilingual inscriptions in Arabic and Sharada scripts, and some bear images of a bull and horseman. Some Ghurid coins bear inscriptions in Devanagari and/or stylized images of a flower, bull, horseman, and/or goddess. Approximate Date: A.D. 712-1206.

(k) The Delhi Sultanate issued gold tankas, silver tankas and jitals, and copper alloy denominations bearing Arabic inscriptions, either enclosed in a circle, scalloped circle, octofoil, flower, square, or inscription band, or covering the full face of the coins. Some bear inscriptions in Devanagari and/or stylized images of a bull, horseman, lion, or goddess. Some coins are square. Approximate Date: A.D. 1206-1526.

(l) The Mughal Empire issued coins such as gold mohurs; silver shahrukhis, rupees, and tankas; copper and copper alloy dams, and other denominations. Coins bear Arabic inscriptions enclosed in a circle, ring of dots, square, or inscription band, or covering the entire face. Some coins are square. Some coins bear an image of the seated emperor, a portrait bust of the emperor, a sun, and/or Zodiac symbols. Approximate Date: A.D. 1526-1749.

(6) Statuary, Ornaments, and other Decorated Objects—Primarily in copper, gold, silver, or alloys such as bronze and brass. Includes free-standing and supported statuary; relief or incised plaques or roundels; finials; votive ornaments; stands; and other ornaments. Statuary may be fashioned as humans, animals, deities, or mythological figures; miniature chariots; wheeled carts; or other objects. Statuary may take naturalized or stylized forms. Decorative techniques for statuary, ornaments, and other decorated objects include chasing (embossing), gilding, engraving, repoussé (relief hammering), and/or inlaying with other materials. Decorative elements may include humans, deities, animals, mythological figures, scenes of activity, floral, geometric, and/or vegetal motifs, and/or inscriptions in various languages and scripts. Imagery representative of the Early Historic and Middle Historic Periods includes figures from Hellenistic (Greek), Buddhist, and Hindu religious traditions. Approximate Date: 3500 B.C.-A.D. 1750.

(7) Stamps, Seals, and Tablets—Primarily cast in copper and alloys such as bronze and brass; also includes stamps and seals in gold or silver. Types include amulets, flat tablets, rings, small devices with engraving on one side, and others. Stamps and seals may have engravings that include animals, humans, deities, mythological figures, geometric, floral, and vegetal motifs, symbols, and/or inscriptions in various languages and scripts. May be inlaid with other types of material. Approximate Date: 3500 B.C.-A.D. 1750.

(D) Plaster, Stucco, and Unfired Clay —Includes ceiling decoration or tracery, columns, corbels, cornices, large- and small-scale figures of animals, humans, and deities, friezes, medallions, mihrabs, ornaments, niches, panels, plaques, reliefs, roundels, stupas, vaults, window screens, and other architectural and non-architectural decoration or sculpture. May be painted or bear traces of paint; gilded; inlaid with stones or other materials; and/or inscribed in various languages and scripts. Stucco panels may depict elaborate scenes of animals and human activity (such as hunting or elite activity) and/or arabesque (intertwining), geometric, floral, and/or vegetal patterns. Stucco panels may have been made with molds. Stucco sculpture and decorated objects of the Early Historic Period may resemble Hellenistic (Greek) styles and figures; they may depict individuals such as the Buddha, Bodhisattvas, or devotees. Unfired clay bullae and roundels with stamped or rolled impressions used as sealing material are included. Approximate Date: 5500 B.C.-A.D. 1750.

(E) Paintings —Includes paintings, frescoes, and fragments on natural stones and cave walls, building walls and ceilings, and portable media. Rock paintings of the Paleolithic through Bronze Age are usually executed in red or black pigments and depict stylized animals and humans or symbols. Patterns in red, black, and white pigments are typical for wall paintings of the Neolithic period. Rock and wall frescoes of the Early Historic Period depict humans, animals, and geometric symbols, sometimes with imagery from Buddhist and Hindu religious traditions, in various colors and styles. Wall and ceiling frescoes with polychrome arabesque, floral, vegetal, and geometric patterns and inscriptions are typical of the Mughal Period. Mughal Period paintings also include miniature portraits set in rings or pendants and larger paintings on cotton. Approximate Date: 30,000 B.C.-A.D. 1750.

(F) Ivory and Bone

(1) Non-Architectural Relief Panels and Plaques—Decorated and engraved panels and plaques featuring low-and high-relief carvings. May include imagery of humans, deities, animals, mythological creatures, and human activity, as well as floral, geometric, and/or vegetal motifs. May be gilded and/or painted or bear traces of paint or pigment. Approximate Date: 1st Century A.D.-A.D. 1750.

(2) Statuary—Includes carved animal, human, and deity figures. Geometric, floral, and/or vegetal decorative elements may be part of the carved design. Approximate Date: 1st Century A.D.-A.D. 1750.

(3) Containers, Tools, Handles, and other Instruments—Includes awls, boxes, buckles, buttons, caskets, combs, flasks, game dice, game pieces, dagger or sword handles or hilts, mirrors and mirror handles, points, polishers, reliquaries, rods, rulers, spatulas, spindles, stoppers, and other personal objects made of ivory and bone. May be incised and/or painted with decorative motifs, inlaid with other materials, carved in relief, carved in zoomorphic shapes, and/or inscribed in various languages and scripts. Approximate Date: 45,000 B.C.-A.D. 1750.

(4) Furniture and Furniture Elements—Includes bone or ivory brackets, handles, finials, and elements of chairs, couches, beds, footstools, chests, trunks and other types of furniture such as arms, legs, feet, inlays, and panels. Approximate Date: 1st Century A.D.-A.D. 1750.

(5) Jewelry and Ornaments—Types include, but are not limited to, beads, pendants, hairpins, pins, and rings. Approximate Date: 5500 B.C.-A.D. 1750.

(6) Stamps and Seals—Bone and ivory seals include button-shaped and square stamps, among other shapes. May be engraved with animals, humans, deities, geometric, floral, and/or vegetal designs, symbols, and/or inscriptions in various languages and scripts, including the Indus script. Approximate Date: 4000 B.C.-A.D. 712.

(G) Glass

(1) Architectural Elements—Includes glass pieces or tiles arranged in mosaic fashion to create geometric, floral, and/or vegetal designs on architectural surfaces or in windows. Glass may be mirrored or stained. Approximate Date: 1st Century A.D.-A.D. 1750.

(2) Beads and Jewelry—Includes beads in the form of animals, cylinders, cones, discs, spheres, or other shapes, as well as bangles. Decoration may include bevels, incisions, and/or raised decoration. Includes glass inlay used in other types of jewelry and decorated items. Includes stamp seals or gems incised with decorative and figural designs. Approximate Date: 1100 B.C.-A.D. 1750.

(3) Vessels—Vessel types include conventional shapes such as beakers, bottles, bowls, cups, dishes, flasks, goblets, jars, mugs, plates, and vases, and other forms such as cosmetic containers, lamps, medicine droppers, and animal-shaped vessels. Some vessels may have been formed in molds or using mosaic techniques. May be monochrome or polychrome. Some polychrome glass vessels may have been painted with arabesque (intertwining), floral and/or vegetal designs or bear traces of paint. Approximate Date: 1st Century A.D.-A.D. 1750.

(4) Ornaments—Includes glass medallions. May have molded decorations including, but not limited to, animals, humans, geometric, floral, and vegetal motifs. Typically associated with the Ghaznavid and Ghurid periods. Approximate Date: A.D. 1000-1200.

(H) Leather, Birch Bark, Vellum, Parchment, and Paper

(1) Books and Manuscripts—Includes scrolls, sheets, and bound volumes. Texts may be written in ink on birch bark, vellum, parchment, or paper, and may be gathered into leather or wooden bindings, albums, or folios. Includes secular and religious texts. Texts of the Early Historic Period written on birchbark, vellum, and parchment include sacred texts of Buddhism and other religions of ancient Pakistan, as well as texts on secular topics such as mathematics, and are written in various languages and scripts, such as Brahmi, Gandhari, Kharosthi, and Sharada. Books and manuscripts of the Middle and Late Historic Periods were written primarily on paper in various languages in scripts such as Arabic, Persian, Devanagari, and Sharada. Topics of this period include, but are not limited to, religion, religious epics, science, mathematics, medicine, literature, poetry, history, and biography. Books and manuscripts of this period may be embellished or decorated with monochrome or polychrome paintings or illuminations of arabesque (intertwining), geometric, floral, or vegetal motifs; images of animals, plants, and humans, including individual portraits; landscapes; and/or scenes of human activities, such as courtly gatherings and ceremonies, hunting, falconry, battles, and historical, mythological, or legendary events. May be in miniature form with decorated borders. Paper may be marbleized and/or embellished with gold. Approximate Date: 1st Century A.D.-A.D. 1750.

(2) Items of Personal Adornment—Primarily in leather, including bracelets and other types of jewelry, belts, necklaces, sandals, and shoes. May be embroidered or embellished with other materials. Leather goods may have also been used in conjunction with textiles. Approximate Date: 7000 B.C.-1750 A.D.

(I) Textiles —Includes silk, linen, cotton, hemp, wool, and other woven materials used in basketry and other household goods. Includes clothing, shoes, jewelry, and items of personal adornment; sheaths; burial shrouds; tent coverings, tent hangings, and other domestic textiles; carpets; baskets; and others. Textiles may be plain, or patterns may have been woven into the body of the textile. Other decorative techniques include embroidery, application of gold leaf, or painting with various motifs, such as animals, geometric, floral, and vegetal motifs, and other designs. Gold or silver threads may be woven into the textile. Approximate Date: 7000 B.C.-A.D. 1750.

(J) Wood, Shell, and other Organic Material —Wooden objects include architectural elements, such as arches, balconies, bases, benches, capitals, columns, doors, door frames, friezes, lintels, mihrabs, minbars, jambs, panels, posts, screens, shutters, window frames and fittings, and window screens, or pieces of any of these objects; boxes; coffins; finials; furniture; jewelry and other items of personal adornment; musical instruments; statuary and figurines; stamps and seals with engraved designs and/or inscriptions in various languages and scripts; vessels and containers; weapons such as bows; and other objects. Jewelry and ornaments made of shell, mother-of-pearl, and pearl include bangles, beads, bracelets, cones, inlays, necklaces, pendants, rings, studs, and other types. Vessels made of shell or set with mother-of-pearl panels include ewers, ladles, libation vessels, plates, and spoons. Wooden, shell, mother-of-pearl, and pearl objects may be carved, incised, inlaid with other materials, lacquered, and/or painted. Approximate Date: 7000 B.C.-1750 A.D.

(K) Human Remains —Human remains and fragments of human remains, including skeletal remains, soft tissue, and ash from the human body that may be preserved in burials, reliquaries, and other contexts.

Ethnological material in the Designated List includes manuscripts and architectural materials from civic and religious buildings associated with Pakistan's diverse history from A.D. 800 through 1849.

(A) Architectural Materials —Architectural materials include non-industrial and/or handmade elements used to decorate civic and religious architecture. They may be made of stone, ceramic or terracotta, plaster and stucco, glass, and/or wood, and painted media.

(1) Stone—Primarily in limestone, marble, sandstone, and steatite schist. Includes arches; balustrades; benches; brackets; bricks and blocks from walls, ceilings, and floors; columns, including capitals and bases; corbels; cornices; dentils; domes; door frames; false gables; friezes; lintels; merlons; mihrabs; minarets; mosaics; niches; panels; pilasters; pillars, including capitals and bases; plinths; railings; ringstones; vaults; window screens ( jali s); and others. May be plain, carved in relief, incised, inlaid, or inscribed in various languages and scripts. May be painted and/or gilded. May include relief sculptures, mosaics, and inlays that were part of a civic or religious building, such as friezes, panels, or figures in the round. Imagery may be civic or religious. Mosaic designs include animals, humans, and geometric, floral, and/or vegetal motifs. Approximate Date: A.D. 800-1849.

(2) Ceramic and Fired Clay—Includes terracotta (fired clay) bricks, mosaics, niches, panels, pipes, tiles, window screens ( jali s), and other elements used as decorative elements in civic and religious buildings. Bricks may be cut or molded to form decorative patterns on building exteriors. Mosaic designs include animals, humans, and geometric, floral, and/or vegetal motifs. Panels and tiles may be painted, plastered, or have traces of paint or plaster. Tiles may be square or polygonal and may be carved, incised, impressed, or molded with decorations in the form of animals, humans, geometric, arabesque (intertwining), floral, and/or vegetal motifs, and/or calligraphic writing in various scripts and languages, and/or then glazed. Glaze may be clear, monochrome, and/or polychrome. Polychrome glaze may be applied in the cuerda seca technique. Approximate Date: A.D. 800-1849.

(3) Plaster and Stucco—Includes ceiling decoration or tracery, columns, corbels, cornices, friezes, medallions, mihrabs, niches, panels, plaques, reliefs, roundels, vaults, window screens, and other types. May be painted or bear traces of paint; gilded; inlaid with stones or other materials; and/or inscribed in various languages and scripts. Designs may include arabesque (intertwining), geometric, floral, and/or vegetal patterns. May have been made using molds. Approximate Date: A.D. 800-1849.

(4) Paintings and Frescos—Includes paintings and frescoes on civic and religious building walls and ceilings, and fragments thereof. Frescoes with polychrome arabesque (intertwining), floral, vegetal, and/or geometric patterns and inscriptions are typical of the Mughal Period. Jain and Hindu temples and Sikh gurdwaras are sometimes adorned with frescoes depicting human and animal figures and scenes, as well as floral, vegetal, and geometric motifs. Approximate Date: A.D. 800-1849.

(5) Glass—Includes glass pieces or tiles arranged in mosaic fashion to create geometric, floral, and/or vegetal designs on architectural surfaces or in windows. Glass may be mirrored or stained. Often found in mosques and Sikh gurdwaras. Approximate Date: A.D. 1000-1849.

(6) Wood—Includes hand-carved arches, balconies, bases, benches, capitals, columns, doors, door frames, friezes, lintels, mihrabs, minbars, jambs, panels, posts, screens, shutters, window frames and fittings, and window screens, or parts thereof, used as structural elements in and/or to decorate civic or religious architecture. These architectural elements may have been reused for new purposes, such as a wood panel used as a table, or a door jamb used as a bench. May be carved, incised, inlaid with other materials, and/or painted. Approximate Date: A.D. 800-1849.

(B) Manuscripts —Manuscripts, portions of manuscripts, and works on paper include non-industrial, handmade, handwritten, hand-illustrated and/or illuminated scrolls, sheets, and bound volumes. They may be made of various media, from writing, illustrations, and/or illuminations on parchment, vellum, birchbark, cotton, or paper to binding in leather or wood. Texts may be written in various languages and scripts, such as Arabic, Balochi, Brahmi, Gandhari, Kharoshti, Nagari, Pashto, Persian, Sharada, Sindhi, and/or Urdu. They may include sacred texts of Buddhism and/or other religious traditions. Other topics include, but are not limited to, astronomy, botany, history, literature, mathematics, medicine, poetry, religion, and/or sciences. May be embellished or decorated with monochrome, bichrome, or polychrome handmade illustrations and/or illuminations. These may include arabesque (intertwining), geometric, floral, or vegetal motifs; images of animals, plants, and humans, including portraiture; landscapes; and/or scenes of human activities, such as courtly gatherings and ceremonies, hunting, falconry, battles, and historical, mythological, or legendary events. May be in miniature form with decorated borders. Approximate Date: A.D. 800-1849.

This amendment involves a foreign affairs function of the United States and is, therefore, being made without notice or public procedure (5 U.S.C. 553(a)(1)). For the same reason, a delayed effective date is not required under 5 U.S.C. 553(d)(3).

Executive Orders 12866 (as amended by Executive Order 14094) 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 (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. CBP has determined that this document is not a regulation or rule subject to the provisions of Executive Orders 12866 and 13563 because it pertains to a foreign affairs function of the United States, as described above, and therefore is specifically exempted by section 3(d)(2) of Executive Order 12866 and, by extension, Executive Order 13563.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires an agency to prepare and make available to the public a regulatory flexibility analysis that describes the effect of a proposed rule on small entities ( i.e., small businesses, small organizations, and small governmental jurisdictions) when the agency is required to publish a general notice of proposed rulemaking for a rule. Since a general notice of proposed rulemaking is not necessary for this rule, CBP is not required to prepare a regulatory flexibility analysis for this rule.

This regulation is being issued in accordance with 19 CFR 0.1(a)(1) pertaining to the Secretary of the Treasury's authority (or that of the Secretary's delegate) to approve regulations related to customs revenue functions.

Troy A. Miller, the Senior Official Performing the Duties of the Commissioner, having reviewed and approved this document, has delegated the authority to electronically sign this document to the Director (or Acting Director, if applicable) of the Regulations and Disclosure Law Division for CBP, for purposes of publication in the Federal Register .

For the reasons set forth above, part 12 of title 19 of the Code of Federal Regulations (19 CFR part 12), is amended as set forth below:

The Coast Guard will enforce the special local regulations in 33 CFR 100.1102 for the Spring Classic in Parker, AZ for the locations described in Table 1 to § 100.1102, Item 6 of that section, April 13, 2024, to April 14, 2024, from 6 a.m. until 6 p.m. daily. The location includes the waters of Parker, AZ. This enforcement action is being taken to provide for the safety of life on navigable waterways during the event. The Coast Guard's regulation for recurring marine events on the Colorado River, between Davis Dam (Bullhead City, Arizona) and Headgate Dam (Parker, Arizona) identifies the regulated entities and area for this event. Under the provisions of 33 CFR 100.1102, persons and vessels are prohibited from anchoring, blocking, loitering, or impeding within this regulated area, unless authorized by the Captain of the Port San Diego, or his designated representative. The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation.

In addition to this document in the Federal Register , the Coast Guard will provide the maritime community with advance notification of this enforcement period via the Local Notice to Mariners, marine information broadcasts, and local advertising by the event sponsor.

If the Captain of the Port Sector San Diego or his designated representative determines that the regulated area need not be enforced for the full duration stated on this document, he or she may use a Broadcast Notice to Mariners or other communications coordinated with the event sponsor to grant general permission to enter the regulated area.

The Coast Guard will enforce the special local regulations in 33 CFR 100.1102 for the Desert Storm Poker Run Shootout in Lake Havasu, AZ, for the locations described in Table 1 to § 100.1102, Item No. 4 from 11 a.m. until 5 p.m. on April 26, 2024, and 10 a.m. to 3 p.m. on April 27, 2024. In case of inclement weather, we will also enforce the special local regulations on Sunday, April 28, 2024 from 10 a.m. to 3 p.m. This enforcement action is being taken to provide for the safety of life on navigable waterways during the event. The Coast Guard's regulation for recurring marine events in the San Diego Captain of the Port Zone identifies the regulated entities and area for this event. Under the provisions of § 100.1102, persons and vessels are prohibited from anchoring, blocking, loitering, or impeding within this regulated area, unless authorized by the Captain of the Port, or his designated representative. The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation.

In addition to this document in the Federal Register , the Coast Guard will provide the maritime community with advance notification of this enforcement period via the Local Notice to Mariners, marine information broadcasts, and local advertising by the event sponsor.

If the Captain of the Port Sector San Diego or his designated representative determines that the regulated area need not be enforced for the full duration stated on this document, he or she may use a Broadcast Notice to Mariners or other communications coordinated with the event sponsor to grant general permission to enter the regulated area.

The Coast Guard is issuing this temporary rule under authority in 5 U.S.C. 553(b)(B). This statutory provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency, for good cause, finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” The Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because it is impracticable. The Coast Guard received all relevant information for the transfer of the large gantry cranes and the need for the safety zone on March 18, 2024. Insufficient time remains to publish an NPRM and receive and consider public comments because the rulemaking process would not be completed before the events commencement on April 4, 2024. Proceeding with the NPRM process would delay the establishment of the safety zones beyond the event date, compromising the safety of the M/V HAPPY DIAMOND, the crew, and other vessels navigating the surrounding waterways. Therefore, it is impracticable to publish an NPRM because we must establish the temporary safety zone by April 4, 2024.

Also, 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 the transfer of large gantry cranes beginning on April 4, 2024.

The Coast Guard is issuing this rule under authority in 46 U.S.C. 70034. The Captain of the Port Houston-Galveston (COTP) has determined that potential hazards associated with the transfer of large gantry cranes starting April 4, 2024, will be a safety concern for anyone within a 100-yard radius while the M/V HAPPY DIAMOND is in transit and for anyone within 25-yard radius while the M/V HAPPY DIAMOND is moored. This rule is needed to protect persons, property, and the marine environment within the navigable waters of the safety zones while the M/V HAPPY DIAMOND transits to and unloads in Seabrook, Texas.

This rule establishes two temporary safety zones from 5 a.m. on April 4, 2024, through 4 p.m. on April 17, 2024. The temporary safety zones include a moving safety zone, covering all navigable waters within 100 yards of the M/V HAPPY DIAMOND, and a fixed safety zone, covering all navigable waters within 25 yards of the vessel. The duration of the zones is intended to ensure the safety of the public and navigable waters in the specified areas during the transit of the large gantry cranes in the Houston Ship Channel and while the vessel is moored. No vessel or person will be permitted to enter, transit through, anchor in, or remain within the safety zones without obtaining permission from the COTP or a designated representative.

Moving Safety Zone: This area includes all waters within 100 yards of the M/V HAPPY DIAMOND as the vessel transits from the Gulf of Mexico off the coast of Galveston and through the Houston Ship Channel. The following coordinates are the approximate start position 29°19′01.21″ N, 094°38′38.1″ W in the Gulf of Mexico off the coast of Galveston.

Fixed Safety Zone: This area includes all waters within 25 yards of the M/V HAPPY DIAMOND once the vessel is moored at Bayport Terminal in Seabrook, Texas.

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 the 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, the Office of Management and Budget has not reviewed this rule.

This regulatory action determination is based on the safety zones size, location, duration, and time-of-day. The safety zones will be enforced for 15 days during the transfer of large gantry cranes in the Houston Ship Channel. Although the rule prohibits persons and vessels from entering, transiting through, anchoring in, or remaining within the regulated area without authorization from the COTP or a designated representative, they may operate in the surrounding areas during the enforcement period. The Coast Guard will provide advance notification of the safety zones to the local maritime community by Local Notice to Mariners and/or Broadcast Notice to Mariners, and the rule would allow vessels to seek permission to enter the zones.

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 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 businesses. 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 principles of federalism 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 will prohibit persons and vessels from entering, transiting through, anchoring in, or remaining within the regulated area during the transfer of large gantry cranes in the Houston Ship Channel. 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 July 20, 2023, VA published a proposed rule in the Federal Register (88 FR 46720) to rename and clarify certain loss-mitigation terms used in VA's regulations to better align such name and terms with their general use in the housing finance industry. The public comment period for the proposed rule closed on September 18, 2023. VA is adopting as final the proposed regulatory changes with the grammatical edit as noted below.

VA received one comment that did not address the subject of the rulemaking but instead requested VA ban realtors from transactions involving veterans or their survivors. VA finds this comment to be outside the scope of this rulemaking and, therefore, will make no changes to the regulatory text based on this comment.

In the proposed rule, VA discussed that the Agency would remove the references to “written” and “executed” in regard to a repayment plan and a special forbearance agreement and replace them with a requirement for the repayment plan or special forbearance agreement be documented 88 FR 46720, 46721. However, VA inadvertently kept the term “executed” in the proposed amendment to the definition of “special forbearance.” Therefore, VA is correcting the error in this final rule by replacing the current rule's phrase, “a written agreement executed” with “a documented agreement,” as proposed, and removing the term “executed.” The corrected definition of special forbearance reads in this final rule, “a documented agreement by and between the holder and the borrower.” The deletion is grammatical only, not substantive, and reflects VA's intent as explained in the proposal.

The purpose of this paragraph is to clarify the Agency's intent with respect to the severability of the provisions of this final rule. Each provision that the Agency has amended is capable of operating independently, and the Agency intends them to be severable. If any provision of this rule is determined by judicial review or operation of law to be invalid, the Agency would not intend that partial invalidation to render the remainder of this rule invalid. Likewise, if the application of any portion of this final rule to a particular circumstance were determined to be invalid, the agencies would intend that the rule remain applicable to all other circumstances.

Executive Order 12866 (Regulatory Planning and Review) directs agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 (Executive Order on Modernizing Regulatory Review) supplements and reaffirms the principles, structures, and definitions governing contemporary regulatory review established in Executive Order 12866 of September 30, 1993 (Regulatory Planning and Review), and Executive Order 13563 of January 18, 2011 (Improving Regulation and Regulatory Review). The Office of Information and Regulatory Affairs has determined that this rulemaking is not a significant regulatory action under Executive Order 12866, as amended by Executive Order 14094. The Regulatory Impact Analysis associated with this rulemaking can be found as a supporting document at www.regulations.gov.

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-612). However, this rulemaking will have a direct impact on a number of industries that service VA loans. VA defines a servicer as a mortgage company that collects funds for a debt incurred by a borrower to purchase a home. When a loan becomes delinquent after a borrower misses one or more mortgage payments, servicers are responsible for servicing delinquent loans and working with the borrower to reach an agreement that will bring the loan current or avoid foreclosure whenever feasible.

A recent analysis indicated there are currently 450 servicers in varying industries that will be impacted by this rulemaking. This final rule will impose a one-time rule familiarization cost to servicers in 2024, estimated at $55.91 per servicer regardless of size. The $55.91 cost is derived by dividing the cost of rule familiarization, which is estimated to be $25,157, by the 450 servicers VA currently works with. To estimate the one-time rule familiarization cost, VA multiplies the number of servicers by the time needed for in-house or retained legal counsel to review and ensure compliance with the rule and their compensation rate. VA assumes that it would take 30 minutes for a lawyer to review the rulemaking. The compensation rate of the lawyers is estimated by multiplying their hourly wage rate ($78.74) by the fringe benefits factor, 1.42. Multiplying the number of servicers (450) by the time to review the rule (30 minutes) and their total compensation rate ($111.81 per hour) results in a one-time total cost of $25,157 in Fiscal Year (FY) 2024. This one-time cost in FY 2024 is offset by the long-term cost savings of this rulemaking from reduced agreement preparation and sharing efforts.

VA considers a rulemaking to have a “significant economic impact” when the impact associated with the rulemaking for a small entity equals or exceeds 1 percent of annual revenue. Thus, this rulemaking is not expected to have a significant economic impact on the participating small servicers. After the first year of implementation, there will be a monetary benefit realized by servicers due to the reduction in burden this rulemaking will accomplish. Therefore, pursuant to 5 U.S.C. 605(b), the initial and final regulatory flexibility analysis requirements of 5 U.S.C. 603 and 604 do not apply.

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

Although this final rule contains provisions constituting collections of information under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521), there are no provisions associated with this rulemaking constituting any new collection of information or any revisions to the existing collection of information. The collections of information for 38 CFR 36.4317, 36.4319, and 36.4320 are currently approved by Office of Management and Budget (OMB) and have been assigned OMB control number 2900-0021.

Pursuant to Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (known as the Congressional Review Act) (5 U.S.C. 801 et seq. ), the Office of Information and Regulatory Affairs designated this rule as not satisfying the criteria under 5 U.S.C. 804(2).

Denis McDonough, Secretary of Veterans Affairs, approved and signed this document on March 28, 2024, and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs.

For the reasons stated in the preamble, the Department of Veterans Affairs amends 38 CFR part 36 as set forth below:

In FR Doc. 2023-16249 of August 7, 2023 (88 FR 53200), there were technical errors that are identified and corrected in this correcting document. These corrections are applicable as if they had been included in the final rule entitled “Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2024” (hereinafter referred to as the FY 2024 SNF PPS final rule), which was effective October 1, 2023.

On page 53221 of the FY 2024 SNF PPS final rule (88 FR 53200), we discussed our proposal to add the surgical option that allows a subset of subcategory 42.2—codes for displaced fractures to be eligible for one of two orthopedic surgery categories. Additionally, we stated that we would add this surgical option to the subcategory of M84.5—codes for pathological fractures to certain weight bearing bones to be eligible for one of two orthopedic surgery categories. In the final rule, we inadvertently stated that this proposal applied to 45 of the codes within the subcategory S42.2 codes and to 46 of the codes within the subcategory M84.5 codes. However, these numbers were inadvertently swapped, meaning that the proposal applied to 46 of the codes within the subcategory S42.2 codes and to 45 of the codes within the subcategory M84.5 codes. We are correcting these errors.

We are correcting the following errors to the FY 2024 Patient Driven Payment Model (PDPM) ICD-10-CM mappings (hereinafter referred to as PDPM ICD-10 code mappings) that were made available on the CMS website at https://www.cms.gov/medicare/medicare-fee-for-service-payment/snfpps/pdpm in conjunction with the release of the FY 2024 SNF PPS final rule, as corrected by the correction notification that appeared in the October 4, 2023 Federal Register , entitled “Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities; Updates to the Quality Reporting Program and Value-Based Purchasing Program for Federal Fiscal Year 2024; Correction” (88 FR 68486). The FY 2024 PDPM ICD-10 code mappings file may be accessed from the list of items under the “PDPM Resources” section of the website with an effective date of “10-01-2023”.

The first table in the FY 2024 PDPM ICD-10 code mappings file displays the list of ICD-10 codes that are recorded in Item I0020B ICD Code of the Minimum Data Set (MDS) assessment to determine a patient's clinical category assignment under PDPM. First, we are correcting errors in the clinical category assignment of 2 codes, B99.8 (Other infectious disease) and B99.9 (Unspecified infectious disease) (lines 1071 and 1072 of the Excel spreadsheet) to reinstate their prior year's assignments from the FY 2023 SNF PPS final rule, as we proposed no changes in clinical categories in this code range in the FY 2024 SNF PPS proposed rule nor finalized them in the FY 2024 SNF PPS final rule. As such, the clinical category mapping for these two codes will be corrected to be “Medical Management”.

Second, we are correcting errors in the clinical category assignments of codes within the S42.2 subcategory of ICD-10 codes (lines 32154 et seq. ) and the M84.5 subcategory of ICD-10 codes (lines 17229 et seq. ). As discussed in the FY 2024 SNF PPS final rule (88 FR 53221), we had proposed to add the surgical option that allows a subset of subcategory 42.2—codes for displaced fractures to be eligible for one of two orthopedic surgery categories. Additionally, we stated that we would add this surgical option to the subcategory of M84.5—codes for pathological fractures to certain weight bearing bones to be eligible for one of two orthopedic surgery categories. However, when updating the PDPM ICD-10 mapping for FY 2024 to reflect these changes, we inadvertently added the surgical option to a selection of ICD-10 codes for which we did not propose any changes. Further, we inadvertently did not add the surgical option for a selection of ICD-10 codes for which we did propose to do so.

Table 1 displays the list of affected ICD-10 codes for which we are correcting the clinical category assignments by adding the surgical option.

Table 2 displays the list of affected ICD-10 codes for which we are correcting the clinical category assignments by removing the surgical option.

Given these errors, we are republishing the PDPM ICD-10 code mappings accordingly on the CMS website at https://www.cms.gov/medicare/medicare-fee-for-service-payment/snfpps/pdpm, applicable to October 1, 2023.

Under section 553(b) of the Administrative Procedure Act (the APA) (5 U.S.C. 553(b)), the agency is required to publish a notice of proposed rulemaking in the Federal Register before the provisions of a rule take effect. Similarly, section 1871(b)(1) of the Social Security Act (the Act) requires the Secretary to provide for notice of the proposed rule in the Federal Register and provide a period of not less than 60 days for public comment. In addition, section 553(d) of the APA and section 1871(e)(1)(B)(i) of the Act mandate a 30-day delay in effective date after issuance or publication of a rule. Sections 553(b)(B) and 553(d)(3) of the APA provide for exceptions from the APA notice and comment, and delay in effective date requirements; in cases in which these exceptions apply, sections 1871(b)(2)(C) and 1871(e)(1)(B)(ii) of the Act provide exceptions from the notice and 60-day comment period and delay in effective date requirements of the Act as well. Section 553(b)(B) of the APA and section 1871(b)(2)(C) of the Act authorize an agency to dispense with normal notice and comment rulemaking procedures for good cause if the agency makes a finding that the notice and comment process is impracticable, unnecessary, or contrary to the public interest, and includes a statement of the finding and the reasons for it in the rule. In addition, section 553(d)(3) of the APA and section 1871(e)(1)(B)(ii) allow the agency to avoid the 30-day delay in effective date where such delay is contrary to the public interest and the agency includes in the rule a statement of the finding and the reasons for it.

In our view, this correcting document does not constitute a rulemaking that would be subject to notice and comment requirements. This document merely corrects technical errors in the FY 2024 SNF PPS final rule and in the tables referenced in the final rule. The corrections contained in this document are consistent with, and do not make substantive changes to, the policies and payment methodologies that were proposed, subject to notice and comment procedures, and adopted in the FY 2024 SNF PPS final rule. As a result, the corrections made through this correcting document are intended to resolve inadvertent errors so that the rule accurately reflects the policies adopted in the final rule. Even if this were a rulemaking to which the notice and comment and delayed effective date requirements applied, we find that there is good cause to waive such requirements. It is in the public interest for providers to receive appropriate payments in as timely a manner as possible, and to ensure that the FY 2024 SNF PPS final rule and the tables referenced in the final rule accurately reflect our methodologies, payment rates, and policies. This correcting document ensures that the FY 2024 SNF PPS final rule and the tables referenced in the final rule accurately reflect these methodologies and policies. Therefore, we believe we have good cause to waive the notice and comment and effective date requirements.

In FR Doc. 2023-16249 of August 7, 2023 (88 FR 53200), make the following corrections:

1. On page 53221, second column, third full paragraph:

a. Second sentence that reads, “We proposed adding the surgical option that allows 45 subcategory S42.2—codes for displaced fractures to be eligible for one of two orthopedic surgery categories.” is corrected to read, “We proposed adding the surgical option that allows 46 subcategory S42.2—codes for displaced fractures to be eligible for one of two orthopedic surgery categories.”

b. Fourth sentence that reads, “We also proposed adding the surgical option to subcategory 46 M84.5—codes for pathological fractures to certain major weight-bearing bones to be eligible for one of two orthopedic surgery categories.” is corrected to read, “We also proposed adding the surgical option to subcategory 45 M84.5—codes for pathological fractures to certain major weight-bearing bones to be eligible for one of two orthopedic surgery categories.”

This is a summary of the Commission's Order in WC Docket Nos. 10-90, 23-328, 14-58, 09-197 and WT Docket No. 10-208; FCC 23-87, adopted on October 19, 2023, and released on October 20, 2023, with an Erratum issued by the Wireline Competition Bureau on Feb. 13, 2024. The full text of this document is available at the following internet address: https://docs.fcc.gov/public/attachments/FCC-23-87A1.pdf.

1. The Commission adopts its proposal to revise § 54.313(i) of its rules to streamline the process for submitting annual high-cost information and certifications by requiring that such filings be made only with the universal service program administrator, i.e., the Universal Service Administrative Company (USAC). Currently, this rule requires high-cost support recipients to file this information with the Commission, with USAC, and with the relevant state commission or relevant authority in a U.S. Territory, or Tribal government, as appropriate, resulting in redundant and unnecessary administrative burdens on high-cost support recipients. In addition to relieving recipients of these burdens, this rule change is warranted because the Commission can take advantage of technological advances to make this information more readily available to all interested parties by using the benefits of a centralized, online collection of information and improving access and records management. Several commenters support this change, and the Nebraska Public Service Commission asks the Commission to ensure that states retain full access to the annual reports. The Commission agrees that states should retain full access to the annual reports and it directs USAC to continue to provide access to this information to the States, U.S. Territories, and Tribal governments electronically via links to the data on USAC's website. Accordingly, the Commission finds that modifying § 54.313(i) of its rules to limit submission of the annual high-cost report to USAC is well warranted.

2. The Commission similarly adopts its proposal to revise § 54.314 of its rules to require states that desire Eligible Telecommunication Carriers (ETCs) to receive high-cost support and ETCs not subject to state jurisdiction to file annual reports with USAC only, rather than both USAC and the Commission's Office of the Secretary (OSEC). Several commenters support this modification, and none opposes. The Commission notes that its staff coordinates routinely with USAC, so this modification should have no impact on its ability to review and monitor these filings as part of its program oversight. The Wireless internet Service Providers Association (WISPA) supports this modification but only if reports are made publicly available so that funding recipients can ensure that the certification has been received and can demonstrate this to third parties, such as potential investors. The Commission finds that WISPA's request is reasonable. The Commission thus modifies its rules to require the submission of annual certifications under § 54.314 of the Commission's rules with USAC only and commit to making this information publicly available.

3. Third, the Commission adopts its proposal to more closely align support reductions with an ETC's failure to certify by the deadlines established in its rules. Current rules provide that support reductions do not occur until January of the year following the year when the ETC misses a reporting deadline. The revised rules the Commission adopts in this document will instead reduce support in the month immediately following the notice of support reduction to the eligible telecommunications carrier from USAC or as soon as feasible thereafter. Because support reductions are based on the number of days late, and payments usually occur mid-month, in situations where a filing is not received in time for USAC to calculate the requisite support reduction for the next month's payment, USAC will implement the support reduction as soon as feasible. No commenter opposes this change and CTIA—The Wireless Association (CTIA) agrees that requiring USAC to implement late filing support reductions more promptly by reducing support in the month immediately following the issuance of a notice of support reduction or as soon as feasible immediately thereafter avoids confusion and improves accountability.

4. The Commission modifies the reporting requirements for performance testing to require all high-cost support recipients serving fixed locations to report and certify performance testing results on a quarterly basis, rather than annually. High-cost support recipients must perform broadband performance testing one week out of each quarter. All high-cost support recipients, including those that are in compliance with speed and latency requirements, will be required to report and certify the results of the performance tests quarterly rather than annually. This modification will allow the Commission to better assess whether carriers are on track to meeting the Commission's performance measures requirements and to determine whether there are significant problems with a carrier's network that may interfere with consumer service. The Wireline Competition Bureau (Bureau) will continue to assess compliance with program requirements based on the annual testing results ( i.e., annual calculations), and carriers found not compliant will have support withheld until the carrier achieves a full quarter of compliance. No commenter opposes this modification, and NTCA—The Rural Broadband Association (NTCA) supports quarterly certification of performance test results for all high-cost support recipients, stating that reporting and certifying a carrier's performance testing results on a quarterly basis so the burden is minimal while also ensuring access to results enhances the Commission's oversight.

5. Carriers are required to report and certify locations in the High Cost Universal Broadband portal (HUBB) by March 1st annually but some carriers may not have reported locations when scheduled to begin performance pre-testing or testing. As a result, the Commission recognizes that certification of HUBB locations on March 1st may impede the carrier's ability to complete some of its testing. In these circumstances, the Bureau may exercise discretion when assessing the scope of a carrier's compliance or when implementing support withholdings.

6. Currently, the Commission requires quarterly reporting of carriers' pre-testing data, reflecting the results of tests conducted prior to the commencement of the official test period. Those quarterly testing results must be reported and certified within one week after the end of the quarter in which the tests are conducted, to provide insight into carriers' experience with the testing process. The Commission adopts a similar schedule of quarterly reporting filings for all high-cost carriers' testing. Once effective, all high-cost carriers will be required to report and certify their quarterly performance testing results within two weeks, rather than within one week, after the end of the quarter in which the tests are conducted. The Commission provides two weeks to offset the fact that, for administrative ease, it declines to adopt any grace period: first quarter testing results will be due April 15th, second quarter results will be due July 15th, third quarter results will be due October 15th, and fourth quarter results will be due January 15th. The Commission directs the Bureau to announce when quarterly reporting and certification will go into effect.

7. The Commission believes that establishing a specific reporting schedule will provide certainty, promote accountability, and conform with timelines for other testing protocols to minimize confusion. Given that carriers will be certifying locations quarterly, support withholding for non-compliance may be implemented sooner than when reports were due by July 1st annually. This will ensure that the withholding is closer in time to the determination of noncompliance and encourage the non-compliant carrier to improve its performance so that it can regain the withheld support.

8. Under this new quarterly certification schedule, the Commission implements support reductions for late performance measures reporting based on the current framework under § 54.313(j) that reduces support based on the number of days late, but factoring in that it is requiring quarterly filing certifications. Support reductions due to late filings will be assessed at the end of the fourth quarter and will be based on total number of days late divided by four, then rounded to the nearest whole number. When that number is between 1 and 7, a carrier will have its support reduced an amount equivalent to seven days in support; when that number is 8 or higher, a carrier will have its support reduced on a pro-rata basis equivalent to the period of non-compliance ( i.e., the number of days), plus the minimum seven-day reduction.

9. The Commission declines to relieve privately held rate-of-return carriers that receive Alternative Connect America Model (A-CAM) support or Alaska Plan support of the requirement to file annually a report of the company's financial conditions and operations. NTCA had sought this relief for all privately held rate-of-return carriers that receive A-CAM support or other fixed support mechanisms, such as the Alaska Plan, and the Commission sought comment on this issue in the Administrative Notice of Proposed Rulemaking (NPRM), 87 FR 36283, June 16, 2022.

10. Although NTCA and the Alaska Telecom Association (ATA) support eliminating this requirement, the Commission is not persuaded by their arguments. Moreover, the Commission has determined that the public interest benefits of collecting the information—understanding the efficacy of the model and helping to ensure that support is sufficient but not excessive—outweigh any burdens.

11. The Commission concluded in the USF/Intercarrier Compensation (ICC) Transformation Order, 76 FR 73830, November 29, 2011, that it is not necessary to require publicly traded companies to submit financial information because it could obtain such information directly for Securities and Exchange Commission registrants. At the same time, it declined to impose such a requirement on privately held price cap carriers receiving model-based support because the Commission “expect[ed] that a model developed through a transparent and rigorous process will produce support levels that are sufficient but not excessive.”

12. NTCA argues that A-CAM carriers are similarly “recipients of fixed support, which the Commission has already recognized leads them to being `disciplined by market forces' and which should be the dispositive factor here.” However, what the Commission actually stated was that “support awarded through competitive processes,” not model-based support, “will be disciplined by market forces.” And while the Commission concedes that, as NTCA notes, “it is not true across the board” that recipients of Connect America Fund (CAF) Phase II model-based support were publicly traded companies, the vast majority were, and as such their financial information was publicly available. Given these circumstances, it was sound policy not to require this information in that context. In contrast, there are many more rate-of-return carriers receiving A-CAM support, and many more of them are privately held and, thus, their information is not readily available to the Commission. The availability of support recipients' financial information enables the Commission to evaluate whether model-based support is actually sufficient but not excessive. Moreover, all high-cost support recipients have an obligation to use such support only for its intended purpose, and financial information helps the Commission validate compliance with this requirement. Thus, the Commission finds that the availability of the financial information of A-CAM carriers will help it evaluate whether A-CAM produces support levels that are sufficient but not excessive, and as such, it is important for the Commission to continue to collect such information.

13. ATA argues that Alaska Plan carriers' support is “parallel to model-based support in that it is frozen at a set level” and “intended to be sufficient to support a carrier's performance obligations, but is not excessive because the support was frozen at a historic cost-based level which has in effect declined over time as costs increased.” However, just because Alaska Plan support is frozen, does not ensure that the support is not excessive. The Commission finds that the continued availability of the financial information of Alaska carriers enables it to evaluate whether Alaska Plan carriers' support is sufficient but not excessive.

14. The Commission adopts its proposal to modify its rules to create a consistent, one-time grace period for all compliance filings with grace periods. Specifically, the Commission establishes a grace period that allows filers to submit compliance filings “within four business days” of the relevant due date without risking a finding of non-compliance for missing the filing deadline. Establishing a uniform grace period will reduce confusion and is supported by all commenters who addressed the issue, although WISPA prefers that the grace period be set at five business days instead of four. The Commission finds that a four-day grace period is adequate. As the Commission explained in the Administrative NPRM, it proposed to establish a set grace period to eliminate confusion. Currently, several Commission rules identify a specific date, after the due date, by which carriers could file reports without a support reduction if they had not previously missed a deadline, while other rules identified the grace period as three or four days after the filing deadline. The Commission also clarifies that the due date is day zero, so the day after the due date is day one. For example, where a filing is due March 1, recipients must file by the end of March 5 or be subject to a support reduction. Consistent with the Commission's Computation of Time rule, if March 5 falls on a weekend or holiday, the filing must be made by the end of the next business day to avoid the support reduction. The Commission also clarifies that, by this rule modification, it is not establishing a new opportunity to utilize a grace period for carriers that have already taken advantage of the one-time grace period available to them.

15. The Commission modifies its rules to adopt uniform deployment, certification, and location reporting deadlines for all CAF Phase II auction support recipients (including recipients of support allocated through New York's New NY Broadband program). In doing so, the Commission codifies and makes permanent the Bureau's decision to waive recipient-specific reporting deadlines based on the date of authorization in favor of uniform reporting deadlines for all of these recipients, finding that this approach alleviates unnecessary administrative burdens and better facilitates Commission oversight. Two commenters support this change, and none oppose it. Accordingly, the Commission modifies its rules to provide that all CAF Phase II auction support recipients must comply with deployment milestones by deadlines occurring at the end of the specified calendar year (rather than the date the Bureau authorized the support recipient to receive support) and must meet annual certification and location reporting requirements (annual deployment report) as of March 1st annually, including reporting necessary to demonstrate compliance with the prior year milestone. In addition, the Commission modifies § 54.316(b)(7) of its rules regarding the certification deadlines for the Bringing Puerto Rico Together Fund stage 2 fixed program and the Connect USVI Fund stage 2 fixed program to make explicit the annual March 1st deadline, as specified in the respective authorization public notices, which aligns those programs' rules with the rules for other high-cost support mechanisms.

16. The Commission declines to amend § 54.316(a) of its rules to require ETCs receiving high-cost support and subject to defined deployment obligations to report the “maximum speeds actually being offered, advertised, or delivered to customers.” The Commission agrees with WISPA and CTIA, the only commenters to weigh in on this proposal, that such an amendment would result in collection of information similar to data the Commission already collects through its performance testing program and in fulfillment of its Broadband Data Collection (BDC) responsibilities. Through the performance testing program, the Commission assesses compliance with public service requirements, including speed and latency standards, by requiring high-cost support recipients to perform a minimum of one download test and one upload test per testing hour at a certain number of randomly chosen testing locations and to report this information to the Commission. Ultimately, the Commission will use this information to assess performance throughout the provider's entire supported service area. In addition, under the BDC, each facilities-based provider of fixed broadband internet access service must report maximum advertised download and upload speeds at the location level (with reference to the Broadband Serviceable Location Data Fabric). For these reasons, the proposed modification of § 54.316(a) would result in a largely redundant reporting requirement, and the Commission declines to adopt it.

17. The Commission adopts its proposal to amend § 54.316(a)(1) of its rules to more accurately reflect the deployed locations reporting obligations of support recipients. Currently, this rule directs “recipients of high-cost support with defined broadband deployment obligations” to “provide to [USAC] on a recurring basis information regarding the locations to which the [ETC] is offering broadband service in satisfaction of its public interest obligations. . . .” All filers subject to this requirement have a specific annual deadline for submitting this information, and the Commission finds that this section's reference to “recurring” filings is superfluous. Accordingly, the Commission modifies the rule to remove this language.

18. The Commission modifies its voice and broadband rate certification rules to clarify the reporting period. Specifically, the Commission makes explicit that carriers submitting the annual FCC Form 481 are certifying compliance with both the annual voice and broadband pricing benchmarks adopted in the prior calendar year ending the last day of December. As explained in the Administrative NPRM, when the Commission moved the annual FCC Form 481 filing deadline to July 1st, the Commission moved the date for the relevant voice rates to the rates in place as of June 1st the year the report was filed, as opposed to the prior year. Maintaining the rule's unique time period for voice rate certifications creates unnecessary confusion. Prior to the adoption of the rate floor provision, all certifications in Form 481 applied to the preceding calendar year, a uniformity to which the Commission returns with the adoption of this rule modification. For example, the support recipient submitting a Form 481 on July 1, 2024, will certify compliance during 2023 with voice and broadband benchmarks set for the 2023 calendar year (as announced in 2022). The Commission further updates the rule to reflect that the annual public notice announcing the benchmarks is issued by the Bureau and Office of Economics and Analytics.

19. Relatedly, in its comments, Teleguam Holdings LLC (GTA) asserts that the Commission should release its reasonable comparability benchmark rates earlier in the year (or extend the filing deadline for this certification) in order to allow support recipients sufficient time to modify their rates. The Commission agrees with GTA that release of these benchmark rates too close to the year-end can impose on support recipients, especially smaller companies, significant administrative burdens in effectuating rate changes at the start of the applicable year. Therefore, the Commission will endeavor to release these rates earlier in the year.

20. The Commission amends § 54.316(a) of its rules to make clear that it will permit high-cost support recipients to report and certify locations that should have been reported for a prior reporting year, even after the reporting deadline for that year, in future annual deployment reports and to count these locations (hereinafter “late-reported locations”) toward their defined deployment obligations. To ensure that support recipients are motivated to submit complete and timely annual deployment reports, the Commission adopts a support reduction mechanism that will apply to all late-reported locations due to be reported after the effective date of the Order. For the submission of late-reported locations that should have reported before the effective date of the Order, the Commission exercises its discretion to not apply this mechanism.

21. Under § 54.316(a) of the Commission's rules, support recipients reporting in the HUBB have a duty to report all qualifying locations to which the support recipient deployed service during the relevant reporting period (the prior year) by March 1st, including locations that, if reported, would result in a carrier exceeding an interim or final milestone. As explained in the Administrative NPRM, there is currently no mechanism by which support recipients can later submit and certify locations toward satisfaction of defined deployment obligations if the recipient missed the reporting deadline for those locations. Creating such a mechanism also better facilitates compliance with support recipients' general duty under § 1.17 of the Commission's rules to correct or amend information reported to the Commission and helps ensure that the Commission may effectively assess these recipients' progress in deploying service.

22. In the Administrative NPRM, the Commission proposed a formula for a support reduction mechanism for late-reported locations that would take into account the relative due diligence of support recipients in identifying and reporting locations. Specifically, the Commission proposed “a support reduction mechanism where recipients' support will be reduced for [late-reported] locations based on the percentage of a recipient's total locations for the reporting year being reported after the deadline and the number of days after the deadline.” The Commission adopts this formula with certain modifications to address concerns raised by commenters and to balance accountability with administrative burden.

23. As an initial matter, the Commission rejects NTCA's argument that any support reduction is unnecessary because support recipients are already sufficiently motivated to report and amend their filings to avoid possible default consequences and to gain the benefits of demonstrating to the public their deployment efforts. While, ultimately, support recipients may need to submit late-reported locations to avoid default, they would have no particular motivation to do so unless and until default is imminent, absent any consequence for late reporting. Indeed, acceptance of late-reported locations for the purpose of counting these locations toward defined deployment obligations at any time during the deployment period without consequence would encourage a lackadaisical approach to identifying and reporting locations on a timely basis and potentially could delay or disrupt verifications of compliance with milestones. Further, many support recipients are likely to delay deployment to the most difficult to serve areas where locations can be more difficult to assess, e.g., where newly deployed areas are missing postal addresses. Support recipients may thus be motivated to delay reporting of certain easily identifiable locations in other earlier deployed areas in order to increase the likelihood of passing verification for later milestones, i.e., by closing the non-compliance gap or increasing the probability of passing under the statistical measures used in the verification process. Finally, customers' goodwill toward their service providers is unlikely to be greatly affected by reporting delays unless the number of unreported locations is substantial and/or causes a milestone failure, and therefore, this concern is unlikely to be a significant factor in motivating support recipients to accurately assess and timely report or amend their annual deployment reports.

24. In their comments, GCI Communication Corp. (GCI) and NTCA object to the use of the support reduction mechanism as proposed in the Administrative NPRM, asserting that it would result in large variability in support reductions and have a disproportionately negative impact on those support recipients with fewer locations to serve and/or slower deployments at the beginning of their deployment term. While the Commission acknowledges that carriers with fewer deployed locations in a given year risk a larger support reduction for submitting late-reported locations for that year, it also notes that the time and effort associated with identifying and correctly reporting deployed locations should generally scale based on the number of locations deployed in a given year. In other words, as the number of deployed locations reported in a given year increases, so too do the burdens on carriers assessing locations and the associated likelihood of omitting a deployed location. Accordingly, this ratio is a reasonable measure of the relative due diligence by the reporting carrier warranting its incorporation in the support reduction formula.

25. GCI also asserts that “[t]he penalties for providers who timely certified their deployed locations and need to add additional locations should not be worse than the penalties for failure to deploy on time,” i.e., a scaled withholding of support during a set time frame (cure period) during which time the carrier may recover withheld support upon demonstration of compliance. The Commission rejects GCI's attempt to analogize late reporting to delayed deployment. The cure period serves the Commission's overriding interest in maximizing deployment benefits by providing noncompliant carriers with the time to come into compliance by continuing to build the network. Carriers that seek to report late-reported locations do not need a cure period to provide them with additional time to file the locations. There may be circumstances where the support recipient has acted in good faith when deploying its network and reporting locations, only to learn of reporting errors during the verification process, such as the reporting of ineligible locations as eligible locations. In these circumstances, the support recipients may come into compliance by reporting locations newly deployed within the cure period (without support reduction) and/or reporting late-reported locations subject to the support withholding the Commission adopts here. Accordingly, all carriers reporting late-reported locations, whether they are in the cure period or not, are similarly situated in terms of support reduction consequences.

26. The Commission does, however, recognize that in certain circumstances application of the proposed formula would result in a significant support reduction that could threaten the ability of the support recipient to complete deployment, meet performance standards, and satisfy public interest obligations. The Commission also recognizes that some limited modification to the withholding formula would produce greater consistency in the amount of support withheld among support recipients with similar obligations and receiving similar support amounts, thus addressing some of GCI's expressed concerns. Accordingly, the Commission modifies the proposed formula to provide for a maximum per-day, per-location reduction of seven dollars ($7). The Commission also caps the duration multiplier at 15 days if the late-reported locations are filed as of the next reporting deadline after the locations should have been filed and at 30 days (for each instance of late reporting) if the late-reported locations are filed at any time thereafter. Further, the Commission adopts a one-time de minimis exception from support withholding for late-reported locations deployed in any single year that are less than five percent of the locations that were filed in the relevant reporting year. The Commission thus acknowledges GCI's and NTCA's concerns regarding the likelihood that carriers will make a minimum number of “inevitable” errors in reporting despite the exercise of due diligence, while also striking an appropriate balance to ensure that support recipients will make best efforts to avoid such errors.

27. Finally, and contrary to the Commission's tentative conclusion in the Administrative NPRM, it adopts a one-time grace period for amending an annual filing with additional locations consistent with the grace period afforded support recipients that fail to submit their annual filing in § 54.316(c)(2)(iii) of its rules. The Commission finds that such one-time grace period, like that granted for late annual filings, places a minimum burden on the resources dedicated to program administration and evaluation of location information while accommodating the potential for a one-time administrative error. This is a particularly opportune time for the adoption of this grace period as carriers have been in the process of assessing their deployed locations for the mandatory BDC filings. The Commission will apply the support reduction for the filing of late-reported locations in the next month immediately following the notice of support reduction to the eligible telecommunications carrier from USAC or as soon as feasible thereafter.

28. To encourage support recipients to complete annual reviews of already served areas to identify unreported or misreported locations and to immediately report those locations even if the support recipient does not perceive such locations as necessary to meet interim deployment milestones, the Commission will not apply the support reduction consequence to any locations that were deployed in years prior to the effective date of this rule change but reported after the effective date of this rule. The Commission thus dismisses as moot all pending petitions for waiver to allow such reporting.

29. In addition, the Commission will not reduce support for late-reported locations reported after the support recipient has demonstrated compliance with the final milestone. Reducing support under these circumstances, where the benefit to carriers of such reporting is significantly less, would likely result in some support recipients failing to amend their filings. In addition, after the conclusion of the deployment period (including any cure period), the Commission will have a lesser stake in motivating timely reporting of every deployed location with a support reduction mechanism because such reporting will not threaten to disrupt verification processes. The Commission makes clear, however, that its approach to late-reported locations adopted here is independent of the obligation to amend filings under § 1.17 of its rules that attaches from the moment of filing and which could lead to forfeiture consequences, even in the absence of intentional misreporting and even after the demonstration of compliance with final deployment requirements. Support recipients have a continuing obligation to timely amend every annual deployment report upon discovery of an inaccuracy or omission.

30. In this document the Commission amends its rules to provide a simpler process for rate-of-return local exchange carriers (LECs) seeking to merge, consolidate, or acquire one or more rate-of-return study areas to calculate the new entity's Access Recovery Charge (ARC), CAF—Intercarrier Compensation (ICC) support, and reciprocal compensation and switched access rate caps. The Commission finds that the rule revisions proposed in the Administrative NPRM will significantly reduce the administrative burdens on rate-of-return LECs seeking to increase efficiencies and productivity through these transactions and provide predictability to carriers considering such transactions, ultimately benefiting consumers. The limited record received on the rule revisions proposed in the Administrative NPRM supports the proposed revisions, with one commenter agreeing that the proposals “reflect a practical and effective step forward to streamline the merger and acquisition process. . . .” No party opposes these proposed changes. Accordingly, the Commission now adopts those proposed changes and revises its rules to eliminate the need for a rate-of-return LEC that is involved in a merger, consolidation, or acquisition with another rate-of-return carrier to obtain a waiver of the applicable intercarrier compensation rules when certain conditions apply. The Commission also adopts a streamlined process that will apply in those cases where carriers are still required to seek a waiver of the Commission's rules.

31. In the USF/ICC Transformation Order, the Commission capped rate-of-return carriers' reciprocal compensation and interstate switched access rates and most intrastate switched access rates at the rates in effect on December 29, 2011. At the same time, the Commission adopted a multi-year transition for reducing most terminating switched access rates to bill-and-keep. As part of these reforms, the Commission adopted the ARC, which allows rate-of-return carriers to recover from end-users a portion of the intercarrier compensation revenues lost due to the Commission's reforms, up to a defined amount (Eligible Recovery) for each year of the transition. If the projected ARC revenues are not sufficient to cover the entire Eligible Recovery amount, rate-of-return carriers may elect to collect the remainder in CAF ICC support.

32. The calculation of a rate-of-return LEC's Eligible Recovery begins with its Base Period Revenue. A rate-of-return carrier's Base Period Revenue is the sum of certain terminating intrastate switched access revenues and net reciprocal compensation revenues received by March 31, 2012, for services provided during Fiscal Year (FY) 2011, and the projected revenue requirement for interstate switched access services for the 2011-2012 tariff period. A rate-of-return LEC's Base Period Revenue is calculated only once, but is adjusted during each step of the intercarrier compensation recovery mechanism calculations for each year of the transition. Specifically, the Base Period Revenue for rate-of-return carriers has been reduced by five percent each year, beginning in 2012, the first year of reform. A rate-of-return carrier's Eligible Recovery is equal to the adjusted Base Period Revenue for the year in question, less, for the relevant year of the transition, the sum of: (1) projected terminating intrastate switched access revenue; (2) projected interstate switched access revenue; and (3) projected net reciprocal compensation revenue. Eligible Recovery is also adjusted to reflect certain demand true-ups.

33. The Commission's existing rules for calculating Eligible Recovery do not address the adjustments that are necessary when study areas are merged after one company acquires all or a portion of another. Because a carrier's Base Period Revenue and interstate revenue requirement are study-area-specific, as are a carrier's capped switched access rates, combining two study areas requires a decision about how best to combine two different Base Period Revenues and interstate revenue requirements, and—when the study areas do not have the same capped rates—a waiver of the Commission's rules to establish the proper rate levels.

34. Since the Eligible Recovery rules have taken effect, several rate-of-return LECs have partially or fully merged study areas or acquired new study areas. Because the intercarrier compensation and CAF ICC rules adopted in the USF/ICC Transformation Order do not contemplate study area changes, these carriers have had to file petitions for waiver of portions of § 51.917 of the Commission's rules to reset the applicable Base Period Revenue associated with the study areas they have merged or acquired. In this line of waiver orders, the Bureau has permitted carriers to add together the relevant interstate revenues from FY 2011 of the merging study areas and the 2011-2012 interstate revenue requirement of the merging study areas. This calculation then creates a combined Base Period Revenue which serves as the baseline for calculating the Eligible Recovery of the company serving the combined study area going forward. To facilitate mergers for entities that participate in the National Exchange Carrier Association (NECA) traffic-sensitive tariff, the Bureau has granted waivers of § 51.909 of the Commission's rules to allow NECA to place the consolidated study area in the rate bands that most closely approximate the merged entities' cost characteristics. The rate for each rate band then becomes the rate cap for the corresponding rate element in the merged study area.

35. In the Administrative NPRM, the Commission observed that the waiver process imposes costs and administrative burdens on rate-of-return LECs and, in some cases, may delay the closing of transactions. The Commission determined that rule revisions reflecting the pattern of outcomes in prior waiver orders would reduce these costs and administrative burdens by eliminating the need for carriers to obtain individual waivers when certain conditions apply. No party disputed these conclusions or identified any issues with the proposed rule revisions. In fact, the only comments addressing these proposals were filed by NECA, which agreed that the proposed rule changes would ease administrative burdens and provide carriers with predictability when considering mergers and/or acquisitions.

36. The Commission concludes that adopting the proposed rules will reduce regulatory costs and burdens, avoid potential delay, and allow carriers to assess the effects of a proposed transaction more accurately. For these reasons, the Commission adopts the rule revisions proposed in the Administrative NPRM and amends the intercarrier compensation rules in §§ 51.917 and 51.909 to address study area changes resulting from transactions involving rate-of-return carriers.

37. Base Period Revenue calculation. The Commission revises § 51.917 to provide guidance on calculating Base Period Revenues for rate-of-return study areas affected by a transaction, thereby permitting rate-of-return carriers to adjust their Base Period Revenues without the need for a waiver. Specifically, the Commission revises § 51.917 of its rules to provide that when two or more entire rate-of-return study areas are merged, the LEC shall combine the Base Period Revenue and interstate revenue requirements of the merging study areas for purposes of calculating Eligible Recovery. This approach is supported by NECA and consistent with the approach the Commission has taken previously in addressing transactions where study areas have merged. In the case of a partial study area change, the revised rules provide that rate-of-return LECs shall allocate the Base Period Revenue and interstate revenue requirement levels of the partial study area based on the proportion of access lines acquired compared to the total access lines in the pre-merger study area of the remaining entity.

38. Setting rate caps. The Commission revises § 51.909 to establish procedures for setting new rate caps for merging rate-of-return LECs and adopt a streamlined waiver process if the rates for the new combined study area would result in the new entity's CAF ICC support exceeding a certain threshold. Specifically, for carriers that file their own tariffs, the new rate cap for each rate element shall be the weighted average of the preexisting rates in each of the affected study areas. This approach is consistent with precedent and there was no opposition in the record to this logical and straightforward approach to establishing new rate caps for merging rate-of-return LECs that do not participate in NECA tariffs.

39. For merging rate-of-return LECs that participate in the NECA traffic-sensitive tariff and that have to establish a single switched access rate for a rate element, the revised rules provide that the new consolidated rate, as determined by NECA pursuant to the rate bands in its traffic-sensitive tariff, shall be the new rate cap if the merged entity's CAF ICC support will not increase as a result of the merger by more than two percent above the amount received by the merging entities prior to the transaction, using the demand and rate data for the preceding calendar year. In prior orders, the Bureau allowed NECA to place the consolidated study area in the rate bands that most closely approximated the merged entities' cost characteristics and NECA worked cooperatively with the Bureau to ensure that the most accurate rate bands are used for the merged entities. Under this approach, the rate for each rate band will become the rate cap for the corresponding rate element in the merged study area. The Commission expects that NECA will continue to evaluate the circumstances of each transaction, select the appropriate rate bands, and coordinate with the Bureau as appropriate.

40. The Commission proposed a two-percent threshold based on recently submitted petitions for waiver, which predicted increases between zero and two percent to CAF ICC as a result of the waiver. No party objected to this particular threshold or suggested an alternative one and increases in CAF ICC support of two percent or less will not materially impact the CAF ICC fund. Thus, the Commission now adopts the proposed two-percent threshold for carriers participating in the NECA traffic-sensitive tariff and eliminates the need for a waiver in circumstances where the CAF ICC increase is at or below two percent.

41. Streamlined waiver process. The Administrative NPRM also proposed revised rules that would streamline the waiver process for NECA tariff participants if the impact of rate banding exceeds the two-percent threshold. In such circumstances, the revised rules require carriers to file a petition for waiver specifying the impact of the merger, acquisition, or consolidation on the new entity's rates and CAF ICC support. Any petition for waiver should include information such as: (1) a description of the merging study areas, or portions of study areas involved; (2) the intrastate and interstate switched access demand for each rate element; (3) the relevant pre- and post-merger intrastate and interstate switched access rates for the study areas involved, as proposed; (4) the relevant pre-and post-merger intrastate and interstate switched access revenues, including the effects of interstate switched access revenue pooling, for the study areas involved; (5) the effect on CAF ICC resulting from the merger; and (6) a brief statement of the public interest benefits of the merger. The petition must be submitted for consideration via the Electronic Comment Filing System and a courtesy copy must be emailed to the Chief, Pricing Policy Division, Wireline Competition Bureau.

42. Under the new streamlined process, once the petition for waiver is filed, the Bureau will release a public notice announcing receipt of the waiver petition and establishing a 30-day comment period with an additional 15-day period for replies. If there is no opposition to the petition, the waiver will be deemed granted on the 60th day after the release of the public notice, unless the Bureau or the Commission acts to prevent the “automatic” grant. If an opposition is filed, the petition will no longer be eligible for the streamlined grant process and will instead be subject to the Commission's rules for waiver petitions generally. Because no party opposes this proposal or suggested changes to the proposed process or waiver requirements, the Commission adopts this streamlined process and delegates to the Bureau the authority to review, analyze, and approve these petitions for waiver.

43. For the reasons specified in the Administrative NPRM, the Commission amends § 54.902 of its rules—which governs the amount of CAF Broadband Loop Support (BLS) a rate-of-return carrier receives when it acquires exchanges from another incumbent LEC—to better reflect the current state of the high-cost program. Currently, § 54.902(a) describes how CAF BLS support is calculated when a rate-of-return carrier acquires exchanges from another rate-of-return carrier, while § 54.902(b) specifies that in situations where a rate-of-return carrier acquires exchanges from a price cap carrier, the acquired exchanges remain subject to the support amounts and obligations established for frozen and model-based support. The Commission modifies § 54.902(a) to provide that only transferred exchanges that are already eligible for CAF BLS would be eligible for CAF BLS after their transfers. The Commission further modifies § 54.902(b) to provide that any acquired exchanges subject to § 54.902(b) continue to be subject to the support obligations in place at the time that the exchange is acquired, including obligations associated with frozen and auction-based support. As explained in the Administrative NPRM, these modifications are consistent generally with the rules as originally adopted, when all rate-of-return carriers were subject to the Interstate Common Line Support mechanism (which was renamed CAF BLS when modernized by the Commission in 2016), and consider changes to the high-cost program after the current rule went into effect: specifically, the creation of a voluntary pathway for rate-of-return carriers to select model-based support and the introduction of auction mechanisms permitting rate-of-return carriers to acquire exchanges from carriers that are not subject to rate-or-return or price cap regulation.

44. The Commission modifies the study area boundary process to require waivers for all study area boundary changes. The Commission finds that the original purpose of the study area boundary freeze—to prevent incumbent LECs from establishing separate study areas made up of only high-cost exchanges to maximize their receipt of high-cost universal service support—is best served by providing the Wireline Competition Bureau (WCB) with the opportunity to review such changes. By requiring waivers for all study area boundary changes, the Commission eliminates the exceptions adopted in 1996 by the then Common Carrier Bureau (now the WCB). Requiring all changes in study area boundaries to be reviewed by the Bureau will ensure that any proposed changes are not approved until the effects on the Fund are taken into account.

45. Since the exceptions to the study area boundary waiver requirement were adopted in 1996, the Commission has substantially reformed how universal service support is awarded. Incumbent LECs now receive support in different ways, including model-based support and auction support, in addition to traditional rate-of-return regulation (legacy support). Under the Commission's current rules, when a carrier that owns multiple study areas within a state wants to merge these commonly-owned study areas, the carrier is not required to petition the Commission. However, allowing carriers to merge study areas that receive support under different mechanisms creates opportunities for carriers to manipulate the Commission's support. For example, if a carrier seeks to merge two study areas in a state, one of which receives legacy rate-of-return support and another that receives model-based support, it would be difficult for the Commission to determine which lines in the new study area are entitled to rate-of-return support, which typically increases as the number of lines increases. Similarly, such a merger could create confusion regarding tracking carrier mandatory build-out obligations by changing the areas in which they must deploy broadband. For example, an A-CAM carrier receives a fixed amount of support in exchange for deploying broadband to a specific number of locations based on costs as determined by a model. If the A-CAM carrier merges its study area with a legacy rate-of-return study area in the same state owned by the same carrier, it would then be harder to track the deployment obligations under each program.

46. In addition, allowing carriers to add unserved areas to their study areas, even if those areas are not within an existing study area, could undermine the Commission's goal of distributing universal service support in the most efficient manner possible. In furtherance of this objective, the Commission has encouraged the transition to model-based support and auction-awarded support over traditional rate-of-return regulation. If rate-of-return carriers can extend their existing study area into unserved areas, this could result in the use of legacy support in additional areas when such areas could be served with broadband more efficiently using model-based or auction-based support.

47. The Nebraska Public Service Commission, the only party commenting on this issue, supports a streamlined mechanism for study area boundary changes, and suggests that any study area changes that have been previously approved by a state should be eligible for the streamlined review process. The Commission notes that it already has adopted a streamlined process to address all study area waiver petitions in the 2011 USF/ICC Transformation Order, and this streamlined process would apply to the waiver applications required here. The process takes into consideration whether the state commission having regulatory authority over the transferred exchanges does not object to the transfer, and whether the transfer is in the public interest. Evaluation of the public interest benefits of a proposed study area waiver include: (1) the number of lines at issue; (2) the projected universal service fund cost per line; and (3) whether such a grant would result in consolidation of study areas that facilitates reductions in cost by taking advantage of the economies of scale, i.e., reduction in cost per line due to the increased number of lines. Under the streamlined process, once a carrier submits a petition the Bureau will issue a public notice seeking comment and noting whether the waiver is appropriate for streamlined treatment. Absent any further action by the Bureau, if the waiver is subject to streamlined treatment, it is granted on the 60th day after the reply comment due date. Alternatively, if the petition requires further analysis and review, the public notice will state that the petition is not suitable for streamlined treatment.

48. Requiring waivers for all study area boundary changes will help to avoid the issues created by merging study areas receiving different types of support or the expanded use of less efficient support methodologies. Requiring changes in study area boundaries to be reviewed by the Bureau will ensure that any proposed changes are not approved until the effects on the Fund are taken into account. Because the Commission has already established a streamlined process for such waivers, those requests that do not present any support or other concerns can be swiftly granted, thereby minimizing the burden on those carriers proposing mergers that promote efficiency and are clearly in the public interest.

49. As proposed in the Administrative NPRM, the Commission eliminates optional quarterly line count reporting for CAF BLS support recipients, finding that the mandatory annual line count reporting set forth in §§ 54.313(h)(5) and 54.903(a)(1) of its rules suffices for the purposes of setting per line caps. No commenter filed comments on this proposal or the Commission's alternative proposal to update the schedule to file optional quarterly line counts to better align with the deadline for mandatory annual line count filings.

50. The optional quarterly reporting deadlines, falling on September 30th, December 31st, and March 31st, pertain to line counts as of six months prior to the filing deadline. The Commission notes that the December 31st optional quarterly line count update is due on the same day as the mandatory annual line count report for the prior reporting year, making this optional quarterly filing obsolete. All other quarterly line count reports have a six-month lag time, i.e., each quarterly report reports line counts as of six months earlier. These optional quarterly line count filings also have limited utility. While USAC uses these quarterly line count updates to administer the monthly per-line cap on high-cost universal service support each quarter, only a very limited number of carriers have filed these updates in recent years, many of which are not subject to the per-line cap. USAC also uses quarterly line count data to determine preliminary (CAF BLS) amounts for a carrier that has acquired exchanges from another CAF BLS support recipient, but those amounts are ultimately subject to a true-up based on the acquiring carrier's actual cost and revenue data for their exchange (including the acquired exchange). Because the Commission can generally rely on the mandatory annual line counts due on March 31st to monitor line counts with minimum impact on reporting carriers and with minimum limitation on accuracy, it concludes that eliminating the optional quarterly line count filings is a more efficient modification than merely updating the filing schedule for these filings. Accordingly, the Commission eliminates these optional quarterly line count filings and modifies all related rules regarding these quarterly line counts.

51. The Commission revises § 54.205 of its rules to require an ETC designated by a state authority and seeking to relinquish its ETC designation to also provide advance notice to the Commission. The Commission sought comment on this proposal, which was supported by NTCA. As per this proposal, the Commission will also require the former ETC to notify it of the state's decision to permit or deny such relinquishment by submitting the relevant state order or other document issued by the state within 10 days of such issuance in the Electronic Comment Filing System, WC Docket No. 09-197. The Commission will require these filings regardless of whether the ETC is currently receiving Federal support, consistent with long standing precedent that states that obligations run with the ETC designation. The Commission's decision to require notice of relinquishment will help deter waste, fraud, and abuse by enabling swift discontinuance of support payments to non-ETCs, and, where applicable, allow the Commission to initiate default and potentially enforcement proceedings where it becomes clear that the support recipient has failed to fulfill its obligations. The Commission notes that these changes are applicable to all ETCs, including Lifeline-only ETCs. The Commission makes these modifications pursuant to authority granted under section 254 and as reasonably ancillary thereto. These changes will apply to all ETCs submitting requests for relinquishment after the effective date of these rule changes.

52. The Commission adopts several minor changes to its rules to correct inaccuracies associated with subsequent rule changes. Specifically, the Commission makes the following corrections:

• Section 54.314(d)(2) of the Commission's rules cross references § 54.313(a)(8). Section 54.313 was revised and renumbered, and § 54.313(a)(8) became § 54.313(a)(4), while § 54.313(a)(8) was eliminated. Accordingly, the Commission takes this opportunity to revise § 54.314(d)(2) to reference § 54.313(a)(4) rather than § 54.313(a)(8).

• Section 54.315(c)(4) of the Commission's rules currently indicates that the failure of CAF Phase II auction support recipients to meet service milestones will trigger reporting obligations and support withholding consistent with § 54.320(c) of the Commission's rules. This rule section should instead cross reference § 54.320(d).

• Similarly, § 54.1508(e)(1) of the Commission's rules also includes an incorrect cross reference. Specifically, when the section references milestones, it should cross reference § 54.320(d) instead of § 54.320(c).

• Subpart K of part 54 of title 47 is titled “Interstate Common Line Support Mechanism for Rate-of-Return Carriers.” In 2016, the Commission reformed this mechanism to provide support for stand-alone broadband, now known as CAF BLS. Consistent with this reform, the Commission retitles subpart K to read “Connect America Fund Broadband Loop Support for Rate-of-Return Carriers.”

• Similarly, §§ 54.701(c)(1)(iii) and 54.705(c) of the Commission's rules describe the high-cost support mechanisms to include “interstate access universal service support mechanism for price cap carriers described in subpart J of this part, and the interstate common line support mechanism for rate-of-return carriers described in subpart K of this part.” The Commission deleted subpart J of part 54 to reflect its decision in the USF/ICC Transformation Order to eliminate the Interstate Access Support mechanism as a stand-alone support mechanism. In 2016, the Commission replaced the interstate common line support mechanism. In subsequent years, the Commission also created several new high-cost support mechanisms for rate-of-return and price-cap carriers. Accordingly, the Commission revises §§ 54.701(c)(1)(iii) and 54.705(c) to remove the references to “interstate access universal service support mechanism for price cap carriers described in subpart J of this part,” and “interstate common line support mechanism.” The Commission adds to these sections a reference to the high-cost support mechanisms described in subparts J, K, M, and O of the part, and the low-income support mechanisms described in subpart E of the part.

53. GTA has submitted proposals as part of its comments in this proceeding to apply the newly adopted Alaska rate benchmarks as suitable proxy for all insular territories in the United States. This proposal is not sufficiently related to those proposals raised in the Administrative NPRM to provide the requisite notice and comment periods for rulemakings as specified in the Administrative Procedure Act. Accordingly, the Commission declines to address them as part of the Order. These issues would need to be raised in a petition for rulemaking. The Commission does note that in its comments in this proceeding, GTA did not provide sufficient arguments or evidence for it to evaluate the reasonableness of the proposal, so the Commission would expect any such petition to include substantial additional information.

54. The Order contains new and modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies will be invited to comment on the new and modified information collection requirements contained in this proceeding. In addition, the Commission notes that, pursuant to the Small Business Paperwork Relief Act of 2002, it previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees. The Commission describes impacts that might affect small businesses, which includes most businesses with fewer than 25 employees in this document.

55. Congressional Review Act. The Commission has determined, and the Administrator of the Office of Information and Regulatory Affairs, OMB, concurs, that this rule is “non-major” under the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send a copy of the Order to Congress and the Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A).

56. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Administrative NPRM released in May of 2022. The Commission sought written public comment on the proposals in the Administrative NPRM, including comment on the IRFA. No comments were filed addressing the IRFA. This Final Regulatory Flexibility Analysis conforms to the RFA.

57. In the Order, the Commission adopts several changes to its rules that will improve the administration of the high-cost program to enhance its efficiency and efficacy, better safeguard USF, and streamline annual reporting and certification requirements for high-cost support recipients. First, the Commission adopts its proposal to streamline the process for submitting annual high-cost information and certifications by requiring that such filings be made only with the USAC, rather than with both USAC and the Commission's OSEC. Second, the Commission similarly adopts its proposal to require states that desire ETCs to receive high-cost support and ETCs not subject to state jurisdiction to file annual reports with USAC only. Third, the Commission adopts its proposal to more closely align support reductions with an ETC's failure to certify locations by the deadlines established in its rules. Fourth, the Commission modifies the reporting requirements for performance testing to require all high-cost support recipients serving fixed locations to report and certify performance testing results on a quarterly basis, rather than annually. Fifth, the Commission retains annual financial reporting for privately held rate-of-return carriers that receive A-CAM support or Alaska Plan support. Sixth, the Commission adopts its proposal to modify its rules to create a consistent one-time grace period for all compliance filings with grace periods to “within four business days.” Seventh, the Commission modifies its rules to adopt uniform deployment, certification, and location reporting deadlines for all CAF Phase II auction support recipients. Eighth, the Commission declines to amend § 54.316(a) of its rules to require ETCs receiving high-cost support and subject to defined deployment obligations to report the maximum speeds offered, advertised, or delivered to customers. Ninth, the Commission adopts its proposal to amend § 54.316(a)(1) to more accurately reflect the deployed locations reporting obligations of support recipients. Tenth, the Commission modifies its voice and broadband rate certification rules to clarify the reporting period. The Commission also amends § 54.316(a) to clarify that it will permit high-cost support recipients to report and certify late-reported locations in future annual deployment reports and to count these locations toward their defined deployment obligations.

58. In addition, the Order amends the Commission's rules to provide a simpler process for rate-of-return LECs seeking to merge, consolidate, or acquire one or more rate-of-return study areas to calculate the new entity's ARC, CAFF ICC support, and reciprocal compensation and switched access rate caps. The Commission amends § 54.902 of its rules to better reflect the current state of the high-cost program. The Commission modifies the study area boundary process to require waivers for all study area boundary changes. The Order also eliminates optional quarterly line count reporting for CAF BLS support recipients and revises § 54.205 of the Commission's rules to require an ETC designated by a state authority and seeking to relinquish its ETC designation to provide advance notice to the Commission.

59. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the rules adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act. A “small-business concern” is one that: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA).

60. Small Businesses, Small Organizations, Small Governmental Jurisdictions. The Commission's actions, over time, may affect small entities that are not easily categorized at present. The Commission therefore describes, at the outset, three broad groups of small entities that could be directly affected herein. First, while there are industry specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the SBA's, Office of Advocacy, in general a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States, which translates to 33.2 million businesses.

61. Next, the type of small entity described as a “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 or less to delineate its annual electronic filing requirements for small exempt organizations. Nationwide, for tax year 2020, there were approximately 447,689 small exempt organizations in the U.S. reporting revenues of $50,000 or less according to the registration and tax data for exempt organizations available from the IRS.

62. Finally, the small entity described as a “small governmental jurisdiction” is defined generally as “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.” U.S. Census Bureau data from the 2017 Census of Governments indicate there were 90,075 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States. Of this number, there were 36,931 general purpose governments (county, municipal, and town or township) with populations of less than 50,000 and 12,040 special purpose governments—independent school districts with enrollment populations of less than 50,000. Accordingly, based on the 2017 U.S. Census of Governments data, the Commission estimates that at least 48,971 entities fall into the category of “small governmental jurisdictions.”

63. Small entities potentially affected by the rules herein include Wired Telecommunications Carriers, LECs, Incumbent LECs, Competitive LECs, Interexchange Carriers (IXCs), Local Resellers, Toll Resellers, Other Toll Carriers, Prepaid Calling Card Providers, Wireless Telecommunications Carriers (except Satellite), Cable and Other Subscription Programming, Cable Companies and Systems (Rate Regulation), Cable System Operators (Telecom Act Standard), All Other Telecommunications, Wired Broadband Internet Access Service Providers (Wired ISPs), Wireless Broadband Internet Access Service Providers (Wireless ISPs or WISPs), Internet Service Providers (Non-Broadband), All Other Information Services.

64. In the Order, the Commission adopts measures to improve the management, administration, and oversight of the high-cost program that may impact small entities, including: streamlining reporting and certification requirements; improving review of mergers between rate-of-return local exchange carriers; clarifying support for exchanges acquired by a CAF BLS recipient; establishing a streamlined process to merge jointly-owned study areas; improving the process to relinquish ETC status, and improving the Commission's audit program.

65. The Commission revises § 54.313(i) of its rules to streamline the process for submitting annual high-cost information and certifications by requiring that such filings be made only with the USAC which administers the program, rather than both USAC and the Commission's OSEC. The Commission similarly revises § 54.314 of its rules to require that high-cost support recipients file annual reports with USAC only. Additionally, the Commission more closely aligns support reductions with an ETC's failure to certify locations by the deadlines established in the Commission's rules. The Commission also modifies the reporting requirements for performance testing to apply to all high-cost support recipients serving fixed locations, not just those carriers that are not in compliance with speed and latency requirements. These carriers will be required to report and certify performance testing results on a quarterly basis instead of annually, and the Commission will allow for an additional week to file the report. Further, the Commission modifies its rules to create a consistent one-time grace period for all compliance filings to “within four business days.” The Commission updates its rules to adopt uniform deployment, certification, and location reporting deadlines for all CAF Phase II auction support recipients (including recipients of support allocated through the New York's New NY Broadband program). Section 54.316(a)(1) of the Commission's rules is amended to more accurately reflect the reporting obligations of support recipients in reporting deployed locations. The Commission's voice rate certification rule is updated to require carriers submitting an annual FCC Form 481 to certify compliance with the annual voice and broadband benchmarks adopted for the preceding calendar year ending the last day of December rather than those benchmarks applicable to the year that the report is filed. The Commission modifies and amends its rules to permit high-cost support recipients that have deployed locations in years prior to the annual reporting year to submit these locations (late-reported locations) and to count these locations toward their defined deployment obligations.

66. The Commission amends its rules to provide a simpler process for rate-of-return LECs seeking to merge, consolidate, or acquire one or more rate-of-return study areas to calculate the new entity's ARC, CAF ICC support, and reciprocal compensation and switched access rate caps. Section 51.917 is modified to provide guidance on calculating Base Period Revenues for rate-of-return study areas affected by a transaction, thereby permitting rate-of-return carriers to adjust their Base Period Revenues without the need for a waiver. Specifically, the Commission revises § 51.917 of its rules to provide that when two or more entire rate-of-return study areas are merged, the LEC shall combine the Base Period Revenue and interstate revenue requirements of the merging study areas for purposes of calculating Eligible Recovery. The Commission modifies § 51.909 to establish procedures for setting new rate caps for merging rate-of-return LECs and adopt a streamlined waiver process if the rates for the new combined study area would result in the new entity's CAF ICC support exceeding a certain threshold. Specifically, for carriers that file their own tariffs, the new rate cap for each rate element shall be the weighted average of the preexisting rates in each of the affected study areas. Revising the waiver process will reduce costs and administrative burdens by eliminating the need for carriers, including small entities, to obtain individual waivers when certain conditions apply.

67. The Commission modifies § 54.902(a) to limit eligibility for CAF BLS support to those transactions where the acquiring carrier would only be eligible to receive CAF BLS support for exchanges acquired from existing CAF BLS recipients, and revises § 54.902(b) to include any model-based, auction-based, or frozen support. The Commission updates the study area boundary process to require waivers for all study area boundary changes. The Commission eliminates optional quarterly line count reporting for CAF BLS support recipients, finding that the mandatory annual line count reporting set forth in §§ 54.313(h)(5) and 54.903(a)(1) of the Commission's rules suffices for the purposes of setting per line caps. The Commission revises § 54.205 of the Commission's rules to require an ETC designated by a state authority and seeking to relinquish its ETC designation to also provide advance notice to the Commission. In addition, the Commission requires former ETCs designated by a state authority that have relinquished their designation to provide notice of such relinquishment within 10 days of the effective date of this rule modification. The Commission adopts several minor changes to its rules to correct inaccuracies associated with subsequent rule changes.

68. The Commission modifies § 54.902(a) to limit eligibility for CAF BLS support to those transactions where the acquiring carrier would only be eligible to receive CAF BLS support for exchanges acquired from existing CAF BLS recipients, and revise § 54.902(b) to include any model-based, auction-based, or frozen support. The Commission updates the study area boundary process to require waivers for all study area boundary changes. The Commission eliminates optional quarterly line count reporting for CAF BLS support recipients, finding that the mandatory annual line count reporting set forth in §§ 54.313(h)(5) and 54.903(a)(1) of its rules suffices for the purposes of setting per line caps. The Commission revises § 54.205 of its rules to require an ETC designated by a state authority and seeking to relinquish its ETC designation to also provide advance notice to the Commission. In addition, the Commission requires former ETCs designated by a state authority that have relinquished their designation to provide notice of such relinquishment within 10 days of the effective date of this rule modification. The Commission adopts several minor changes to its rules to correct inaccuracies associated with subsequent rule changes.

69. The record does not provide sufficient information to allow the Commission to determine whether small entities will be required to hire professionals to comply with its decisions. The Commission anticipates the approaches it has taken to implement the requirements will have minimal cost implications because it expects that much of the required information is already collected to ensure compliance with the terms and conditions of support. Further, the changes the Commission makes to streamline waiver processes and eliminate duplicative filing requirements may reduce administrative costs and compliance requirements for small entities that may have smaller staff and fewer resources.

70. The RFA requires an agency to provide, “a description of the steps the agency has taken to minimize the significant economic impact on small entities . . . including a statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency which affect the impact on small entities was rejected.”

71. In reaching its final conclusions and through its actions in this proceeding, the Commission has considered the economic impact of, and alternatives to, proposals that may affect small entities. The rules that the Commission adopts in the Order will benefit small and other entities by improving and streamlining annual reporting and certification, as well as by eliminating ambiguity and reducing administrative burdens. Additionally, the Commission adopts consistent grace periods of four business days which will eliminate confusion for all entities from grace periods falling on a weekend or holiday. The Commission also eliminates the need for rate-of-return LECs, most of which are small entities, that are involved in a merger, consolidation, or acquisition with another rate-of-return carrier to obtain a waiver of certain intercarrier compensation rules. For carriers that do not satisfy the criteria identified for transactions when waiver is not required, the Commission adopts a streamlined CAF ICC merger approval process. Specifically, the Commission modifies § 54.314 to require the submission of annual certifications of its rules with USAC only, instead of USAC and the Commission. Revisions to § 54.316(a) clarify high-cost support recipients obligations for late-reported locations, addressing commenters concerns by modifying the support reduction and capping the duration multiplier if timely filing is made by the next deadline. The Commission, however, declines to amend § 54.316(a) to require ETCs receiving high-cost support and subject to defined deployment obligations to report the maximum speeds offered or delivered to customers because similar information is collected through fulfillment of their BDC responsibilities.

72. To the extent the Commission retains certification and reporting requirements, it finds that the importance of monitoring the use of the public's funds outweighs the burden of filing the required information on all entities, including small entities, particularly because much of the information that the Commission requires they report is information it expects they will already be collecting to ensure they comply with the terms and conditions of support and they will be able to submit their location data on a rolling basis to help minimize the burden of uploading a large number of locations at once. For example, the Commission declines proposals to relieve privately held rate-of-return carriers that receive A-CAM support or Alaska Plan support of the requirement to file annually a report of the company's financial conditions and operations, because the public interest benefits evaluating the efficacy outweigh the burdens. The Commission considered proposals that sought to apply the newly adopted Alaska rate benchmarks as suitable proxy for all insular territories in the United States, but declines to address them in the Order because they are not sufficiently related to the proposals in the Administrative NPRM, and recommend that commenters submit a petition for rulemaking to address this issue.

73. Accordingly, it is ordered, pursuant to the authority contained in sections 4(i), 214, 218-220, 254, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 214, 218-220, 254, 303(r), and 403, and §§ 1.1 and 1.425 of the Commission's rules, 47 CFR 1.1 and 1.425 the Order is adopted . The Order shall be effective thirty days after publication in the Federal Register , except for those portions containing information collection requirements in §§ 36.4, 54.205, 54.313(a)(2), (3), and (6), (i), and (j), 54.314(a) through (d), 54.316(a) through (d), 54.903(a)(2), and 54.1306 of the Commission's rules that have not been approved by OMB.

74. It is further ordered that parts 36, 51, and 54 of the Commission's rules are amended as set forth in this document, and that any such rule amendments that contain new or modified information collection requirements that require approval by the OMB under the PRA shall be effective after announcement in the Federal Register or OMB approval of the Commission's rules, and on the effective date announced therein.

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 36, 51, and 54 as follows:

A copy of USSF's Incidental Take Authorization (ITA) application, supporting documents, received public comments, and the proposed rule, as well as a list of the references cited in this document, may be obtained online at: https://www.fisheries.noaa.gov/national/marine-mammal-protection/incidental-take-authorizations-military-readiness-activities. In case of problems accessing these documents, please call the contact listed above (see FOR FURTHER INFORMATION CONTACT ).

This final rule provides a framework under the authority of the MMPA (16 U.S.C. 1361 et seq. ) for NMFS to authorize the take of marine mammals incidental to space vehicle (rocket) launches, missile launches, and aircraft operations at VSFB. NMFS received a request from USSF to incidentally take six species of marine mammals (with six managed stocks) by Level B harassment incidental to launch noise and sonic booms. No take by Level A harassment, mortality or serious injury is anticipated or authorized in this final rulemaking. Please see the Legal Authority for the Final Action section below for definitions of harassment, serious injury, and incidental take.

The MMPA prohibits the “take” of marine mammals, with certain exceptions. Sections 101(a)(5)(A) and (D) of the MMPA (16 U.S.C. 1361 et seq. ) generally direct the Secretary of Commerce (as delegated to NMFS) to allow, upon request, the incidental, but not intentional, taking of small numbers of marine mammals by U.S. citizens who engage in a specified activity (other than commercial fishing) within a specified geographical region if certain findings are made, regulations are promulgated (when applicable), and public notice and an opportunity for public comment are provided.

Authorization for incidental takings shall be granted if NMFS finds that the taking will have a negligible impact on the affected species or stock(s) and will not have an unmitigable adverse impact on the availability of the species or stock(s) for taking for subsistence uses (where relevant). If such findings are made, NMFS must prescribe the permissible methods of taking and “other means of effecting the least practicable adverse impact” on the affected species or stocks and their habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of the species or stocks for taking for certain subsistence uses (referred to as “mitigation”) and requirements pertaining to the monitoring and reporting of such takings.

As noted above, no serious injury or mortality is anticipated or authorized in this final rule. Relevant definitions of MMPA statutory and regulatory terms are included below:

• U.S. Citizens —individual U.S. citizens or any corporation or similar entity if it is organized under the laws of the United States or any governmental unit defined in 16 U.S.C. 1362(13) (50 CFR 216.103);

• Take —to harass, hunt, capture, or kill, or attempt to harass, hunt, capture, or kill any marine mammal (16 U.S.C. 1362(13); 50 CFR 216.3);

• Incidental harassment, incidental taking, and incidental, but not intentional, taking —an accidental taking. This does not mean that the taking is unexpected, but rather it includes those takings that are infrequent, unavoidable, or accidental (see 50 CFR 216.103);

• Serious Injury —any injury that will likely result in mortality (50 CFR 216.3);

• Level A harassment —any act of pursuit, torment, or annoyance which has the potential to injure a marine mammal or marine mammal stock in the wild (16 U.S.C. 1362(18); 50 CFR 216.3); and

• Level B harassment —any act of pursuit, torment, or annoyance which has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering (16 U.S.C. 1362(18); 50 CFR 216.3).

Section 101(a)(5)(A) of the MMPA and the implementing regulations at 50 CFR part 216, subpart I provide the legal basis for proposing and, if appropriate, issuing regulations and an associated LOA(s). This final rule describes permissible methods of taking and mitigation, monitoring, and reporting requirements for USSF's activities.

The National Defense Authorization Act for Fiscal Year 2004 (2004 NDAA, Pub. L. 108-136) amended the MMPA to remove the “small numbers” and “specified geographical region” limitations indicated above and amended the definition of “harassment” as applied to a “military readiness activity.” Missile launches conducted at VSFB, which comprise a small portion of the activities, are considered military readiness activities pursuant to the MMPA, as amended by the 2004 NDAA.

The major provisions of this final rule are:

• Scheduling launches to avoid lowest tides during harbor seal and California sea lion pupping seasons, when practicable;

• Required flight paths for aircraft takeoffs and landings and minimum altitude requirements to reduce disturbance to haul out areas;

• Required minimum altitudes for unscrewed aerial systems (UAS);

• Required acoustic and biological monitoring during a subset of launches to record the presence of marine mammals and document marine mammal responses to the launches; and

• Required semi-monthly surveys of marine mammal haulouts at VSFB and Northern Channel Islands (NCI).

On November 2, 2022, NMFS received a request from USSF requesting authorization for the take of marine mammals incidental to rocket and missile launch activities and aircraft operations at VSFB in Vandenberg, California. Following NMFS' review of the materials provided, USSF submitted a revised application on May 25, 2023. The application was deemed adequate and complete on May 26, 2023. USSF's request for authorization pertains to incidental take of six species of marine mammals, by Level B harassment only.

On June 15, 2023, we published a notice of receipt of the USSF's application in the Federal Register (88 FR 39231), requesting comments and information related to the USSF request for 30 days. We received no responsive comments. On January 29, 2024, NMFS published a proposed rule in the Federal Register (89 FR 5451). The public comment period on the proposed rule was open for 30 days on https:// www.regulations.gov starting on January 29, 2024, and closed after February 28, 2024. The public comments can be viewed at https://www.regulations.gov/document/NOAA-NMFS-2024-0008-0003/comment; a summary of public comments received during this 30-day period and NMFS responses are described in the Comments and Responses section.

The take of marine mammals incidental to rocket and missile launches and aircraft operations at VSFB is currently authorized via an LOA issued under current incidental take regulations, which are effective through April 10, 2024 (84 FR 14314; April 10, 2019). To date, NMFS has promulgated incidental take regulations under the MMPA for substantially similar activities at the site four times.

Responsibility for activities at the site were transferred from the U.S. Air Force (USAF) to the USSF in May 2021, and both entities complied with the requirements ( e.g., mitigation, monitoring, and reporting) of the current LOA. Information regarding the monitoring results may be found in the Potential Effects of the Specified Activity on Marine Mammals and their Habitat section.

USSF operations include rocket and missile launch activities that create noise (launch noise and/or sonic booms (overpressure of high-energy impulsive sound)) and visual stimulus that can take pinnipeds hauled out on shore along the periphery of VSFB by Level B harassment. In addition, a subset of rocket launches can create noise that affects pinniped haul outs along the shoreline of the Northern Channel Islands (NCI), particularly San Miguel and Santa Rosa islands. In addition to rocket and missile launch activities at VSFB, aircraft (crewed fixed wing airplanes and rotary wing helicopters, and different types of UAS) conduct flight operations to support activities at VSFB, and USSF operates a small harbor on the south coast. The activities will occur over the 5-year period of the regulations, from April 2024 through April 2029. Activities will occur year-round and could occur at any time of day, during any or all days of the week. As annual launch numbers increase, more than one launch could occur on some days.

A detailed description of the planned activities comprising the specified activity is provided in the proposed rule (89 FR 5451, January 29, 2024) and is not repeated here. Since that time, there have been minor changes to the schedule for rocket launches and the amount of harbor operations that do not affect the analyses in the proposed rule, as described below in the Changes from the Proposed to Final Rule section of this final rule.

Required mitigation, monitoring, and reporting measures are described in detail later in this document (see the Mitigation and Monitoring and Reporting sections of this final rule).

The proposed rule, which was published in the Federal Register on January 29, 2024 (89 FR 5451), described, in detail, USSF's activity, the marine mammal species that may be affected by the activity, and the anticipated effects on marine mammals. The proposed rule also requested public input on the request for authorization described therein, our analyses, our preliminary determinations, and any other aspect of the proposed rule, and requested that interested persons submit relevant information, suggestions, and comments.

During the 30-day public comment period, NMFS received comments from seven members of the general public and recommendations from the Marine Mammal Commission. All relevant substantive comments and NMFS' responses are summarized below. The comments are available online at: https://www.fisheries.noaa.gov/national/marine-mammal-protection/incidental-take-authorizations-military-readiness-activities. Please see the comment submissions for full details.

Comment 1: A commenter stated that USSF is requesting authorization from NMFS to take the marine mammals out of an area where they will be completing tests for 5 years. The commenter stated that NMFS should require USSF to provide proper shelter and habitat for the marine mammals and that NMFS should not be responsible for transport of the marine mammals.

Response: The commenter appears to have misunderstood the intent of this rulemaking, and NMFS has clarified herein. While this proposed rule is titled “Taking Marine Mammals Incidental to U.S. Space Force Launches and Supporting Activities at Vandenberg Space Force Base, Vandenberg, California,” the rule and associated LOA would not authorize USSF to transport marine mammals to another location. Rather, this final rule and LOA authorize USSF to “take” marine mammals by Level B harassment. The MMPA defines Level B harassment for military readiness and non-military readiness activities. Take by Level B harassment authorized by this final rule and LOA would be in the form of disruption of behavioral patterns for individual marine mammals resulting from exposure to launch related visual or auditory stimulus. As such, while NMFS considered impacts of USSF's activities to marine mammal habitat, as described in the Potential Effects of the Specified Activity on Marine Mammals and Their Habitat section of the proposed rule (89 FR 5451, January 29, 2024) and this final rule, this final rule does not require USSF to provide shelter and habitat for marine mammals.

Comment 2: NMFS received comments stating that despite not doing substantial harm to pinnipeds, it should be of importance to minimize or potentially eliminate any take to the pinnipeds, and there must be a clear mitigation plan with an end goal of eliminating any takes; that it is imperative for the USSF to find a way that either absorbs or reflects the sound of sonic booms away from seals; and that USSF could explore the use of technology to reduce noise levels during launches.

One comment stated that a study of physical response from pinniped species is not enough to prove minimal harm, although the commenter stated that they admire the amount of research and attention the USSF gave to including biological effects in their research and USSF's acknowledgement of harm from these disturbances.

Another comment stated that it is important to consider the potential effects of launches and supporting activities on marine mammal populations and to implement measures to mitigate any negative impacts. The commenter stated that, for example, USSF could implement monitoring programs to assess the potential impact of their activities on marine mammal populations, and could adjust their operations if necessary to minimize any adverse effects.

Response: NMFS concurs with the commenters that appropriate mitigation for USSF's activity is important. While the statutory criteria for issuance of an ITA does not use the terminology of “minimal harm” to marine mammals, as described in the Mitigation section of this final rule, in order to authorize take under section 101(a)(5)(A) of the MMPA, NMFS must set forth the permissible methods of taking pursuant to the activity, and other means of effecting the least practicable impact on the species or stock and its habitat, paying particular attention to rookeries, mating grounds, and areas of similar significance, and on the availability of the species or stock for taking for certain subsistence uses (the latter not being applicable for this action). As such, this final rule requires USSF to implement certain mitigation measures for its activities. For launches (rockets and missiles), USSF must provide pupping information to launch proponents at the earliest possible stage in the launch planning process to maximize their ability to schedule launches to minimize pinniped disturbance during pupping seasons on VSFB from 1 March to 30 April and on the Northern Channel Islands from 1 June to 31 July. If practicable, rocket launches predicted to produce a sonic boom on the Northern Channel Islands >3 pounds per square foot (psf) from 1 June—31 July will be scheduled to coincide with tides in excess of +1.0 feet (ft; 0.3 m), with an objective to do so at least 50 percent of the time. USSF will provide to NMFS for approval a detailed plan that outlines how this measure will be implemented. This measure will minimize occurrence of launches during low tides when harbor seals and California sea lions are anticipated to haul out in the greatest numbers during times of year when pupping may be occurring, thereby further reducing the already unlikely potential for separation of mothers from pups and potential for injury during stampedes. While harbor seal pupping extends through June, harbor seals reach full size at approximately 2 months old, at which point they are less vulnerable to disturbances. In consideration of those facts and practicability concerns raised by USSF, this measure does not extend through the later portion of the harbor seal pupping season at VSFB.

For manned flight operations, aircraft must use approved routes for testing and evaluation. Manned aircraft must also remain outside of a 1,000-ft (305 m) buffer around pinniped rookeries and haul-out sites (except in emergencies such as law enforcement response or Search and Rescue operations, and with a reduced, 500-ft (152 m) buffer at Small Haul-out 1). As discussed earlier, use of these routes and implementation of the buffer would avoid behavioral disturbance of marine mammals from manned aircraft operations.

For UAS, UAS classes 0-2 must maintain a minimum altitude of 300 ft (91 m) over all known marine mammal haulouts when marine mammals are present, except at take-off and landing. Class 3 must maintain a minimum altitude of 500 ft (152 m), except at take-off and landing. UAS classes 4 and 5 only operate from the VSFB airfield and must maintain a minimum altitude of 1,000 ft (305 m) over marine mammal haulouts except at take-off and landing. USSF must not fly class 4 or 5 UAS below 1,000 ft (305 m) over haulouts.

While absorbing or reflecting the sound of sonic booms away from seals, as suggested by the commenter, could be an effective measure in theory, such technology does not currently exist.

In addition to the mitigation described above, USSF must conduct monitoring as suggested by the commenter. USSF must conduct routine, semi-monthly counts on all haul out sites on VSFB and launch-specific monitoring at VSFB and/or NCI when specific criteria are met. Please see the Monitoring and Reporting section of this final rule for additional details.

Comment 3: A commenter noted that the USSF has requested a 5-year ITA, but will continue rocket and missile launches that take pinnipeds beyond the 5-year expiration of an authorization, such that it will need to request subsequent authorization(s). The commenter stated that a 5-year request is “redundant” if it will continue to be requested.

Response: Under section 101(a)(5)(A) of the MMPA, incidental take authorizations are limited to periods of 5 years at a time for all non-commercial fishing activities except military readiness activities, for which incidental take authorizations can be effective for up to 7 years at a time. Accordingly, for applicants or authorization-holders that want MMPA incidental take authorization for activities that extend beyond 5 (or 7) years, it is necessary for them to request, and NMFS to analyze and potentially issue, a new authorization every 5 (or 7) years.

NMFS also received recommendations from the Marine Mammal Commission (MMC), which are noted in the next section, Changes from the Proposed to Final Rule.

NMFS made changes to multiple components in this final rule, in part due to additional discussions with USSF, and in part as a result of recommendations provided by the MMC. These changes are relatively minor and in many cases, are intended to further clarify the requirements of the rule. In table 9 and table 13 of the proposed rule (89 FR 5451, January 29, 2024), the 5-year take numbers reflect the addition of the unrounded annual take estimates for each year. Following the MMC's recommendation, NMFS updated table 5 and table 10 of this final rule such that the 5-year take estimates reflect the sum of the rounded annual take numbers. This resulted in a change to the 5-year take estimate for harbor seal and elephant seal in table 5, and for California sea lion and Guadalupe fur seal in table 10.

NMFS made some minor changes to the monitoring measures in this final rule. First, as recommended by the MMC, NMFS clarified 50 CFR 217.65(c) to state that, at VSFB, USSF must conduct marine mammal monitoring and take acoustic measurements (1) for all new rockets, (2) for rockets (existing and new) launched from new facilities, (3) for larger or louder rockets (including those with new launch proponents) than those that have been previously launched from VSFB during their first three launches, and (4) for the first three launches from any new facilities during March through July. This updated language did not change the intent of the proposed measure. (In the proposed rule, this measure stated “at VSFB, USSF must conduct marine mammal monitoring and take acoustic measurements for all new rockets (for both existing and new launch proponents using the existing facilities) that are larger or louder than those that have been previously launched from VSFB during their first three launches and for the first three launches from any new facilities during March through July.”) Second, also in response to an MMC recommendation, NMFS updated 50 CFR 217.65(c)(2) and (h)(2) to clarify that USSF must conduct a minimum of four surveys per day during the 72 hours prior to a launch and during the 48 hours after a launch. (The proposed rule did not include a required minimum number of surveys, and instead stated that “monitoring must include multiple surveys each day.”) Third, upon further consideration, NMFS' final rule requires monitoring of launches with a sonic boom expected to exceed 7 psf from January 1 through February 28. (The proposed rule did not require monitoring on the NCI from October 1 through February 28 each year, a portion of which overlaps with elephant seal pupping.) This change is intended to ensure that some monitoring is conducted during the majority of the period when elephant seal pups may be present on the NCI.

NMFS also updated several reporting requirements as recommended by the MMC. NMFS updated § 217.65(j)(1) to require reporting of the number(s), type(s), and location(s) of rockets/missiles launched. NMFS also added the description of responses that would constitute harassment from this activity to § 217.65(j)(3)(iv) of this final rule. NMFS also edited § 217.65(j)(3)(v) to require that USSF report the length of time the animal(s) remained off the haulout. Lastly, NMFS updated § 217.65(j)(3)(vii) to specify that the recorded sound levels associated with the launch must be reported in sound exposure level (SEL), peak sound pressure level (SPLpeak), and root mean square sound pressure level (SPLrms), and psf if a sonic boom occurs. Additionally, USSF must report the estimated distance of the recorder to the launch site and the distance of the closest animals to the launch site.

The required reporting frequency for individual launches has also been updated. The proposed rule would have required USSF to submit a launch report to NMFS' West Coast Region and Office of Protected Resources within 90 days for each rocket or missile launch where monitoring is required. In coordination with USSF, NMFS updated this measure to require USSF to submit this information in its annual report, rather than separate, launch-specific reports. NMFS anticipates that submission of this information in an annual report will be administratively simpler for USSF, and it will also make the information easier for NMFS and the public to locate and consider. NMFS also updated § 217.65(k), related to reporting of mortality or injury of marine mammals. As suggested by the MMC in its informal comments, this measure now requires that if real-time monitoring during a launch shows that the activity identified in § 217.60(a) is reasonably likely to have resulted in the mortality or injury of any marine mammal, USSF must notify NMFS within 24 hours (or next business day). NMFS and USSF must then jointly review the launch procedure and the mitigation requirements and make appropriate changes through the adaptive management process, as necessary and before any subsequent launches of rockets and missiles with similar or greater sound fields and/or sonic boom pressure levels. (In the proposed rule, this measure required reporting of likely mortality or injury of any marine mammals within 48 hours of discovery, but it did not specify steps that would be taken after a report is made.)

Further, after publication of the proposed rule, USSF notified NMFS that United Launch Alliance (ULA) concluded its lease of the space launch complex (SLC)-6 site, and SpaceX plans to begin launches of its Falcon and Falcon Heavy rockets in late 2024/early 2025. This would include no more than five Falcon Heavy launches per year. The total number of rocket launches from VSFB would not exceed the 110 launches estimated in the proposed rule (89 FR 5451, January 29, 2024). Further, while some of these launches may result in a sonic boom exceeding 2.0 psf over the NCI, the total number of launches exceeding the 2.0 psf threshold over NCI would not increase from that described in the proposed rule (89 FR 5451, January 29, 2024). Therefore these changes did not affect our analysis and changes to the take estimates were not warranted.

Additionally, as described in the proposed rule (89 FR 5451, January 29, 2024), USSF's activity includes harbor operations ( e.g., vessel transits). While pinnipeds may occur around the harbor, NMFS generally expects that they would be habituated to these routine harbor operations and, while they may show brief reactions to these activities, such reactions are not expected to qualify as Level B harassment. Since publication of the proposed rule, USSF has informed NMFS that harbor operations will be more extensive than initially anticipated and described in the proposed rule (up to 200 small barge operations per year vs. 30 as described in the proposed rule). However, this change does not alter our assessment that take is not expected to result from harbor operations.

Lastly, since publication of the proposed rule (89 FR 5451, January 29, 2024), NMFS released the draft 2023 Stock Assessment Reports (SARs; available at https://www.fisheries.noaa.gov/national/marine-mammal-protection/marine-mammal-stock-assessment-reports ). Therefore, in this final rule NMFS updated information on abundance and serious injury and mortality information for Steller sea lions, as reflected in the 2023 SARs (see table 1).

Sections 3 and 4 of the application summarize available information regarding status and trends, distribution and habitat preferences, and relevant behavior and life history of the potentially affected species. NMFS fully considered all of this information, and we refer the reader to these descriptions and to additional information regarding population trends and threats that may be found in NMFS' SARs; https://www.fisheries.noaa.gov/national/marine-mammal-protection/marine-mammal-stock-assessments ). More general information about these species ( e.g., physical and behavioral descriptions) may be found on NMFS' website ( https://www.fisheries.noaa.gov/find-species ).

Table 1 lists all species or stocks for which take is expected and authorized for this activity, and summarizes information related to the population or stock, including regulatory status under the MMPA and Endangered Species Act (ESA) and potential biological removal (PBR), where known. PBR is defined by the MMPA as the maximum number of animals, not including natural mortalities, that may be removed from a marine mammal stock while allowing that stock to reach or maintain its optimum sustainable population (as described in NMFS' SARs). While no serious injury or mortality is anticipated or authorized here, PBR and annual serious injury and mortality from anthropogenic sources are included here as gross indicators of the status of the species or stocks and other threats.

Marine mammal abundance estimates presented in this document represent the total number of individuals that make up a given stock or the total number estimated within a particular study or survey area. NMFS' stock abundance estimates for most species represent the total estimate of individuals within the geographic area, if known, that comprise that stock. We also refer to studies and onsite monitoring to inform abundance and distribution trends within the project area. For some species, such as the Guadalupe fur seal, this geographic area may extend beyond U.S. waters. All managed stocks in this region are assessed in NMFS' SARs. All values presented in table 1 are the most recent available at the time of publication and are available online at: https://ww.fisheries.noaa.gov/national/marine-mammal-protection/marine-mammal-stock-assessments.

As indicated above, all six species (with six managed stocks) temporally and spatially co-occur with the specified activity to the degree that take is reasonably likely to occur. In addition to the 6 species of pinniped expected to be affected by the specified activities, an additional 28 species of cetaceans are expected to occur or could occur in the waters near the project area. However, we have determined that the potential stressors associated with the specified activities that could result in take of marine mammals ( i.e., launch noise, sonic booms and disturbance from aircraft operations) only have the potential to result in harassment of marine mammals that are hauled out of the water. Noise from the specified activities is unlikely to ensonify subsurface waters to an extent that could result in take of cetaceans. Therefore, we have concluded that the likelihood of the planned activities resulting in the harassment of any cetacean to be so low as to be discountable. Accordingly, cetaceans are not considered further in this final rule. Further, only one live northern fur seal has been reported at VSFB in the past 25 years (SBMMC 2012), at least two deceased fur seals have been found on VSFB. Guadalupe fur seals have yet to be reported at VSFB. Therefore, it is extremely unlikely that any fur seals will be taken at that site. However as discussed below, NMFS anticipates that both species could be taken at NCI. Steller sea lions are not anticipated to occur at NCI, and therefore, are not expected to be taken at that site, but are likely to be taken at VSFB. Harbor seal, northern elephant seal, and California sea lion are likely to be taken at both NCI and VSFB.

California sea otters ( Enhydra lutris nereis ) may also be found in waters off of VSFB, which is near the southern extent of their range. However, California sea otters are managed by the U.S. Fish and Wildlife Service and are not considered further in this final rule.

A detailed description of the species likely to be affected by USSF's activities, including brief introductions to the species and relevant stocks as well as available information regarding population trends and threats, and information regarding local occurrence, were provided in the proposed rule (89 FR 5451, January 29, 2024); since that time, we are not aware of any changes in the status of these species and stocks; therefore, detailed descriptions are not provided here. Please refer to the proposed rule for these descriptions. Please also refer to NMFS' website ( https://www.fisheries.noaa.gov/find-species ) for generalized species accounts.

The effects of noise from USSF's activities have the potential to result in behavioral harassment of marine mammals in the vicinity of VSFB and the NCI. The proposed rule (89 FR 5451, January 29, 2024) included a discussion of the effects of anthropogenic noise on marine mammals and the potential effects of noise from USSF's activities on marine mammals and their habitat. That information and analysis is referenced in this final rule and is not repeated here; please refer to the proposed rule (89 FR 5451, January 29, 2024).

This section provides an estimate of the number of incidental takes authorized by this rule and LOA, which will inform both NMFS' consideration of “small numbers” and the negligible impact determinations.

Harassment is the only type of take expected to result from these activities. Except with respect to military readiness activities, section 3(18) of the MMPA defines “harassment” as any act of pursuit, torment, or annoyance, which: (i) has the potential to injure a marine mammal or marine mammal stock in the wild (Level A harassment); or (ii) has the potential to disturb a marine mammal or marine mammal stock in the wild by causing disruption of behavioral patterns, including, but not limited to, migration, breathing, nursing, breeding, feeding, or sheltering (Level B harassment). As stated above, a relatively small portion of USSF's activities are considered military readiness activities. For military readiness activities, the MMPA defines “harassment” as: (i) Any act that injures or has the significant potential to injure a marine mammal or marine mammal stock in the wild (Level A harassment); or (ii) Any act that disturbs or is likely to disturb a marine mammal or marine mammal stock in the wild by causing disruption of natural behavioral patterns, including, but not limited to, migration, surfacing, nursing, breeding, feeding, or sheltering, to a point where the behavioral patterns are abandoned or significantly altered (Level B harassment). The take estimate methodology outlined below is considered appropriate for the quantification of take by Level B harassment based on either of the two definitions.

Authorized takes are by Level B harassment only, in the form of disruption of behavioral patterns for individual marine mammals resulting from exposure to launch related visual or auditory stimulus. Based on the nature of the activity and as shown in activity-specific studies (described below), Level A harassment is neither anticipated nor authorized. As described previously, no serious injury or mortality is anticipated or authorized for this activity. Below we describe how the authorized take numbers are estimated.

For acoustic impacts, generally speaking, we estimate take by considering: (1) acoustic thresholds above which NMFS believes the best available science indicates marine mammals will be behaviorally harassed or incur some degree of permanent hearing impairment; (2) the area that will be ensonified above these levels in a day; (3) the density or occurrence of marine mammals within these ensonified areas; and, (4) the number of days of activities. We note that while these factors can contribute to a basic calculation to provide an initial prediction of potential takes, additional information that can qualitatively inform take estimates is also sometimes available ( e.g., previous monitoring results or average group size). Below, we describe the factors considered here (which include thresholds for take from launches and UAS, considered in combination with pinniped survey data in the form of daily counts) in more detail and present the take estimates.

For underwater sounds, NMFS recommends the use of acoustic thresholds that identify the received levels above which exposed marine mammals would be reasonably expected to be behaviorally harassed (equated to Level B harassment) or to incur permanent threshold shift (PTS) of some degree (equated to Level A harassment). Thresholds have also been developed identifying the received level of in-air sound above which exposed pinnipeds would likely be behaviorally harassed. Here, thresholds for behavioral disturbance from launch activities have been developed based on observations of pinniped responses before, during, and after launches and UAS activity. For rocket and missile launches at VSFB, given the sound levels and proximity, NMFS assumes that all rocket launches will behaviorally harass pinnipeds of any species hauled out at sites around the periphery of the base. For rocket launches from VSFB that transit over or near NCI, based on several years of onsite behavioral observations and monitoring data, NMFS predicts that those that create a sonic boom over 2.0 psf could behaviorally harass pinnipeds of any species hauled out on NCI. For UAS activity NMFS predicts that, given the potential variability of locations, routing and altitudes necessary to meet mission needs, classes 0-3 could behaviorally harass pinnipeds of any species hauled out at VSFB.

Regarding potential hearing impairment, the effects of launch noise on pinniped hearing were the subject of studies at the site in the past. In addition to monitoring pinniped haul-out sites before, during and after launches, researchers were previously required to capture harbor seals at nearby haulouts and Point Conception to test their sensitivity to launch noises. Auditory Brainstem Response (ABR) tests were performed under 5-year SRPs starting in 1997. The goal was to determine whether launch noise affected the hearing of pinnipeds (MMCG and SAIC 2012a). The low frequency sounds from launches can be intense, with the potential of causing a temporary threshold shift (TTS), in which part or all of an animal's hearing range is temporarily diminished. In some cases, this diminishment can last from minutes to days before hearing returns to normal. None of the seals tested in these studies over a span of 15 years showed signs of TTS or PTS, supporting a finding that launch noise at the levels tested is unlikely to cause PTS and that any occurrence of TTS may be of short duration.

Here, we describe operational and environmental parameters of the activity that are used in estimating the area ensonified above the acoustic thresholds, including source levels and transmission loss coefficient.

Because the haulouts at NCI are more distant from the rocket launch sites than those at VSFB, different methods are used to predict when launches are likely to impact pinnipeds at the two sites. As stated above, for rocket and missile launches at VSFB, NMFS conservatively assumes that all rocket launches will behaviorally harass pinnipeds of any species hauled out at sites around the periphery of the base. For rocket launches from VSFB that transit over or near NCI, NMFS predicts that those that are projected to create a sonic boom over 2 psf could behaviorally harass pinnipeds of any species hauled out on NCI. For UAS activity, NMFS predicts that classes 0-3 could behaviorally harass pinnipeds of any species hauled out at VSFB.

The USSF is not able to predict the exact areas that will be impacted by noise associated with the specified activities, including sonic booms, launch noise and UAS operations. Many different types of launch vehicle types are operated from VSFB. Different combinations of vehicles and launch sites create different sound profiles, and dynamic environmental conditions also bear on sound transmission. As such, the different haul-out sites around the periphery of the base are ensonified to varying degrees when launches and, when applicable, recoveries of first stage boosters occur. USSF is not able to predict the exact timing, types and trajectories of these future rocket launch programs. However, as described below, rocket launches are expected to behaviorally disturb pinnipeds at VSFB and some launches are also expected to disturb pinniped hauled out at NCI. Missiles are only expected to impact pinnipeds at Lion Rock (Point Sal), and UAS impacts are only expected to occur at Small Haulout 1 (in VSFB).

Therefore, for the purposes of estimating take, we conservatively estimate that all haulout sites at VSFB will be ensonified by rocket launch noise above the level expected to result in behavioral disturbance. Different space launch vehicles also have varying trajectories, which result in different sonic boom profiles, some of which are likely to affect areas on the NCI (San Miguel, Santa Rosa, Santa Cruz, and Anacapa). Based on several years of onsite monitoring data, harassment of marine mammals is unlikely to occur when the intensity of a sonic boom is below 2 psf. Santa Cruz and Anacapa Islands are not expected to be impacted by sonic booms in excess of 2 psf (USAF, 2018), therefore, USSF does not anticipate take of marine mammals on these islands, and NMFS concurs. Sonic booms from VSFB launches or recoveries can impact haul out areas and may take marine mammals on San Miguel Island and occasionally on Santa Rosa Island. In order to accommodate the variability of possible launches and (when applicable) sonic booms over NCI, USSF estimates that 25 percent of pinniped haulouts on San Miguel and Santa Rosa Islands may be ensonified to a level above 2 psf. NMFS concurs, and we consider this to be a conservative assumption based on sonic boom models which show that areas predicted to be impacted by a sonic boom with peak overpressures of 2 psf and above are typically limited to isolated parts of a single island, and sonic boom model results tend to overestimate actual recorded sonic booms on the NCI (personal communication: R. Evans, USSF, to J. Carduner, NMFS, OPR).

Modeling has not been required for launches of currently deployed missiles because of their trajectories west of VSFB and north of San Miguel Island and the previously well-documented acoustic properties of the missiles. The anticipated Ground-Based Strategic Defense Program (GBSD) is expected to utilize approximately the same trajectories as the current intercontinental ballistic missile (ICBM), and the GBSD program will be required to model at least one representative launch. When missiles are launched in a generally western direction (they turn south several hundred miles from VSFB and at high altitude), there is no sonic boom impact on the NCI; thus take of pinnipeds on NCI is not anticipated from missile launches. Given flight characteristics and trajectories, take from missile launch is not anticipated for most species. However, given proximity and the generally western trajectory, noise from missile launches from North Base may take California sea lions that haul out at Lion Rock (Point Sal) near VSFB's northern boundary.

In this section, we bring together the information above and describe take from the three different activity types (rockets, missiles, and UAS) expected to occur at VSFB and NCI, the marine mammal occurrence data (based on two survey series specific to VSFB and NCI), species and location-specific data related the likelihood of either exposure ( e.g., tidal differences) or response ( e.g., proportion of previously recorded responses that qualify as take), and the amount of activity. We describe the calculations used to arrive at the take estimates for each activity, species, and location, and present the total estimated take in table 11.

NMFS uses a three-tiered scale to determine whether the response of a pinniped on land to stimuli is indicative of Level B harassment under the MMPA (table 2). NMFS considers the behaviors that meet the definitions of both movements and flushes in table 2 to qualify as Level B harassment. Thus a pinniped on land is considered by NMFS to have been taken by Level B harassment if it moves greater than two times its body length, or if the animal is already moving and changes direction and/or speed, or if the animal flushes from land into the water. Animals that become alert or stir without other movements indicative of disturbance are not considered harassed. Prior observations of pinniped responses to certain exposures may be used to predict future responses and assist in estimating take. Here, the levels of observed responses of particular species during monitoring are used to inform take estimate correction factors as described in the species and activity-specific sections below.

Data collected from marine mammal surveys, including monthly marine mammal surveys and launch-specific monitoring conducted by the USSF at VSFB, and observations collected by NMFS at NCI, represent the best available information on the occurrence of the six pinniped species expected to occur in the project area. Monthly marine mammal surveys at VSFB are conducted to document the abundance, distribution and status of pinnipeds at VSFB. When possible, these surveys are timed to coincide with the lowest afternoon tides of each month, when the greatest numbers of animals are usually hauled out. Data gathered during monthly surveys include: species, number, general behavior, presence of pups, age class, gender, reactions to natural or human-caused disturbances, and environmental conditions. Some species are observed regularly at VSFB and the NCI ( e.g., California sea lion), while other species are observed less frequently ( e.g., northern fur seals and Guadalupe fur seals).

Take estimates were calculated separately for each stock in each year that the regulations are valid (from 2024 to 2029), on both VSFB and the NCI, based on the number of animals assumed hauled out at each location that are expected to be behaviorally harassed by the stimuli associated with the specified activities ( i.e., launch, sonic boom, or UAS noise). First, the number of hauled out animals per month was estimated at both VSFB and the NCI for each stock, based on survey data and subject matter expert input. Second, we estimated the percentage of animals that would be taken by harassment from a launch at a given site, using the corrections and adjustments. In order to determine that percentage, we considered whether certain factors could result in fewer than the total estimated number at a location being harassed. These factors include whether the extent of ensonification is expected to affect only a portion of the animals in an area, tidal inundation that displaces animals from affected areas and for species reactivity to launch noise, life history patterns and, where appropriate, seasonal dispersal patterns.

Launches covered in this authorization are not expected to produce a sonic boom over the mainland except that some first stage recoveries back to launch facilities on the base that may do so. Because first stage recoveries always occur within 10 minutes of the initial launch, a response from any given animal to both launch and recovery are considered to be one instance of take, even when both launch and recovery meet or exceed the 2 psf threshold for calculating take.

As described above, rocket launches, missile launches, and UAS activities are expected to result in take of pinnipeds on VSFB at haul outs along the periphery of the base. Because the supporting information and/or methods are different for these three activity types, we describe them separately below. Launches from different launch facilities at VSFB create different degrees of ensonification at specific haul out sites, and further, USSF has limited ability to forecast which launch sites may be used for future launches. As described previously, some launches also involve the recovery of a booster component back to the launch site, or to an alternate offshore location.

As noted above, NMFS first estimated the number of hauled out animals per month at VSFB for each stock. NMFS used marine mammal counts collected by USSF during monthly marine mammal surveys to approximate haulout abundance. NMFS compared monthly counts for a given species from 2020 to 2022 and selected the highest count (sum across all haul out sites) for each month for each species, as indicated in table 3. NMFS then selected the highest monthly count for each species and used that as the estimated number of animals that would be hauled out at any given time during a launch. Because launches from different SLCs impact different haul-outs, we expect that using this highest monthly estimate will result in a conservative take estimate. Therefore, NMFS considers the 2020-2022 survey data relied upon to be the best data available.

As further indicated in the table 4, and described below, the predicted number of animals taken by each launch, by species, is adjusted as indicated to account for the fact that (1) for some species, animals are only hauled out and available to be taken during low tide and (2) years of monitoring reports showing that different species respond behaviorally to launches in a different manner.

USSF assumes that all rocket launches will take, by Level B harassment, animals hauled out at sites around the periphery of the base. Some rocket launches create overpressure at time of launch, and some recoveries of first-stage boosters can create a sonic boom when they return to the launch pad. Some flights also transit over or near portions of the NCI, but potential impacts to marine mammals at the NCI are discussed separately, below.

Table 5 lists the authorized take by Level B harassment from rocket launch and recovery activities at VSFB, and below we describe how NMFS estimated take for each species. Note that northern fur seal and Guadalupe fur seal are not anticipated to occur at VSFB, and therefore, NMFS does not anticipate impacts to these species at VSFB.

Pacific harbor seals haul out regularly at more than ten sites on both north and south VSFB. They are the most widespread pinniped species on VSFB and have been seen in all months, with decades of successful pupping. Rocket launches from sites closer to the haulouts are more likely to cause disturbance, including noise and visual impacts. Many of their haulout sites are inundated during high tide, and NMFS anticipates that take of this species will only occur during low tides. Rocket launches from sites closer to the haulouts are more likely to cause disturbance, including noise and visual impacts. However, to capture variability, we assume that all rocket launches result in Level B harassment of 100 percent of the harbor seals at all VSFB haulouts.

To determine the number of animals that will be taken by Level B harassment, we multiplied the max count indicated in table 3 by the number of planned launches per year (table 5) for each year of the authorization. As noted in table 3, monitoring data show that, generally speaking, most if not all harbor seals exposed to launch noise exhibit a behavioral response to launch stimulus that equates to take by Level B harassment and, therefore, we predict that 100 percent of animals exposed to launch noise will be taken per launch. However, given that most haulout sites at VSFB are inundated at high tide, NMFS applied a 50 percent correction factor (table 4). Therefore, estimated takes = max daily count (149) X tidal correction factor (0.5) X number of rocket launches in the area for each year for each year (40 in year 1, etc. ), and the resulting take numbers NMFS is authorizing are listed in table 5.

California sea lions on VSFB only haul out regularly at Rocky Point (north and south) and Amphitheatre Cove. California sea lions are most abundant at the haul out in Zone G at Lion Rock (Point Sal). Rocket launches from SLC-6, SLC-8, and the future SLC-11, which are closest to North Rocky Point, will be the most likely to result in noise and visual impacts. Rocket launches from SLC-3E and SLC-4E, both farther inland and some four times the distance, are less likely to impact California sea lions at North Rocky Point. During very high tides and strong winds, when spray is heavy, the sea lions often leave this site or are unable to access it. Therefore, NMFS assumes that for any given rocket launch at VSFB, 50 percent of the maximum number of California sea lions that haul out at VSFB may be taken by Level B harassment.

To determine the number of animals that will be taken by Level B harassment, we multiplied the max count indicated in table 3 by the number of planned launches per year (table 5) for each year of the authorization. As noted in table 3, monitoring data show that, generally speaking, most if not all California sea lions hauled out at VSFB will exhibit a behavioral response to launch stimulus that equates to take by Level B harassment and, therefore, we predict that 100 percent of animals exposed to launch noise will be taken per launch. However, given that most haulout sites at VSFB are inundated at high tide, NMFS applied a 50 percent correction factor (table 4). Therefore, the number of estimated takes = max daily count (112) × tidal correction factor (0.5) × number of rocket launches in the area (40 in year 1, etc. ), and the resulting take numbers NMFS is authorizing are listed in table 5.

Northern elephant seals historically hauled out at VSFB only rarely, and most animals observed onsite were subadult males. In 2004, a record count of 188 animals was made, mostly newly weaned seals (MMCG and SAIC 2012a); these numbers continued to increase (unpublished data, however reported annually to NMFS). In November 2016, mature adults were observed in Amphitheatre Cove, and pupping was first documented in January 2017 with 18 pups born and weaned. In January 2018, a total of 25 pups were born and weaned; 26 in 2019, 34 in 2020, 33 in 2021 and 49 in 2022. Two pups were born and weaned at Boathouse Beach in both 2021 and 2022. We assume that this site, in addition to Amphitheater, will support pupping in future years. Pupping occurs from December through March, with peak breeding in mid-February.

To determine the number of animals that will be taken by Level B harassment, we multiplied the max count indicated in table 3 by the number of planned launches per year (table 5) for each year of the authorization. As noted in table 3, given elephant seals' known lack of sensitivity to noise, based on VSFB monitoring reports and the literature, NMFS predicts that only 15 percent of elephant seals exposed to the launch noise will respond in a manner that constitutes take by Level B harassment, and, therefore, a 15 percent correction factor was applied. We also note that, unlike for harbor seals and California sea lions, Northern elephant seal presence and numbers are not affected by tides. Therefore, the number of estimated takes = highest daily count (302) × behavioral harassment correction factor (0.15) × number of rocket launches in the area for each year (40 in year 1, etc. ), and the resulting take numbers NMFS is authorizing are listed in table 5.

Steller sea lions have been observed at VSFB since April 2012 (MMCG and SAIC 2012c), though as indicated in table 3, they were not observed between 2020 and 2022. For purposes of estimating take, USSF estimates that up to five Steller sea lions may haul out at VSFB during any given launch. NMFS multiplied this number by the number of planned launches per year for each year of the authorization (table 5). NMFS assumes that all rocket launches result in behavioral disturbance ( i.e., Level B harassment) of 100 percent of the Steller sea lions hauled out at VSFB. Therefore, the number of estimated takes = 5 animals × number of rocket launches in the area (40 in year 1, etc. ), and the resulting take numbers NMFS is authorizing are listed in table 5.